Trade policy barriers are only one element of overall trade costs. Among these, and due to the decrease in the influence of tariff barriers on trade over time, institutional barriers might increase in relative importance and become a key obstacle to the movements of goods across countries. This paper quantifies and compares the impact that a number of trade facilitation and trade policy barriers have on bilateral trade flows. A theoretically justified gravity model of trade is estimated by using the methodology proposed in Baier and Bergstrand (2009) for a cross-section of countries in the year 2000. Results indicate that institutional trade barriers have a greater impact on trade flows than tariff barriers. According to these findings, trade policy negotiation efforts should focus on facilitating trade processes and should be at the forefront of multilateral negotiations.
Paper submitted to the special issue
Trade Facilitation, Transport Costs and Logistics: A New Challenge for European Competitiveness
The data set for this article can be found at: http://hdl.handle.net/1902.1/16723