- Has the WTO Trade Facilitation Agreement helped reduce trade costs? An ex-post analysis.
Five years after the entry into force of the WTO TFA, we set out to find macro-level quantitative evidence of the impact of the WTO Trade Facilitation Agreement (TFA) on trade costs. Using the updated ESCAP-World Bank Trade Cost dataset, we estimate the impact of TFA participation on trade costs. Using a variety of models, we find robust and statistically significant evidence that implementation of the WTO TFA reduces trade costs by 1 to 4 percent on average. The TFA impact in reducing trade costs is strongest between OECD and non-OECD economies, with trade costs reduction across models ranging between 3 to 5 percent. South-South trade costs reductions from TFA participation are less than 2 percent, and those between advanced economies are not significant. Participation in regional trade agreements, in turn, reduce trade costs by 2 to 10 percent on average, highlighting the complementarity between regional and global trade facilitation initiatives. Overall, the trade cost savings associated with WTO TFA found in this post-accession analysis suggest that WTO members still have much to do to implement the WTO TFA in full, both in letter and in spirit. Greater trade cost savings can be achieved through a full and digital TFA+ implementation approach focused on accelerating digitalization of trade procedures, as already enabled in Asia-Pacific by the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific.