1 Promoting Efficiency in Services Raed Safadi, OECD OECD Global Forum on Trade: A trade policy dialogue on the multiple dimensions of market access and development Mexico City, October 2006

2 Impact of services barriers on effective rates of protection (ERP) in agriculture and manufacturing Time as a Trade Barrier

3 Impact of Services Barriers on Effective Rates of Protection (ERP) in Agriculture food products nec beverages & tobacco products sugar vegetable oils & fat milk & dairy meat & fish oil seeds & plants cereals Agriculture (+) (+) (+) (+) (+) (-) (+) (+) (+) (-) (-) (-) (+) (+) (-) (+) (+) (+) ERP1 ERP2 ERP3 Russia (-) (-) (-) (+) (-) (-) (-) (-) (-) (+) (+) (+) (+) (-) (-) (+) (+) (-) (+) (-) (-) ERP1 ERP2 ERP3 India (+) (+) (+) (+) (-) (-) (+) (+) (-) (+) (+) (+) ERP1 ERP2 ERP3 Venezuela (+) (-) (-) (-) (-) (-) (+) (+) (+) (+) (-) (-) (-) (-) (-) (+) (-) (-) ERP1 ERP2 ERP3 Zambia (+) (-) (-) (-) (-) (-) (+) (-) (-) (-) (-) (-) (+) (-) (-) (+) (+) (+) ERP1 ERP2 ERP3 Chile

4 Impact of Services Barriers on Effective Rates of Protection (ERP) in Manufacturing (+) (+) (+)(+) (-) (-)(-) (+) (-)(+) (+) (+)manufacturers (+) (+) (+)(-) (-) (-) (+) (+) (-)machinery & equipment (-) (-) (-) (+) (-) (-)(-) (-) (-)electronic equipment (-) (-) (-)(+) (+) (+) (+) (-) (-) transport equipment (+) (+) (+)(+) (-) (-) (+) (+) (-)motor vehicles & parts (+) (+) (-) (+) (-) (+) (+) (+) (-) base metals & metals (+) (+) (-)(+) (+) (+)(+) (-) (-)(-) (-) (-)mineral products (+) (+) (+) (-) (-) (-)(+) (+) (-) chemical, rubber, plastic prods (+) (+) (-) (+) (+) (+) (+) (+) (-)(-) (-) (-) textiles (+) (-) (-)(+) (+) (+)(+) (+) (-) mineral products (+) (+) (-) (+) (+) (+) (-) (+) (-) (+) (+) (-) forestry & wood products ERP1 ERP2 ERP3 ERP1 ERP2 ERP3 ERP1 ERP2 ERP3 ERP1 ERP2 ERP3 VenezuelaAlbaniaChileIndia Manufacturing

5 Time as a trade barrier: Motivation DevelopingLDC EU150.8%0.02% USA0.7%0.1% Japan0.3%0.1% Tariffs facing developing countries in manufacturing Source: MacMap Source: WTO

6 Are the main trade barriers behind the border? JIT Lean retailing Offshoring Supply chain management Containerization Speed and scale in trade Time for exports (days) Time for imports (days) High-income East Asia South Asia Europe & Central Asia Latin America Middle East & North Africa Sub-Saharan Africa Source: World Bank

7 Import content of exports Source: GTAP

8 Empirical analysis Sectors: –Total merchandise (benchmark) –Intermediate industrial products –Electronics –Fashion clothing Countries: –Importers: Australia, Japan, UK –Exporters: All countries Key variables of interest: –Time for exports –Control of corruption Model: Gravity model

9 Probability to export and time for exports

10 The impact on exports of a 10% improvement in the control of corruption index

11 Time and export volumes % increase in exports following 10% reduction in time for exports

12 Policy implications - preliminaries Excessive time for exports and imports constitutes an export market entry barrier for entrepreneurs in low-income countries – and a disincentive to invest in product quality; Time for exports and imports depends on a logistics chain including testing, freight forwarding, transport, port services, customs services, inventory management, tracking… The activities in the logistics chain are complementary It is time relative to competitors – not absolute time that matters

13 Policy implications cont. Identify and focus reform on bottlenecks in the logistics chain; Logistics and the DDA: –Trade facilitation –GATS liberalisation of transport, communication, logistics and business services; –Aid for trade Well-designed special economic zones can be a first step when investment needed for adequate country-wide infrastructure is beyond the (aid-augmented) resources of the country in the short term. Reforms are urgently needed!