Full Report - Subregional Office for East and North-East Asia - escap

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
Box 1.5. Lowering trade costs to spur South-South integration
As highlighted in the Survey 2012, South-South trade and investment has become increasingly important in the global economy.
South-South exports grew by 19% annually in 2010-2010, compared to 12% for world exports. However, the latest ESCAP-World
Bank Trade Cost data reveal that developing countries continue to suffer from significantly high trade costs (see figure A). For
instance, it costs 2.5 times more for an economy of South-East Asia to trade with Africa than with North America.
By inferring trade costs from the observed pattern of production and trade across countries, the new ESCAP-World Bank Trade
Cost data capture not only international transport costs and tariffs but also other potential cost components, such as differences
in languages, currencies and import or export procedures. It is also comprehensive, covering 178 countries, including a wide
range of developing countries, over the period 1995-2010.
Figure A. Average trade costs, 2007-2010, in percent ad valorem equivalent (international relative to
domestic trade costs)
300
South - North
South - South
250
200
150
100
50
0
NEA - North America
SEA - North America
LAC- North America
Africa - EU-5
South Asia - EU-5
NEA - LAC
NEA - Africa
South Asia - Africa
SEA - LAC
South Asia - LAC
SEA - Africa
Source: ESCAP, based on ESCAP-World Bank Trade Cost database.
Note: NEA=Northeast Asia, SEA=Southeast Asia; LAC=Latin America and Caribbean.
The trade cost data also reveal considerable disparity among developing countries, with areas such as East Asia exhibiting much
lower levels of trade costs than, for example, Africa. A clear policy implication is that South-South cooperation could be improved
to lower trade costs. In particular, cooperation in improving trade-related procedures, infrastructure and services could be
enhanced in line with the recent trade literature which finds non-tariff trade costs to be significant determinants of trade flows. a
In fact, South-South development cooperation, whose net disbursement was estimated at $12.1 billion in 2006, has expanded
rapidly, including in trade related areas. b For instance, the development cooperation by China of $1.9 billion in 2009 was nearly
four times the 2000 level, with 45.7% of it going to Africa and 12.7% of it to Latin America and Caribbean. Of the 2,025
completed projects under grants or interest-free loans, 390 were in transport, power supply and telecommunications. c Technical
cooperation, export credits and special loans for SMEs are other important contributions related to trade.
World
Asia Pacific
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