Journal of Business & Financial Affairs

The Impact of Trade Facilitation on Trade Flow in Asian Countries

Abstract

Waqas Ali* and Nadia Shakoor

The study estimates the relationship between trade facilitation indicators and trade flow in Asian countries. It prioritizes the main trade facilitation determinants that need to be improved for the faster and more international trade flow. The study consists of Asian countries based on main trade facilitation variables such as tariffs, time to import/ export and cost to import/export, population, ICT. The study consist on secondary data and most of the data obtained from the World Bank doing business and economic development database and used 44 Asian countries in sample. In this study we have used fixed and random affect methodology for estimation and then uses Husman test to choose between fixed and random affect results. The obtained results shows the significant impact on imports and exports volume and it clarify that tariff and number of documents to import and export has negative affect on trade flow. A one percent change in tariff rates can affect the trade flow with 6% negatively. So for the cheaper and maximum trade flow, tariff must be brought to minimum level while the number of documents has much more affect than tariff as it shows one percent change in number of documents affects with 25% exports and 6% on imports flow negatively. That is why the number of documents should be reduced to the minimum level too. But for ICT, human capital and customs shows a positive relationship with trade flow. According to this study’s results it shows that 1% improvement in ICT can increase the imports and exports by 5%. The same way trade infrastructure is most important determinant of trade facilitation, It is because infrastructure includes both time and cost, the cheaper and faster trade flow become more beneficial for both of the trading partners. The results suggest 1% reduction in trade costs results in 20% increase in imports and 16% increase in exports. And 1% reduction in time can affect the imports with 8% and exports with 14%.