Is Trade Facilitation a Free Lunch? A General Equilibrium Approach

Multilateral negotiations on tariff liberalization at the WTO have shifted toward non-tariff trade policy issues. Among the recent initiatives is the Trade Facilitation Agreement (TFA), signed at the Bali Ministerial Conference in December 2013. This paper provides the first assessment of the potential economic impact of the TFA based on a dedicated Computable General Equilibrium model. We implement a micro-funded definition of overall trade costs, relate them to the OECD Trade Facilitation Indicators (TFI) and allocate bilaterally the burden of trade facilitation measures. The Computable General Equilibrium model MIRAGE is adapted to this definition of trade facilitation as part of trade costs. Beyond this modeling effort, we integrate in the exercise results of the OECD evaluation \modif{relying on the Trade Facilitation Indicators (TFI), the impact of the TFA on such indicators and ultimately the consequences on trade costs.} An important value added of our ex ante evaluation is to account for the costs associated with such implementation. We show that the outcomes of the Trade Facilitation Agreement are very sensitive to the diligence in implementation and timing, and that the introduction of costs has a lower but not negligible impact.