Trade Facilitation and Firms Exports: The Case of Egypt

This paper tackles the impact of red tape barriers on firms’ exports. The topic of this paper is crucial in international trade for three main reasons: first, trade barriers—as argued by the WTO—are highly correlated to lengthy, bureaucratic and time consuming trade procedures that negatively affect firms’ exports. Second, these barriers are highly persistent and costly in developing countries such as Egypt. Third, they represent a deadweight loss as they do not generate any rent or revenue. In this study, we estimate a gravity model using Egyptian firm-level data to examine the impact of these barriers on firms’ exports. For administrative barriers, we use the Doing Business dataset developed by the World Bank. The findings show that red tape barriers negatively affect Egyptian firms. This effect seems more robust for both the extensive margin (the probability of exporting across different destinations) more than the intensive one (the value of exports). This result is also consistently robust even after we control for the selection bias that may arise in our regressions. Moreover, small and medium exporters are more likely to be affected by such barriers. Finally, for different economic sectors, not all products are affected by trade facilitation in the same way at the intensive margin level. By contrast, they are all negatively affected by administrative barriers at the extensive margin level.