Trading Costs in East Asia’s Global Value Chains

The World Trade Organization’s new Agreement on Trade Facilitation has the potential to significantly reduce East Asia’s trade costs along the entire supply chain, increasing regional gross domestic product (GDP) by 2.7 percent and employment by 1.2 percent. At present, the region’s developing economies suffer from trade costs well above those of the newly industrialized countries and of developed economies, owing to the large number of inefficient border and behind-the-border procedures. Countries have been adding to their stock of nontariff measures, which now account for as much as 90 percent of (non-transportation) trade costs. The ATF defines a new reform agenda for East Asia with potentially far-reaching effects on private sector development, especially for small businesses that need greater transparency and simplification of procedures to enable them to readily access regional and global value chains.