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Detecting illegal trade practices by analyzing discrepancies in forest products trade statistics : An application to Europe, with a focus on Romania

Author

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  • Vincent, Jeffrey R.

Abstract

Discrepancies in bilateral trade statistics for forest products have recently attracted attention as potential indicators of illegal trade practices. For example, if exporters understate quantities to evade export taxes or quotas, then one might expect reported exports to be less than reported imports. Discrepancies in trade statistics can exist for reasons that have nothing to do with illegal activities, however, such as measurement error and shipment lags. Any attempt to infer evidence of illegal activities from statistical discrepancies must control for these other explanations. The author estimates the discrepancies between reported imports and exports for bilateral flows of sawnwood traded by Romania and other European countries. The author also examines whether these discrepancies reflect illegal activities by the traders. The mean discrepancy for sawnwood exported by Romania during 1982-97 was significantly different from zero for coniferous sawnwood but not for nonconiferous sawnwood. Yet the sign of the discrepancy for coniferous sawnwood-reported exports tended to be greater than reported imports-implies that illegal trade activities were more likely occurring in Romania's trading partners than in Romania. An econometric analysis of bilateral trade statistics for Romania and other European countries finds evidence that measurement error, shipment lags, and intentional underreporting all play a role in explaining discrepancies for both types of sawnwood. The econometric model is not sufficiently reliable, however, for estimating the portion that was due solely to illegal activities or determining whether those activities occurred primarily in Romania or in its trading partners. Moreover, given that it is based on observed discrepancies in bilateral trade statistics, it fails to detect illegal trade activities that occur simultaneously in both importing and exporting countries. For these reasons, econometric methods appear unlikely to be of practical use in revealing illegal trade activities in the Romanian forest sector.

Suggested Citation

  • Vincent, Jeffrey R., 2004. "Detecting illegal trade practices by analyzing discrepancies in forest products trade statistics : An application to Europe, with a focus on Romania," Policy Research Working Paper Series 3261, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3261
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    Citations

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    Cited by:

    1. Vasile Iosifescu & Marian Drăgoi, 2023. "Triggers and Halts of Professional Mobility in Public Companies: A Case Study of the Romanian Forest Administration," Social Sciences, MDPI, vol. 12(9), pages 1-14, August.
    2. repec:vuw:vuwecf:16724 is not listed on IDEAS
    3. Terheggen, Anne, 2010. "The new kid in the forest: the impact of China's resource demand on Gabon's tropical timber value chain," MPRA Paper 37982, University Library of Munich, Germany.
    4. Victor Abola & Deborah Sy & Ryan Denniston & Anthony So, 2014. "Empirical measurement of illicit tobacco trade in the Philippines," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 51(2), pages 83-96, December.
    5. Shaar, Karam, 2019. "Essays on modern economic issues in international trade, exchange rates and housing," Working Paper Series 8039, Victoria University of Wellington, School of Economics and Finance.

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