São Paulo – A new database released by the World Bank indicates that lower income countries incur a higher cost when doing business with countries at development levels similar to their own, than when trading with richer partners. The trade costs database, announced last Wednesday (6th), brings together the import costs of agricultural and manufactured goods for 178 from 1995 to 2010.
The World Bank claims, for instance, that Tunisia pays more in order to sell manufactured goods to its neighbour Algeria than it does to France. In turn, it costs twice as much for Algeria to sell agricultural products to Morocco than to Spain.
According to the World Bank, one of the goals of the database, created through a partnership with the Economic and Social Commission for Asia and the Pacific (Escap) is to find “comprehensible” reasons as to why such closely located countries with shared languages and cultures have trouble trading goods. The database was initially meant to be a study on what caused the cost of commercial exchange between North African countries to be high. The project grew and became a pool of information on global trade.
According to the World Bank, the cost of trade is brought about by the separation between countries, which may be of two types: one is the actual physical distance between trade partners, or their speaking different languages.
The other type of separation concerns trade-hampering factors such as commercial practices, tariff and non-tariff aspects, logistics, and the lack of ports, such as the Netherlands’ Rotterdam Port, and airports such as the Dubai Airport, in the United Arab Emirates, which are examples of hubs well-connected with global trade networks. According to the World Bank, these difficulties can be overcome.
“Poorer countries tend to have higher levels of trade costs than do richer countries, in both manufactured and agricultural goods. For manufacturing, trade costs have fallen fastest in high-income countries and considerably more slowly in the lower-income groups. In agriculture, by contrast, trade costs have remained relatively flat across income groups,” says the World Bank.
To the director of the Escap’s investment and trade division, Ravi Ratnayake, “technological factors” are responsible for a significant share of the differences in trade costs around the world. “From a policy perspective, reforms in areas such as infrastructure, core trade-related services sectors, and private sector development can thus have significant benefits for countries in terms of lowering trade costs,” he said.
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The trade cost databank is available at http://databank.worldbank.org/data/views/variableselection/selectvariables.aspx?source=escap-world-bank:-international-trade-costs
*Translated by Gabriel Pomerancblum
