Enhancing Public Availability of Customs Information
In the Islamic Countries
9
Box: The Structural Gravity Model
The gravity model is one of the most widely used and reliable methods in empirical economics.
Having first gained popularity in the 1960s due to its intuitive appeal—larger countries trade more,
and more distant countries trade less, by analogy with Newtonian gravity—it has subsequently come
to be seen as a logical output of many different theoretical models of trade. Recently, Anderson et al.7
have shown that a correctly estimated gravity model can provide a useful simulation platform to look
at the global impacts of trade policy changes. Importantly, the model set up in this way takes full
account of general equilibrium effects, in the sense that the impact of a change in one country’s policy
on its exports to another country depends on what all other countries in the system do at the same
time, because it is relative prices that matter for the determination of bilateral trade flows.
Kumar and Shepherd8 use this approach to provide a rigorous ex ante impact assessment of the TFA.
They focus on developing countries, but include all countries for which data are available in their
model. Although identifying a causal effect is difficult due to a lack of data over multiple years, it is
possible to put some bounds on the likely effects, which suggest that implementation of the TFA could
have a salutary effect on global trade growth.
The simulation reported above uses the same data and modeling framework that is set out in full in
Kumar and Shepherd. The only change is that instead of using data on all TFA provisions, it focuses
on just the first four articles. It is important to note that since high performance on the first four
articles tends to be associated with high performance on other parts of the agreement, the number
presented here is likely an upper bound on the true estimate. Nonetheless, without over-interpreting
the result, it is clear that reducing information costs associated with trade has the potential to boost
trade for all countries, including OIC member countries.
In addition to the trade gains that could arise from greater information availability, it is
important to be conscious of other benefits as well. First, more trade means more revenue from
trade taxes like tariffs, so government revenue would be positively affected by these kinds of
measures. Second, improving information availability is often part of a broader process where
government reduces the distance between itself and a country’s citizens by acting with greater
transparency, and according to the rule of law. As a result, trade information availability can be
one part of a broader commitment to transparency in government, which in turn has benefits
across the spectrum in terms of governance performance. Finally, improving information
availability, along with other types of trade facilitation, can help reduce trade-related corruption
by ensuring that commercial agents are aware of the correct procedures and regulatory charges,
and reducing the incentive for “speed money” facilitation payments.9
Facilitating access to information is therefore an important part of the overall trade facilitation
agenda, as embodied in the TFA. With that background in mind, this report seeks to provide an
overview of performance in this area within the OIC, and to relate it to examples of global best
practice. The objective is to identify areas of relative strength among OIC countries, so that
experience sharing and technical assistance within the organization can help promote
generalized upgrading and stronger performance. It is also important to be cognizant of areas
7 Anderson, J., M. Larch, and Y. Yotov. 2018. “GEPPML: General Equilibrium Analysis with PPML.” The World
Economy, 41(10): 2750-2782.
8 Kumar, U., and B. Shepherd. Forthcoming. “Implementing the WTO Trade Facilitation Agreement: From Global
Impacts to Value Chains.” Working Paper, Asian Development Bank.
9 Shepherd, B. 2010. “Speed Money: Time, Corruption, and Trade.” Working Paper DTC-2010-1, Developing
Trade Consultants.