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Behind-the-Border Determinants of Bilateral Trade Flows in East Asia

The global economy has witnessed significant reduction in traditional trade barriers (e.g., tariffs and quotas) in the past years. This trend has been mainly a result of unilateral, regional, and multilateral trade liberalization reforms. However, technical barriers to trade and other types of trade barriers still exist and have proliferated, hampering the free flow of goods and services as well as investments across borders. Some examples of trade bottlenecks include trade processes and procedures, trade-related infrastructures, regulations, and institutions. In this regard, trade facilitation has become one of the important trade policy measures that are being pursued by countries around the world. In this paper, we observe that the recent trends on trade-related documentary requirements, trading time, cost to trade, quality of physical infrastructure—including airports, ports, railroads, etc., telecommunications services, accessibility to finance, and contract enforcement procedures, appear to be mixed across East Asian economies and over time. Using a standard gravity model and bilateral trade data at the Broad Economic Categories (BEC) 1-digit product classification, we find that, overall, bilateral trade in East Asia is influenced by time delays in trade, quality of port infrastructure, telecommunications services, and depth of credit information...

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