Trade Costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation (TIID Working Paper Series 4/11)

Working paper16 May 2011

This paper explores the trade facilitation performance of India and Mekong countries using a new measure of bilateral comprehensive trade costs, complemented by a review of specific trade policy and trade facilitation-related indicators. A model of comprehensive trade costs is then developed and estimated using these specific indicators in an effort to identify policies and measures that have a significant effect on trade costs, and to prioritize them. The trade costs between India and Mekong countries are found to be high: from 20% to 100% higher than those prevailing among Mekong countries. However, the fact that India, China, Thailand, and most of the other India-Mekong countries made more progress in reducing trade costs with each other than with developed countries – such as Japan and the USA - is encouraging, showing signs of slow but steady improvements in regional connectivity. Econometric results suggest that countries should prioritize policies aimed at further developing maritime and ICT services to reduce trade costs.