Enhancing Asia ’ s Trade : Price and Non - Price Barriers Revisited

In a supply-constrained region like Asia, promoting exports has always been a challenge particularly at a time when Asia’s trade has been severely affected by lack of external demand. This study argues that price barriers have now taken a new shape which may likely to generate differential impacts on trade flows. The size and shape of price barriers would be higher if NTBs, applied by the countries in ongoing crisis period, were counted. One of the conclusions of this study is that ‘price’ barrier is still more important than ‘non-price’ barrier in enhancing Asia’s trade and regional integration. The higher the price barrier between countries in a pair, the less they trade. In other words, a 10 percent increase in the ad-valorem price (transport and tariff) lowered trade by 6 percent. Tariff and transport costs, each considered separately, also influence the trade flow in the same direction, to more or less the same extent. Another conclusion of this study is that incidence of inland transportation cost is much higher than international transportation cost. Costlier inland transportation limits and taxes trade in the way tariffs do. There are indications of huge domestic infrastructure bottlenecks in countries in Asia. Based on direct and indirect evidence related to trade barriers, this study concludes that complementary trade policies focusing on price and non-price barriers have immense importance in enhancing international trade and integration in the post-crisis period. [*Version 1.0: 10 January 2010. Work in progress, no citation, comments welcome.] [ This paper is written for presentation at the international conference on ‘Trade Costs, Infrastructure and Trade Development in Asia’, organized by the Leverhulme Centre for Research on Globalisation and Economic Policy (GEP), University of Nottingham, to be held at the Kuala Lumpur Teaching Centre, the University of Nottingham Malaysia Campus, Kuala Lumpur, 13-14 January 2010. Views expressed by the author are his personal. Usual disclaimers apply.]