Estimating the impact of COVID-19 on South Asia's exports: does trade facilitation matter now more than ever?

Abstract

The COVID-19 has posed a real threat to global trade as the forecast shows an unprecedented decline of trade in 2020. In such a situation, trade facilitation (TF) has been considered as an effective strategy to revive trade. However, primary questions emerge - what extent pandemic would affect exports and how much improvement in TF is needed for recovery. The present study endeavours to answer these questions, especially for South Asia. Using augmented gravity model, study finds negative impact of COVID-19 on exports. Based on coefficient estimates, study predicts decline in South Asian economies' export and finds Nepal the most and India the least affected by pandemic. The study also predicts improvement in TF required for all South Asian countries for resilient recovery of their exports. The study extends further by predicting the reduction in other TF measures like costs and time to export to deal with emerging trade challenges.

Keywords:

• Exports
• trade facilitation
• South Asia
• COVID-19

Acknowledgments

The authors would like to acknowledge Dr. Prabir De, Dr. Nisha Taneja, Prof. Indra Nath Mukherjee, Prof. Shahid Ahmed, Professor, Prof. Ranajoy Bhattacharya, and Dr. Meghna Dutta for their constructive comments and useful guidance. The authors are also thankful to Silvia Sorescu, Policy Analyst, Trade and Agriculture Directorate, OECD for providing data of Trade Facilitation Indicators. The authors also want to thank anonymous reviewers for their valuable suggestions and comments. Their comments helped improving this manuscript to a greater extent.

Disclosure statement

There is no potential conflict of interest.

Notes

1 For details, refer to https://www.tfafacility.org/COVID19-trade-facilitation.

2 There are several notes like Managing Risk and Facilitating Trade in the COVID-19 pandemic, Trade Facilitation Best Practices Implemented in response to the COVID-19 pandemic, Do's and Don'ts of Trade Policy in response to the COVID-19. For details, refer to https://www.worldbank.org/en/topic/trade/brief/trade-and-COVID-19.

3 Authors have come to a conclusion based on data of 2019.

4 The authors have found this based on an LPI report published in 2018.

5 For more details, see https://unctad.org/en/PublicationsLibrary/ditcmisc2020d2_en.pdf.

6 https://thediplomat.com/2020/05/the-trade-and-transitwoes-of-landlocked-afghanistan-duringcovid-19/.

7 https://www.srilankabusiness.com/news/export-performancepercentE2percent80percent93march-2020.Html.

8 https://indianexpress.com/article/business/economy/exports-decline-36-47-in-may-trade-deficit-narrows-to-3-15-billion-6460841/.

9 The value has been taken from ADB Integration Indicators, https://aric.adb.org/integrationindicators.

10 More explanation can be found at www.wto.org/english/tratop_e/covid19_e/covid19_e.htm.

11 For more details, visit page www.tfafacility.org/covid19-trade-facilitation.

12 There is a need to be cautious about how such transformation restricts distinguishing between the separate impact of reporter and partner variables.

13 The study also considers the relative positive effect of each aspect of TF on exports. The results indicate that all the indicators have a positive and significant impact on exports. We do not report the results, but they are available upon request.

14 Below 50 percentile covers only 0 value of WPDI, while above 50 percentile ranges from 5.44 to 316.399 value.

15 The study also considers a scenario where the WPDI of exporting countries increases to the maximum of the previous level of WPDI (used in the estimation). The results remain the same. The results are available upon request.

16 The average increase in WPDI of exporting countries from 2014 to 2020 is 277. The min and maximum value of the year 2014 is 0 and 316.39, respectively and min and maximum value of the year 2020 is 117.94 and 615.74, respectively.

17 We have categorized countries on the basis of information available at https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups.

18 Provided by Silvia Sorescu, Policy Analyst, Trade and Agriculture Directorate. For the detailed explanation of all the 11 TFIs, go to http://www.oecd.org/trade/topics/trade-facilitation.

Additional information

Funding

The authors would like to acknowledge the University Grant Commission, India, for funding this work under UGC JRF (Junior Research Fellowship) scheme, under grant number [F.15-9 (JUNE 2015)/2015(NET)].

Notes on contributors

Mamta Kumari

Mamta Kumari is a doctoral candidate in the Department of Humanities and Social Sciences at the Indian Institute of Technology Patna. She also works as a teaching assistant in the department. Her research interests focus on political economy of trade facilitation and logistics.

Nalin Bharti

Nalin Bharti has worked on several areas including India’s Economic Reforms, ITES trade, Trade and Intellectual Property, WTO & Developing Economy and Labour Economics. He has completed a project sponsored by the UNICEF office of India. He has been awarded a Diploma of Appreciationat the University of Bialystok, Poland in October, 2014. He has contributed One Full reference book, six book chapters edited by international authors and more than 50 conference papers in India and abroad. He is currently involved in a research project on India-Japan Trade and Investment jointly sponsored by ICSSR and JSPS.