Linkages Between Trade Facilitation and Governance: Relevance for Post-COVID-19 Trade Strategy

Abstract

The devastating effect of COVID-19 on the economy, health and the financial system is well known now. The pandemic has distorted trade as well. In such a situation, trade facilitation (TF) has emerged as an effective tool to mitigate the devastating effect of COVID-19 on trade. Several countries have initiated policy responses to take necessary steps towards TF measures. However, a relevant question arises: Are all these countries prepared for the effective and efficient implementation of the TF measures? This study attempts to answer this question by identifying the major institutional determinants of TF measures (mainly included in the World Trade Organization [WTO] Trade Facilitation Agreement) based on existing theories, such as the ‘theory of institutions’ and the ‘political economy of trade policy’ approach. It utilizes data of many countries for the years 2012, 2015, 2017 and 2019. The findings of this study suggest that the quality of governance has a significant positive impact on all TF measures. Moreover, the study finds that developing and small-sized countries are more responsive to the impact of an institutional factor on their TF performance than developed and large-sized countries. Therefore, it proposes measures to improve TF performance, which is crucial to minimize further disruptions in trade caused by COVID-19.