The Evaluation of the Impact of Trade Facilitation on Bilateral Industrial Trade in Developing Countries

The purpose of this paper is to examine the impact of trade facilitation on bilateral trade in developing countries. Trade facilitation increases the attractiveness of investing in countries by improving the flow of trade by speeding up the process of declaration and clearance of goods, and helps reduce the cost of trade and improve competitiveness. In order to quantify the impact of trade facilitation on bilateral trade, we have used the cross-border trade index of countries. Our data includes a sample of panel data of 21749 bilateral relations between developing countries for time span of years 2006 to 2018, which is used to estimate the impact of trade facilitation along with other important variables such as GDP, population, common border, common language and distance between countries using a weighted least squares method.Our results show that trade facilitation, if implemented by both countries, has positive effects on bilateral trade of industrial goods. The results also showed that the tendency for bilateral trade is higher among developing countries with countries with higher GDP. The results showed that having a common border is more important than a common language in bilateral trade, and on the other hand, trade between countries with a higher geographical distance is less. Therefore, it can be said that trade policy focusing on neighboring countries has a higher priority than farther developing countries.