Fundamentals of International Trade

Ministry of Education and Science of Ukraine

National Technical University

“Kharkiv Polytechnic Institute”

 

 

 

 

INDIVIDUAL ASSIGNMENT

“The Global Enabling Trade Index”

 

Course Name: “Fundamentals of International Trade”

 

 

 

 

 

 

 

 

Fulfilled by

the students of BF-20d

Angelina Lutsenko

Elena Tretyakova

 

Kharkiv, 2013

 

1. Description of goal and methodology of the ETI

The Enabling Trade Index is the core of  the Global Enabling Trade Report, which was first published in 2008 by the Geneva based non-profit foundation, World Economic Forum. The last issue of this report was in 2012 and includes 132 economies. The ETI measures the degree to which individual economies have developed institutions, policies, and services which facilitate the free flow of goods over borders. This index ranks the countries using statistical data from different sources (such as World Economic Forum’s Executive Opinion Survey, International Trade Centre, World Bank, the United Nations Conference on Trade and Development (UNCTAD), Global Express Association, the International Air Transport Association (IATA), the International Trade Centre (ITC), WTO etc).

It is made up of four sub-indexes and nine pillars:

• Market access measures the extent to which the policy framework of the country welcomes foreign goods into the economy and enables access to foreign markets for its exporters.

Pillar 1: Domestic and foreign market access (consider the level of protection of a country’s markets, the quality of its trade regime, and the level of protection that a country’s exporters face in their target markets taking into account applied tariffs).

• Border administration assesses the extent to which the administration at the border facilitates the entry and exit of goods.

Pillar 2: Efficiency of customs administration (measures the efficiency of customs procedures considering the volume of services provided by customs authorities and related agencies).

Pillar 3: Efficiency of import-export procedures (assesses the effectiveness and efficiency of clearance processes by customs, related border control agencies, the number of days and documents required to import and export goods, and the total official cost associated with importing as well as exporting, excluding tariffs and trade taxes).

Pillar 4: Transparency of border administration (evaluate the level of corruption and bribery connected with imports and exports).

• Transport and communications infrastructure takes into account whether the country has in place the transport and communications infrastructure necessary to facilitate the movement of goods within the country and across the border.

Pillar 5: Availability and quality of transport infrastructure (consider the state of transport infrastructure in each country by measuring the quality of all types of transport infrastructure, including air, rail, roads, and ports).

Pillar 6: Availability and quality of transport services (assess of infrastructure by taking into account the amount and the quality of services available for shipment, the ability to track and trace international shipments, the timeliness of shipments in reaching destination, general postal efficiency, and the overall competence of the local logistics industry).

Pillar 7: Availability and use of ICTs (consider the level of spread of mobile phones, Internet, and broadband in each country and how they are used by business for buying and selling goods across borders). 

• Business environment looks at the quality of governance as well as at the overarching regulatory and security environment impacting the business of importers and exporters active in the country.

Pillar 8: Regulatory environment captures the extent to which the country’s regulatory environment is conducive to trade (includes indicators that capture the general quality of governance, indicators concerned with openness to foreign participation, which covers the ease of hiring foreign labor in the country, how the policy environment encourages foreign direct investment).

Pillar 9: Physical security (measures country-level violence both in terms of general crime as well as the threat of terrorism, and the reliability of the police services in enforcing law and order).

Each of these pillars is made up of a number of individual variables. The dataset includes both hard data and survey data from the World Economic Forum’s Executive Opinion Survey. The hard data were obtained from publicly available sources and international organizations which operates in the area of international trade.

The ETI methodology points to the large number of factors that have influence on the international trade. So, we can say that to increase benefits from trade, particularly for developing countries, it requires not only further liberalization of national trade policies, but also efforts to improve performance of many other factors.

2. The ETI index leaders in 2012

As in previous years, the top 10 of the Enabling Trade Index 2012 continues to be dominated by relatively small, open economies for which trade is a key to achieve economic efficiency, because their domestic markets are small. Singapore continues to keep leading position. The second is Hong Kong SAR. And as in the previous edition, two Nordic economies, Denmark and Sweden, occupy 3rd and 4th place. New Zealand continues its upward trend, gaining one position to reach 5th place, while Finland and the Netherlands improve to occupy 6th and 7th positions, respectively. Switzerland (8), Canada (9), and Luxembourg (10) round up the top 10 of the ETI 2012.

The UK occupied the 11 place by moving on 6 steps up. Germany and France remain on the same places. Other large world economies are less successful: the USA index continue to fall and is on the 23 place, China (56) and India (100) also dropped in this rating. Among developing economies Turkey and Mexico stay on the same places while Chile (14), Saudi Arabia (27) and South Africa (63) have risen in the rating. Thailand (57), Indonesia (58) and the Philippines (72) has also strengthened their positions in the ranking.

3. The ETI index for Ukraine

Ukraine took the 86th place on level of the international trade involvement, having fallen by five steps in comparison with 2010 (81 place).

 

 

 

Figure 1 – Structure of the ETI for Ukraine

 

Figure 2 – The most problematic factors of trade in Ukraine

The countries which are near Ukraine are Malawi (85 place in rank) and Dominican Republic (87 place in rank).  Our neighbors: Russian Federation is on the 112 place, Moldova - 76th, Poland – 48th, Hungary – 47th.

 

 

Figure 3 – The dynamics of ETI of Ukraine and comparable countries 

 

3. The ETI for the Russian Federation

The Russian Federation took the 112^th place.

Figure 4 – The ETI for the Russian Federation

 

Conclusion: The index compares the ease of doing international trade in 132 countries, assessing the obstacles that arise in the supply chain of goods. The ETI measures not only the abilities of economies to enable trade, but also highlights strengths and areas where improvements are most needed.

 

 

 

 

Appendix