Chahir Zaki

An empirical assessment of the trade facilitation initiative: econometric evidence and global economic effects

This paper attempts to model trade facilitation in a multi-regional and multi-sectoral computable general equilibrium (CGE) model, MIRAGE. It follows Decreux and FontagnA© (2009) in modeling trade facilitation and in assuming that administrative barriers are an iceberg cost. I extend their model using more comprehensive measures of ad-valorem equivalents (AVEs) of red tape costs, which are computed from a gravity model, and are introduced in the CGE model. The novelty in using those AVEs is that they take into account the effects of bureaucracy, internet coverage, corruption, and geographical barriers on the time to trade. The paper has four major findings. Gains derived from trade facilitation are more significant for developing economies (especially for the Middle East and North Africa region and Sub-Saharan countries) than for developed ones, whether in terms of welfare gain (either in the short or long run) or increase in trade. Second, long-run welfare effects of trade facilitation are much higher than in the short run. Third, trade facilitation helps boost both intra-regional trade and inter-regional trade. Fourth and most interestingly, it also helps improve export diversification, leading to an expansion in those sectors that are more sensitive to time, such as food, textiles, and electronics.

On informality and productivity of micro and small enterprises: evidence from MENA countries

The objective of this paper is twofold. First, it aims to examine the impact of informality on productivity in the Middle East and North Africa (MENA) in order to identify existing barriers to formality. Second, it pinpoints factors that boost productivity of micro and small enterprises (MSEs). Using firm-level micro data from the Egyptian and Turkish MSEs surveys, we first find that firms age, entrepreneurs gender, age and education have a significant impact on the probability of belonging to the informal sector. In addition, we find a negative effect of informality on productivity in both Egypt and Turkey. While this result is sensitive to the estimation method for the Egyptian case, it remains robust for the Turkish one. Consequently, there is a clear and significant productivity differential between formal and informal firms in Turkey, but not in Egypt.

Access to finance and financial problems of SMEs: evidence from Egypt

Financial services seem to be under-utilised by small and medium sized enterprises (SMEs) as only 50% are dealing with banks and benefiting from an improved access to finance. In addition, these firms still face several constraints in terms of access to finance. Using an extensive census that has been recently done by the Egyptian Banking Institute, we try to examine the determinants of the access to finance of SMEs in Egypt as well as the determinants of having banking problems. The main findings of this paper show that legal form, economic activity, labour, capital, and sales turnover have a significant effect on having banking facilities. In addition, we found that the smaller the firm, the higher the probability of having banking problems. We run a battery of sensitivity analysis tests and found that these results remain robust.

Do SPS measures matter for margins of trade? Evidence from firm-level data

ABSTRACT According to the World Trade Organization (WTO) standards, countries are allowed to adapt regulations under the Sanitary and phyto-sanitary (SPS) and technical barriers to trade (TBT) agreements in order to protect human, animal and plant health, as well as environment and human safety. Yet, these measures can become an impediment in international trade, especially for developing countries. Therefore, using an Egyptian firm-level data set and a new database on specific trade concerns raised in the TBT and SPS committees at the WTO, we analyse the effects of product standards on two related aspects: first, the probability to export (firm-product extensive margin), and second, the value exported (firm-product intensive margin). We merge this data set with a new database on specific trade concerns raised in the TBT and SPS committees at the WTO. Our main findings show that SPS measures imposed on Egyptian exporters have a negative impact on the probability of exporting a new product to a new destination. By contrast, the intensive margin of exports is not significantly affected by such measures.

Trade facilitation and corruption:a CGE model of Egypt

This paper extends a dynamic computable general equilibrium (CGE) model to introduce trade facilitation aspects. The contributions are twofold on both the theoretical and empirical levels. First, it attempts to explicitly model trade facilitation in two alternative ways. On the one hand, trade facilitation is considered as a pure deadweight loss and, on the other hand, as a rent-generating process that takes corruption into account. Concerning the empirical side, the tariff equivalent of red tape and related procedures are being estimated, not assumed, at the sectoral level in a companion paper and are introduced in the CGE model. The Exter model is modified and calibrated on the Egyptian social accounting matrix of 2000/2001. The results show that trade facilitation boosts exports, imports and welfare in a significant way. Yet, when the cost and the tariff equivalent effect of trade facilitation are jointly modelled, the impact of such a process is reduced. Moreover, some sectors like processed food, garments, chemicals and high value-added products witness a significant expansion more than others. When the welfare gains coming from corruption are taken into account, the elimination of administrative barriers to trade is associated with lower, though positive, gains.

On the determinants of trade in services: evidence from the MENA region

This article examines the determinants of aggregate flows of service trade in MENA countries using an adapted version of the gravity model and a panel data set covering the 2000 to 2009 period for 21 countries and 10 sectors. A new determinant of trade performance is introduced: the number of bound commitments undertaken by a sector in the WTO as well as the availability of those commitments by mode of supply. The results show that being a WTO member boosts trade in services. In addition, the number of bound commitments increases exports, imports and trade in services. This positive and significant effect remains robust even after controlling for several econometric issues, namely, the selection bias related to the WTO membership and the endogeneity of commitments.11. We are grateful to the editor Mark Taylor and two anonymous referees for providing valuable comments and suggestions. We would also like to thank the participants to the ERF 18th Annual Conference and to the 32nd Annual Meeting of the Middle East Economic Association (MEEA). This work benefited from the financial support of Economics Research Forum (ERF). It does not reflect the Forum’s opinion.

Assessing the impact of trade reforms on informal employment in Egypt

This paper proposes an empirical investigation of the effect of trade liberalisation on informal employment in Egypt. The effect of trade liberalisation on the informal sector has been widely discussed at both empirical and public policy levels but was never tested empirically in Egypt. Thus, combining a microeconomic data set (the Egyptian Labor Market Panel Survey) with macroeconomic variables (tariffs), we try to assess to what extent trade reforms affected informal workers in Egypt. Our main findings show that trade liberalisation has reduced informal employment in Egypt. Such results remain unchanged under different robust testings.

Trade and access to finance of SMEs: is there a nexus?

Limited resources and barriers to entry are critically higher for small and medium enterprises (SMEs) than for large companies. One of the reasons explaining why the resources of SMEs are scarce is their limited access to financial services. This in turn reduces the likelihood of exporting. For this reason, using the census of SMEs done by the Central Bank of Egypt and the Egyptian Banking Institute, we try to examine the impact of access to finance on their export performance. We measure the latter by the extensive margin that means the probability of becoming an exporter and the probability of serving several markets. We found a significant and positive impact of dealing with banks and having banking facilities on the probability of exporting and that of exporting to more than one destination. Thus, wider and more efficient financial services are likely to increase the number of exporters and boost exports’ diversification.

On Trade Policies and Wage Disparity: Evidence from Egyptian Microeconomic Data

This paper proposes an empirical investigation of the effect of different trade barriers on wages in Egypt. The effect of trade barriers on wage disparity has been widely discussed at both empirical and public policy levels. This debate has mainly dealt with traditional tariff barriers. Less attention has been attributed to other barriers, such as non-tariff measures and red tape costs. However, these barriers – and in particular red tape costs –impede more than tariffs in developing countries. Thus, using a microeconomic dataset, this paper assesses to what extent different trade barriers affected wage disparities and employment in Egypt. These disparities are studied in three dimensions: on gender (males versus females), qualification (skilled versus unskilled), and regional (urban versus rural workers). The main findings show that red tape barriers have a higher impact than traditional tariffs on wage disparity. Female and blue-collar workers are more affected by such barriers. The effect of trade barriers on regional wage disparity seems to be less important then gender and qualification. Finally, when the effects of observable worker characteristics are filtered out, it turns out that wage premia are negatively affected by all trade barriers.

Do environment regulations matter for EU-MENA trade?

ABSTRACT This study examines the impact of environmental regulations stringency on agricultural trade between European Union (EU) and Middle East and North Africa (MENA countries). Using a gravity model and applying the zero-inflated Poisson (ZIP) model, we estimate the impact of environmental regulations stringency on bilateral agricultural exports between 28 EU and 20 MENA countries during the period 2001–2014. The results have showed that environmental regulations do matter for agricultural trade between both regions because in the presence of excessive zero trade observations, they act as significant fixed export costs that affect the probability of trade. More stringent environmental regulations stimulate innovative efforts in cost-saving green technologies, which increase productivity and positively affect agricultural exports. The results have favoured the revisionist Porter hypothesis (PH), according to which environmental regulations may stimulate innovative efforts, which mitigate the negative effects of higher fixed abatement costs and enhance trade competitiveness.