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Why Is Trade More Costly For Poor Countries? A New Database Gives Us Some Answers

Jean-François Arvis's picture

Airplanes on a runway. Source: World Bank.It is far more expensive for Tunisia to trade manufactured goods with its next-door neighbor, Algeria, than to trade them with distant France. Similarly, the cost of trading agricultural goods between neighbors Algeria and Morocco is more than twice as high as it is between Algeria and Spain. What hinders countries that are so close to each other – and that share common languages and elements of culture – from exchanging goods?

This is one of the questions we sought to answer in developing a new trade costs database, which is a joint project between the World Bank and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). In constructing the database, we were initially motivated by a need to provide understandable estimates of trade costs to clients in North Africa. But the database has broader reach: being able to measure and explain the intensity of trade is of practical importance for many countries and for many aspects of our work at the Bank.