The role of trade facilitation and non- tariff barriers in the context of increasing regional integration : The case of Oman and the Indian Ocean

- 1 January 2020

Trade topics: Regional Integration, Trade & Investment Facilitation, Non-tariff Barriers, GTAP

Oman has been involved in various regional trade integration within the MENA region but has also displayed longstanding Indian ocean connection with the aim to diversity its trading partners and market opportunities. The Indian ocean has always been a trade nexus connecting Asia, the Middle East and Africa and has received new impetus in the course of the current decade. Along with other countries of the region, Oman created in 1997 the Indian Ocean Rim Association (IORA) with the objective of promoting trade liberalization through trade and investment facilitation. However, although the Indian ocean is home to 40% of global trade, intra-trade among IORA countries amounts to a quarter of their world trade, a relatively low figure compared to the other main region trade blocs such as the EU, NAFTA and APEC. It is argued that commitments by member countries to harmonize trade policy with respect to tariff, non-tariff barriers (NTBs), customs and other trade facilitating measures would potentially enhance regional integration and reduce the intra-trade performance gap. The overall objective of this research project is to assess the prevalence of NTBs in the IORA region and analyze the impact of non-tariff measure (NTMs) and trade facilitation on the economy of IORA members, giving special consideration to the issue of technical measures (SPS and TBT) and trade facilitation indicators. Specifically the project will a) analyze the IORA trade patterns and assess the prevalence of NTMs in the region using the region NTMs notifications to WTO; b) estimate the ad-valorem tariff equivalents (AVE) equivalent of non-tariff measures with a particular focus on sanitary and phyto-sanitary measures and technical barriers to trade; and c) evaluate the economy-wide and sectoral effects of deepening IORA region through trade policy reforms, including more efficient trade facilitation measures. A three step approach will be used to achieve the objectives of the project. In a first step, the study will specify an augmented gravity model to estimate, using various econometrics techniques, the ad-valorem equivalents of non-tariff measures. The second step is to use a general equilibrium model, GTAP to analyze trade policy reforms based on the estimated ad-valorem equivalents. The third step is to simulate improvement in the efficiency of trade facilitation measures using built-in GTAP techniques.

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