Archives for posts with tag: GDP

A recent report released by the World Economic Forum  says that border administration and infrastructure are the biggest problem to international trade.

Reducing supply chain barriers to trade could increase GDP by nearly 5% and trade by 15%

If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure and related services – even halfway to the world’s best practices, global GDP could increase by US$ 2.6 trillion (4.7%) and exports by US$ 1.6 trillion (14.5%). For comparison, completely eliminating tariffs could increase global GDP by US$ 0.4 trillion (0.7%) and exports by US$ 1.1 trillion (10.1%). The estimates of the impact of barrier reduction are conservative; they reflect improvements in only two of four major supply chain categories.

Why is lowering barriers so effective? The reason is that it eliminates resource waste, whereas abolishing tariffs mainly reallocates resources. Moreover, the gains from reducing barriers are more evenly distributed among nations than the gains from eliminating tariffs.

Of course, reducing supply chain barriers requires investment, while tariff reductions require only the stroke of a pen. However, many barriers can be traced to regulation. Detailed analysis can enable policymakers to prioritize the investments that are most critical and cost-efficient.

Tariffs are of course very important (see figure).

Source: WEF (2013)

Source: WEF (2013)

But removing supply-chain barriers would be even more successful, especially  in Africa (click on the image to enlarge).

Source: WEF (2013

Source: WEF (2013

From Richard Dowden on African Arguments

Remember Ghana in 2010?  That year the Ghana Statistical Service “improved their national accounts series by incorporating new data sources and better estimation methods, classifications and standards” said the World Bank. That led it to “re-base” the estimates and revise the level of GDP for 2006 upwards by a modest 60 percent. Yes, SIXTY PERCENT richer than we had been told. Overnight it became a middle income country. And Ghana has one of the best bureaucracies in Africa. God knows how they add up the figures elsewhere, but one thing is certain – Africa is a lot richer than the development lobby and aid agencies would have us believe.

I am horrified by the idea that the “development lobby” might benefit from an underestimation of GDP figures, though I see the point. But in the case of Ghana, it was a public statistical agency –one of the best in Africa– which was doing the miscalculation. How can that happen?

It is well known that macroeconomic statistics in the continent are not always reliable, but I expected the problem to be the exact opposite -I thought that governments had an incentive to make things look better than they are. Maybe the problem is just technical. Or maybe (but I hope I am wrong) the incentive structure is upside down and looking attractive to the “development lobby” is more important than looking attractive to the investment community.