chapter  8
22 Pages

The geography of trade and the network effects of economic diplomacy in the South

ByMARIE - LISE E . H . VAN VEENSTRA , MINA YAKOP AND

Firms that want to start exporting must overcome many barriers. The existence of substantial and significant border effects suggests that although many formal (conventional) trade barriers have decreased or been removed over the last decades, there are many other – often intangible – hurdles that need to be passed in international trade. For instance, multilateral negotiations in the WTO have led to a gradual removal of many tariffs. Also, transport costs have been falling steadily. In spite of such trends, the effect of distance is increasing (van Bergeijk 2009). Cultural and institutional distance seems to take an ever more important role in international (trade) relations. Ramaswami and Yang (1990) describe several (perceived) barriers to trade for firms that want to start exporting or expand their current exports. They distinguish four categories of barriers: export knowledge (informational barriers), internal resource constraints (financial or human resources), procedural barriers (language, cultural differences, red tape) and exogenous barriers (fluctuations in the exchange rate, taxation, corruption, etc.). Most of these barriers apply in particular to developing countries (Brunetti

et al. 1997). Keesing and Singer (1991) point out that in developing countries, exporters had more difficulty in obtaining permissions and dealing with restrictions and controls. Delivery is often slower and less reliable in developing countries, quality and service levels are often lower. Developing countries thus could gain more from (public) export promotion. For exporters in developing countries, quality standards abroad (in developed countries) are often higher than domestic standards (De Wulf 2001), making it more difficult for exporters to compete in foreign markets. (Potential) exporters in industrialized countries are hampered less by such barriers to export and especially so for exports between the most developed countries. Exports to and from developing countries are therefore most difficult in terms of crossing such barriers to trade.