WTO Trade Cost Index

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How do trade costs compare across sectors and regions? How have global trade costs evolved over time? Based on estimates of bilateral trade costs for 75 economies and 25 economic sectors between 1995 and 2022, this website shows the global Trade Costs Index (TCI) across all goods and commercial services sectors, as well as its incidence across regions, income groups and economies (Regional and Sectoral Patterns), and the evolution of the TCI over time (Trends Over Time). The full TCI dataset can be downloaded from the Data Download section and the underlying methodological studies can be found in the Methodology section. The TCI also provides a basis for the analysis of how trade policy barriers compare to other trade costs, the degree of restrictiveness of non-tariff measures, and who bears these costs. Studies that use the TCI to answer such questions are available in Research and Analysis.

Background

The Trade Cost Index (TCI) has been produced by the Economic Research and Statistics Division (ERSD) to provide an overview of global economic integration across sectors, economies, and years. The aim is to complement statistics that the WTO provides on trade policies that impact trade costs, such as average tariffs, the number of non-tariff measures or regional and preferential trade agreements. Rather than constructing a trade cost index from information on specific policy measures or other barriers, the TCI is inferred from a comparison between international and domestic trade flows. Hence, the TCI captures the cost of trading internationally relative to trading domestically and reflects all frictions that make international trade more costly or difficult than domestic trade. This includes transportation costs, trade policy barriers, costs to comply with foreign regulations, as well as communication, information and other transaction costs.

Main Findings

• In 2022, international trade costs were on average three times higher than domestic trade costs. Global trade costs declined between 1995 and 2022, but most of the reduction occurred before 2008. Trade costs then increased during the 2008-09 financial crisis and declined more slowly thereafter. The early gains were broad-based across regions, while developments after the financial crisis, particularly from the mid-2010s onwards, varied across regions.
• Trade costs vary substantially across regions. They are highest in the African and South and Central American economies in the sample, often more than one-third above the global average, with African economies recording the highest costs. Europe and Asia have trade costs close to the global average. North America records the lowest costs, while the Middle East and the CIS region are moderately above the global benchmark.
• Trade costs also vary across sectors. Global trade costs are lowest in manufacturing, higher in services and highest in agriculture. Since 1995, the largest reductions in global trade costs have occurred in digitally deliverable services, such as business and professional activities, followed by manufacturing sectors such as transport equipment and electrical and optical equipment. By contrast, trade costs in agriculture and trade and transport services ended the period at broadly the same levels as at the beginning.
• Trade costs tend to fall as income per capita rises. Middle- and low-income economies face higher trade costs than high-income economies. Least-developed countries (LDCs) have the highest trade costs, at around 50 per cent above the level observed in high-income economies. This disparity persists despite convergence: between 1995 and 2022, trade costs declined substantially faster in middle- and low-income economies than in high-income economies.

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