Measuring Trade Costs in Economic Community of West African States (ECOWAS)


In this paper, we measure trade costs for ECOWAS countries and infer their impact on trade flows. The paper applies an unconditional general equilibrium trade model consistent with the Ricardian and heterogeneous firms’ models of trade to estimate a trade cost equation to obtain the tariff equivalent trade cost measure for ECOWAS countries. The method expresses the trade cost parameters as a function of observable trade data. We find that over the period 1980-2003, the cost of trading within SSA was the highest, compared to other regional groups, at an average tariff equivalent of 271.5 percent. On average ECOWAS countries traded with their trading partners at a tariff equivalent trade cost of 268.2 percent, higher than countries from other regional blocs within and out of SSA. With regards to trade flow involving ECOWAS countries, estimates of tariff equivalent trade costs indicates that on average ECOWAS countries traded among each other at a lower cost than with other trading partners from economic blocs out of ECOWAS. This could be attributed to the positive impact of regional trade integration efforts. Over the years especially since 2000, ECOWAS seemed to have promoted intra-ECOWAS trade especially with regards to export of manufactures. With regards to countries within ECOWAS, intra-ECOWAS trade costs with Cote d’Ivoirewere the lowest at an average tariff equivalent trade cost of 138.5 percent and this was significantly lower thanGhana,NigeriaandBenin.

Share and Cite:

C. Ackah, F. Ebo Turkson and K. Opoku, "Measuring Trade Costs in Economic Community of West African States (ECOWAS)," Modern Economy, Vol. 4 No. 1, 2013, pp. 56-65. doi: 10.4236/me.2013.41007.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] De, Prabir, “Impact of Trade Costs on Trade: Empirical Evidence from Asian Countries,” Asia-Pacific Research and Training Network on Trade Working Paper, 2007.
[2] J. E. Anderson and E. van Wincoop, “Trade Costs,” Journal of Economic Literature, Vol. 42, No. 3, 2004, pp. 691-751. doi:10.1257/0022051042177649
[3] H. A. Khan and J. Weiss, “Infrastructure for Regional Cooperation,” The Joint Workshop of ADBI and IDB in Seoul, 15-17 November 2006.
[4] M. Obstfeld and K. S. Rogoff, “The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?” In: B. S. Bernanke and K. S. Rogoff, Eds., NBER Macroeconomics Annual 2000, MIT Press, Cambridge, 2000, pp. 339-389.
[5] “The Costs and Benefits of Trade Facilitation,” Organisation for Economic Cooperation and Development (OECD), Paris, 2005.
[6] J. Francios and M. Manchin, “Institutional Quality, Infrastructure and Propensity to Export,” Policy Research Working Paper, The World Bank, 2006.
[7] A. Irarrazabaly, M. Andreas and D. O. Luca, “The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation,” CEPR Discussion Papers, 2010.
[8] O. B. Alaba, “EU-ECOWAS EPA: Regional Integration, Trade Facilitation and Development in West Africa,” Draft Paper for Presentation at the GTAP Conference, United Nations Economic Commission for Africa (UNECA), Addis Ababa, 2006.
[9] A. Portugal-Perez and J. S. Wilson, “Trade Costs in Africa: Barriers and Opportunities for Reform” World Bank Policy Research Working Paper, The World Bank, 2008.
[10] The World Bank, “Doing Business Database,” The World Bank, Washington, 2008.
[11] “Unlocking Africa’s Trade Potential. Addis Ababa,” United Nations Economic Commission for Africa, 2004.
[12] C. Carrere, “African Regional Agreements: Impact on Trade with or without Currency Unions,” Journal of African Economies, Vol. 13, No. 2, 2003, pp. 199-239.
[13] S. N. Karingi and V. Leyaro, “Monitoring Aid for Trade in Africa: An Assessment of the Effectiveness of the Aid for Trade,” African Trade Policy Centre Work in Progress 2009.
[14] Doing Business, “Making a Difference for Entrepreneurs,” The World Bank and the International Finance Corporation, 2011.
[15] United Nations Economic Commission for Africa (UNECA), “Assessing Regional Integration in Africa IV: Enhancing Intra-African Trade,” 2010.
[16] Economic Commission for Africa, “Trade Facilitation to Promote Intra-African Trade, Report of Committee on Regional Cooperation and Integration,” 2005.
[17] N. Banik and G. John, “Regional Integration and Trade Costs in South Asia,” ADB Institute Working Paper, 2008.
[18] C. Engel and J. H. Rogers, “How Wide Is the Border?” American Economic Review, Vol. 86, No. 5, 1996, pp. 1112-1125.
[19] M. Obstfeld and A. M. Taylor, “Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher’s Commodity Points Revisited,” Journal of the Japanese and International Economies, Vol. 11, No. 4, 1997, pp. 441-479. doi:10.1006/jjie.1997.0385
[20] J. Tinbergen, “Shaping the World Economy: Suggestions for an International Economic Policy,” Twentieth Century Fund, New York, 1962.
[21] J. H. Bergrstrand and E. Peter, “Gravity Equations and Economic Frictions in the World Economy,” In: D. Bernhofen, R. Falvey, D. Greenaway and U. Krieckemeier, Eds., Palgrave Handbook of International Trade, Palgrave-Macmillan Publishing, 2011.
[22] J. E. Anderson, “A Theoretical Foundation for the Gravity Equation,” American Economic Review, Vol. 69, No. 1, 1979, pp. 106-116.
[23] J. E. Anderson and E. van Wincoop, “Gravity with Gravitas: A Solution to the Border Puzzle,” American Economic Review, Vol. 93, No. 1, 2003, pp. 170-192. doi:10.1257/000282803321455214
[24] J. McCallum, “National Borders Matter: Canada-US Regional Trade Patterns,” American Economic Review, Vol. 85, No.3, 1995, pp. 615-623.
[25] C. Engel, “Comment on Anderson and van Wincoop,” In: S. Collins and D. Rodrik, Eds., Brookings Trade Forum 2001, Brookings Institute, Washington, 2002.
[26] D. Novy, “Gravity Redux: Measuring International Trade Costs with Panel Data,” 2010.
[27] D. T. Coe, A. Subramanian and N. T. Tamirisa, “The Missing Globalisation Puzzle,” IMF Working Paper, 2002.
[28] K. Head and J. Ries, “Increasing Returns vs National Product Differentiation as an Explanation for the Pattern of US-Canada Trade,” American Economic Review, Vol. 91, No. 4, 2001, pp. 858-876.
[29] J. Eaton and S. Kortum, “Technology, Geography and Trade,” Econometrica, Vol. 70, No. 5, 2002, pp. 1741-1779. doi:10.1111/1468-0262.00352
[30] T. Chaney, “Distorted Gravity: The Intensive and Extensive Margins of International Trade,” American Economic Review, Vol. 98, No. 4, 2008, pp. 1707-1721. doi:10.1257/aer.98.4.1707
[31] M. J. Melitz and G. I. P. Ottaviano, “Market Size, Trade, and Productivity,” The Review of Economic Studies, Vol. 75, No. 1, 2008, pp. 295-316. doi:10.1111/j.1467-937X.2007.00463.x
[32] T. Mayer and S. Zignago, “Market Access in Global and Regional Trade,” CEPII Working Paper, 2005.
[33] E. Helpman, J. M. Marc and R. Y. Stephen, “Exports versus FDI with Heterogeneous Firms,” American Economic Review, Vol. 94, No. 1, 2004, pp. 300-316. doi:10.1257/000282804322970814
[34] “Trade and Development Report,” UNCTAD/TDR/2008, United Nations Publication.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.