The Enabling Trade Index 2016 framework
The Global Enabling Trade Report (GETR) series has been published since 2008, initially on an annual basis, and biennially since 2010. From the beginning, the assessment has been based on the Enabling Trade Index (ETI), which assesses the extent to which economies have in place institutions, policies, infrastructures and services facilitating the free flow of goods over borders and to their destination. The ETI was developed within the context of the World Economic Forum’s Enabling Trade program, with the help of leading academics, partner organizations and companies, and building on the Forum’s long tradition of research on development and its expertise in benchmarking.
The Forum and the Global Alliance for Trade Facilitation have joined forces to produce the 2016 edition of the Report and to ensure maximum impact. The Report and the Index have been integrated into the Alliance’s work stream on metrics and measurements (see Chapter 1 for more information). Following a brief description of the ETI framework, its methodology, and its data, this chapter presents the key messages emerging from the 2016 edition: millions of businesses and entrepreneurs around the world are still missing out on the opportunities offered by trade due to prohibitive costs and high barriers to entry; the limited access that many of the largest emerging countries offer to their domestic market; and the huge trade-enabling potential of border administration reforms. The analysis continues with the general trends and an overview of the regional results, and concludes with a brief commentary on the performance of selected economies.
The Economy Profiles at the end of the Report and available online are a useful complement to this chapter.1 They present the detailed performance in the ETI of each economy as well as additional information and data to enhance the analysis: economic and trade indicators, a unique dataset on the most problematic factors for exporting and importing, and a dashboard combining the OECD Trade Facilitation Indicators and the current status of the World Trade Organization’s Trade Facilitation Agreement (TFA) ratification and notifications.
THE ETI FRAMEWORK
The Enabling Trade Index assesses the extent to which economies have in place institutions, policies, infrastructures and services facilitating the free flow of goods over borders and to their destination.
The scope of the ETI is therefore much broader than trade facilitation as approached by most international organizations, including the World Trade Organization, which focuses on the simplification and harmonization of international trade procedures, notably in the context of the TFA. Though not the sole object of the ETI, border administration features prominently in the ETI. In fact, pillar 3 is now dedicated to this topic, while pillars 4 through 6 include several indicators that capture concepts covered by the TFA.
As a composite indicator, the ETI consists of an aggregation of individual indicators measuring various trade-enabling factors. These factors are organized into seven pillars, which are, in turn, organized, into four larger, umbrella groupings, called subindexes:
A. Market access.
This subindex measures the extent and complexity of a country’s tariff regime, as well as tariff barriers faced and preferences enjoyed by a country’s exporters in foreign markets. There are two pillars in this subindex:
- Pillar 1: Domestic market access (6 indicators). This pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs.
- Pillar 2: Foreign market access (2 indicators). This pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements, or granted in the form of trade preferences.
B. Border administration.
This subindex assesses consisting of a single pillar:
- Pillar 3: Efficiency and transparency of border administration (13 indicators). This pillar assesses the efficiency and transparency of border administration. More specifically, it captures efficiency, transparency and costs associated with importing and exporting goods. It includes an assessment of the range, quality and comprehensiveness of key services offered by customs and related agencies, and the average time, costs and number of documents required to, respectively, import and export goods. The pillar also assesses the time predictability of border procedures, as well as the transparency of the process—as measured by the availability and quality of information provided by border agencies—and the prevalence of corruption.
This subindex assesses the availability and quality of transport infrastructure of a country, associated services, and communication infrastructure, necessary to facilitate the movement of goods within the country and across the border. It consists of three pillars:
- Pillar 4: Availability and quality of transport infrastructure (7 indicators). This pillar measures the availability and quality of domestic infrastructure for each of the four main modes of transport: road, air, railroad and seaport infrastructures. Air connectivity and sea line connectivity are also assessed.
- Pillar 5: Availability and quality of transport services (6 indicators). A necessary complement to the previous one, this pillar assesses the availability and quality of transport services, including the presence and competencies of shipping and logistics companies in the country, as well as the ease, cost and timeliness of shipment. In addition, this pillar includes a measure of postal efficiency
- Pillar 6: Availability and use of ICTs (7 indicators). This pillar evaluates the availability and quality of information and communication technologies (ICTs) in a country, as approximated by the use of mobile telephony and Internet by the population at large, by companies for business transactions, and by the government for interacting with citizens. It also takes into account the quality of internet access, as broadband access has become the norm, to fully leverage the potential of the internet.
D. Operating environment.
This subindex consists of a single pillar:
- Pillar 7: Operating environment (16 indicators). This pillar assesses the quality of a country’s operating environment, which significantly impacts the capacity of companies that export, import, trade and/or transport merchandise to do business. It assesses a country’s level of protection of property rights, the quality and impartiality of its public institutions, efficiency in enforcing contracts, the availability of finance, openness to foreign participation in terms of foreign investments and labour, as well as the level of personal security approximated by the incidence of crime and terrorism.
Pillar scores are computed by aggregating the individual indicators, which are first converted to a common scale ranging from 1 to 7, with 7 indicating the best possible outcome. Subindex scores are in turn the result of the aggregation of the comprising pillars. Consequently, subindex and overall ETI scores also range from 1 to 7. Appendix B presents the detailed structure of the Index and a description of all of the steps of its computation, including normalization and aggregation, as well as the Technical Notes and Sources section, which provides detailed descriptions of each indicator and their data sources.
Changes to the Methodology
Although the objective and definition of the ETI has remained the same since 2008, the framework has evolved since its inception, motivated by the availability of new indicators and discontinuity of others; feedback collected over the years; new literature development; and empirical evidence. The methodology for the 2016 vintage is largely the same as the one used 2014, when the Report underwent a major review. However, the changes in the methodology and availability of some of the underlying indicators affected comparability of the 2016 results with those of 2014 (see Changes to the ETI methodology). In order to provide a meaningful reference point, the results for 2014 reported in Table 1 below have been re-computed using the updated methodology and differ from those released in 2014, but do not invalidate them. The re-computed 2014 results are used consistently throughout this Report.
Data and coverage
The 57 indicators used in the ETI 2016 are sourced from various organizations, several of which provided guidance and support in designing the ETI framework, creating entirely new indicators or providing privileged or advanced access to their proprietary datasets. The Global Express Association, the International Trade Centre, UNCTAD, the World Bank, and the World Trade Organization are among the long-standing data partners of the project. 2
In addition, 22 indicators, accounting for 36 percent of the ETI score, are derived from the World Economic Forum’s Executive Opinion Survey (EOS).3 The Forum has conducted the EOS annually for over 30 years, making it one of the longest-running and most extensive global surveys on the business environment.4 The 2016 edition of the EOS gathered the opinion of 14,000 respondents from 141 economies.5 The EOS results are used in the computation of the Enabling Trade Index and other Forum indexes, including the Global Competitiveness Index, the Networked Readiness Index, the Travel & Tourism Competitiveness Index and the Global Gender Gap Index, as well as in a number of regional studies. In addition, the EOS data has long served a number of international and local organizations, government bodies, academia, as well as the private sector to inform policy work, strategies and investment decisions.
The 2016 edition of the ETI covers 136 economies, which together account for 98 percent of world GDP and 98.3 percent of world merchandise trade. Brunei Darussalam, the Democratic Republic of Congo, Sierra Leone and Trinidad and Tobago are covered for the first time, and Tajikistan, which was not covered in 2015, was reinstated. Angola, Burkina Faso, Guinea, Guyana, Haiti, Libya and Myanmar were excluded, as it was not possible to administer the Executive Opinion Survey there. Data availability is the key factor driving coverage expansion. Among the 136 economies, 82 (60 percent) have data for all 57 indicators.6 No economy misses more than four data points across the entire Index. In total, only 87 data points are missing (1.1 percent).