Trade costs and borders in global value chains

The effects of trade cost magnification due to multiple border crossings along global value chains are known from the scholarly literature and the reports of international organizations. However, evidence supporting or challenging this view has been limited. This article proposes two new measures of cumulative resistance to exports in global value chains and a measure of the average number of border crossings that build on the inter-country input-output framework. Data from the World Input-Output Database are supplemented with estimates derived from the UN Comtrade and UN TRAINS, allowing for an experimental computation of the accumulated import tariffs faced by exporters in 2001, 2005 and 2010. The average number of border crossings exhibits a slow upward trend, but the accumulated tariffs decline quickly. Trade liberalization therefore neutralizes the risk of higher cumulative protection associated with the international fragmentation of production. The benefits of liberalization or facilitation of trade within free trade agreements accrue to non-members, and this effect can now be estimated.