Trade costs are often cited as an important determinant of trade volume. This paper provides sufficient evidence to ascertain that today's trade issues in Northeast Asia go beyond the traditional mechanisms of tariffs, and include 'behind-the-border' issues. We find that variations in transaction costs along with trade mobility infrastructure facilities have significant influence on regional trade flows in Northeast Asia. This paper concludes that if tariffs were to become lower in Northeast Asia, the economies in that region could benefit substantially from higher trade, provided that trade facilitation measures were greatly strengthened.

Executive Summary

Ⅰ. Introduction

Ⅱ. Definition of Trade Costs and Their Relevance

Ⅲ. Methodology and Data
1. Measuring Transaction Costs
2. Measuring Trade Infrastructures
3. The Augmented Gravity Model
4. The Data

Ⅳ. Overview of Regional Trade and Trade Costs in Northeast Asia

Ⅴ. Impact of Trade Costs on Regional Trade: Estimated Results

Ⅵ. Conclusions

References