(APEC) member economies to the regional average could have a larger impact than reducing tariffs or non-tariff barriers to the same level. The gains from reform accrue primarily to the reformers themselves. The authors suggest that making trade policy more predictable reduces uncertainty, and therefore costs, for businesses. The reform measures outlined by the authors to raise the transparency of trade policy include: (i) binding tariff rates through the WTO; (ii) moving toward “flatter” tariff structures; (iii) making import and export delays less variable; (iv) lowering uncertainty surrounding unofficial payments; and (v) reducing favoritism in administrative decision making.

Using data from the World Bank’s investment climate surveys, Balchin and Edwards (2008) examine the relationship between the business climate, manufacturing productivity, and export performance in eight African countries: Egypt, Kenya, Madagascar, Mauritius, Morocco, South Africa, Tanzania, and Zambia. Based on principal components analysis, they construct several indices summarizing different aspects of the business climate, and find that indices representing micro-level supply constraints, macroeconomic conditions, and the legal environment are all significant determinants of the probability of exporting. At the country level, the quality of the business climate is found to matter most for export participation in Mauritius and Zambia. The study also finds that individual firm characteristics—such as size, age, ownership, use of information technology and managerial education levels—are important determinants of the decision to enter foreign markets. Indeed, larger and younger firms are more likely to export, as well as firms with a larger share of foreignowned firms. Moreover, a higher propensity to export is found for firms whose top manager has some form of tertiary education and for those having access to the Internet.

# **_Information and Communication Costs_**

Border costs associated with information barriers are important. Recent empirical work reflects this fact in assigning importance to modern information and communications technologies as determinants of international trade costs. Limao and Venables (2000), for instance, include a measure of telecommunications development (the number of mainlines) in their indices of infrastructure quality. Francois and Manchin (2007) take a broader approach, including data on mobile telephone usage. Consistent with the view that communications costs are an important component of trade costs, both papers find an overall positive impact of infrastructure quality, including communications infrastructure quality, on bilateral trade.

In line with these arguments, expanded use of the Internet appears to lower the costs of trading internationally. It is now much easier—and cheaper—to obtain information on foreign market conditions, product standards, and consumer preferences through the Internet. This should lower the costs of entering foreign markets and promote trade at the margin. Freund and Weinhold (2004) provide the first empirical evidence in support of this theory. They find that a 10 percent increase in the number of a country’s Web hosts is associated with an export gain of around 0.2 percent. Although this effect is statistically significant, it is relatively small in economic terms. Moreover, they find that development of the Internet does not seem to have brought about significant changes in the impact of distance on trade. This outcome may be consistent with a scenario in which the Internet significantly reduces the fixed costs of market entry, such as obtaining 19