Trade Costs in Malaysia: Pattern and Challenges

Transportation costs have been shown to affect international trade, both in theory and empirical evidence. It is an important component of trade costs. As tariff barriers have been progressively lowered through unilateral, regional as well as multilateral efforts over the years, non tariff trade costs, which include transportation, play an increasingly important role in affecting a country’s trade. The purpose of this paper is two-fold: (i) to profile and analyse trade costs in Malaysia using available data, and (ii) to ascertain the main challenges faced in lowering trade costs in the country. The study covers the period from 1996 – 2009 with a focus on Malaysia’s exports to the US and Australia.