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Contraband Trade: Research Methods

Contraband Trade: Research Methods. Muttukrishna Sarvananthan P oint P edro I nstitute of D evelopment (PPID) Point Pedro, Sri Lanka. www.pointpedro.org. Purpose of the Presentation. To share knowledge of methodologies for researching informal markets with the research staff of LIRNEasia.

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Contraband Trade: Research Methods

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  1. Contraband Trade: Research Methods Muttukrishna Sarvananthan Point Pedro Institute of Development (PPID) Point Pedro, Sri Lanka. www.pointpedro.org

  2. Purpose of the Presentation To share knowledge of methodologies for researching informal markets with the research staff of LIRNEasia

  3. Objectives of the Presentation • Provide a snapshot of all available methods of detecting and estimating contraband trade in goods and services • Discuss what method/s would be most useful for the study of the telecommunication goods & services

  4. What is Contraband Trade? Illicit Trade between any two or more countries.

  5. Types of Contraband Trade • False invoicing (Technical Contraband Trade – TCT) Partial evasion of tariffs • Unrecorded trade (Physical Contraband Trade - PCT) Total evasion of tariffs

  6. Types of False Invoicing • Under-invoicing of exports • Over-invoicing of exports • Under-invoicing of imports • Over-invoicing of imports

  7. Detecting False Invoicing • Partner-Country Data Comparison Method • Unit Price Comparison Method

  8. Partner-Country Data Comparison Method - limitations • Exports – fob (free-on-board) Imports – cif (cost, insurance & freight) • Difference in classification: SITC (standard International Trade Classification) HS (Harmonised System) of classification • Time lag between export and import – difference in fiscal year

  9. Partner-Country Data Comparison Method – limitations continued • This method becomes ineffective if one partner country is a free port. • This method may not be effective if faking takes place at both ends. • Entrepot trade (growing feature of globalisation) recording • Recording trade on the basis of the parent country of the company concerned

  10. Partner-Country Data Comparison Method – limitations continued • Recording transshipment goods

  11. Unit Price Comparison Method • Qualitative differences • Capital goods – made-to-order • Market imperfections

  12. Unrecorded Trade detection methods • Comparison of production data with consumption, net exports & inventory production + imports = consumption + exports + inventory If Left < Right then we may infer contraband trade taking place • Market price comparison method If the market price is less than tariff + domestic taxes inclusive price we could infer contraband trade. This methods would be less effective if there is non-tariff barrier (quantitative restriction) to trade. (imperfect market/s)

  13. Unrecorded Tradeestimation methods • Survey method – semi-structured interviews, questionnaire-based interviews, survey of markets for contraband goods. Extrapolation • Delphi technique

  14. Definition of Delphi • Delphi is basically a technique for gathering and processing the judgments / informed opinions of a group of individuals that are well informed (knowledgeable people) and question them on the issues/trends occurring in the area/field on the basis of their informed judgments. (Chaudhari, 1995: 6)

  15. Definition of Delphi - continued • Basic characteristics of this technique are as follows: (a) structured questionnaire based interrogation of experts (knowledgeable people) on the issue/s being probed. (b) controlled feedback of summarised responses to the respondents of the first round, so as to enable review his/her earlier response to every respondent of the previous round. (c) anonymity of responses. (d) repeat iterations till broadly converging responses are received or reason for unlikely convergence are documented. (Chaudhari, 1995: 6)

  16. Relevant Issues • Source of official data • ‘goods’ vs. ‘bads’ • goods vs. services

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