The self-imposed embargo: customs-related transaction costs of North Cyprus

Abstract

Customs-related transaction costs are a major barrier to the expansion of international trade. These costs are a financial burden to importers and ultimately to consumers. This study measures the transaction costs that are created by the obsolete customs and port handling procedures in North Cyprus. Such an analysis is important because since 1974 North Cyprus has suffered under a direct trade embargo. All its imports and exports must come or go via the ports in Turkey. This study finds that excessive trade transaction costs inflicted by the inefficient port handling and customs services of North Cyprus is between 1.42 to 2.96 times as costly as the extra transportation costs caused by the international embargo on its direct trade with the rest of the world.