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Tuesday, 04 June 2013 10:30

The costs and challenges of implementing trade facilitation measures

Written by Evdokia Moïsé

This study provides data on the costs and challenges of implementing trade facilitation measures currently under negotiation in the WTO. It updates an earlier study undertaken in 2005. This updated study, based on data and insights from nine additional countries, confirms earlier findings identifying the measures that present the greatest challenges to developing countries in implementing reforms. The study also confirms that the costs of putting in place and maintaining trade facilitation measures are not particularly large and are far smaller than the benefits gained from implementing these measures. Moreover, an increasing amount of technical and financial assistance to implement these measures has been made available to developing countries over the last decade.

Among the three main areas of focus — transparency and predictability; procedural simplification and streamlining; and coordination and cooperation between border agencies — equipment and infrastructure seem to be the most expensive elements of trade facilitation, in particular the introduction and use of information technologies and the establishment of single window mechanisms. However, countries themselves report that the most important area is training, given its fundamental role in bringing about sustained change in the business practices of border agencies.

The study highlights the distinction between measures that are expensive to put in place, thus often requiring financial support, and those that are relatively inexpensive but require sustained political commitment to adopt and maintain over the long term. A further distinction can be made between capital expenditure and recurring costs: measures requiring significant upfront investments are not necessarily costly to operate.

The trade facilitation costs reported here are not particularly large in comparison to either the budget and total staff of Customs agencies, or against the very significant gains in terms of trade cost reductions that these measures can bring. The OECD Trade Facilitation Indicators suggest that for developing countries, the cost reduction resulting from these measures would be in the order of 14% on average. A cost-benefit evaluation of trade facilitation should be made over a long time frame, as some measures may involve large one-off costs but deliver long-term benefits.

The total capital expenditure to introduce trade facilitation measures in the reviewed countries ranged between EUR 3.5 and EUR 19 million. Annual operating costs directly or indirectly related to trade facilitation did not exceed EUR 2.5 million in any of these countries. In all countries significant modernisation and facilitation programs are in place and significant progress has already been made towards implementation of the measures under WTO negotiation.

Furthermore, in addition to the effort to invest domestic resources and energy in implementing trade facilitation, there has been no shortage of donor support, which increased by 365% over a ten-year period, reaching USD 381 million in 2011. The largest beneficiary was Africa, which received USD 200 million in 2011, a 17-fold increase from the 2002-05 base-line average. In short, the costs of reducing border bottlenecks are modest — even tiny relative to the expected benefits. And ample development aid appears to be available to implement required changes.

  • Executive summary to: The costs and challenges of implementing trade facilitation measures, by Evdokia Moïsé, OECD Trade Policy Papers, No. 157, May 2013.  Readers can access the report, 19 pages, here.

 

This resource is copyright © 2013 the OECD and was published via TradeMark SA.

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