This chapter analyses the economic impact of trade facilitation and discusses the distribution of potential benefits across countries. Unlike earlier research, the analysis highlights differences in trade transaction costs due to the efficiency and integrity of interacting businesses and administration, the characteristics or kind of traded goods and the size and type of trading businesses. Assuming trade facilitation to lead to a reduction in trade transaction costs of 1% of the value of world trade, aggregate welfare gains are estimated to amount to about USD 40 billion worldwide, with all countries benefiting and non-OECD countries experiencing the biggest gains in relative terms.

Recent OECD research provides new evidence that customs and administrative procedures have substantial effects on trade flows. Metrics for customs and administrative procedures from the World Bank’s “Doing Business” survey (2005) use gravity models to estimate the effects of customs and administrative procedures on trade flows between bilateral trade partners. The results show that all countries can benefit from more efficient customs and administrative procedures, with the greatest benefits accruing to countries with the least efficient customs and administrative procedures. To gain the greatest benefit from improving customs and administrative procedures, both trade partners need to make efforts, even if these efforts are not equivalent.

This chapter examines the economic impact of trade facilitation and in particular the link between trade facilitation and trade flows, government revenue and foreign direct investment. It finds that improved and simplified customs procedures would have a significant positive impact on trade flows. It further shows that a large number of mostly developing countries have managed to boost government revenue by implementing customs modernisation programmes that result in more efficient collection of trade taxes. In addition, the chapter demonstrates that facilitated cross-border movement of goods would have a positive effect on countries’ ability to attract foreign direct investment and better participate in international production supply chains.

The aim of this chapter is to deepen understanding of the costs and benefits of trade facilitation for developing countries, as well as the costs of not undertaking trade facilitation. It focuses particularly on customs operations and customs reform undertaken recently in a number of developing countries, reviewing the key problems that such reforms have sought to overcome, the approaches that countries have adopted to address them, and the results. The discussion is supported by illustrative country case studies, to explore in further detail the rationale, the methods and the results of reform.

This chapter analyses customs automation, one of the most powerful tools for increasing customs efficiency. It focuses in particular on benefits and implementation costs. It aims to contribute to discussions in the WTO Negotiating Group on Trade Facilitation. Cost estimates for customs-related lending projects show that the costs of implementing, maintaining and operating automated customs systems are substantial. However, the very great majority of WTO members have already implemented such systems and past experience shows that, over time, the financial benefits have very often exceeded costs. Among the various lessons learned from successful implementation of automated customs systems, two are particularly highlighted. First, automation should not be considered a panacea for facilitating trade; and second, commitment and financial sustainability are prerequisites for successful customs modernisation involving automation.

This chapter seeks to analyse the costs of introducing and implementing trade facilitation measures, in response to the WTO 2004 Modalities for Negotiations on Trade Facilitation, which decided to “address the concerns of developing and least-developed countries related to cost implications of proposed measures”. It draws on the experience of 15 non-OECD member countries, which have recently introduced, or are in the process of introducing, trade facilitation measures proposed for inclusion in a future WTO agreement on trade facilitation. The aim of the study was to provide indications as to the relative complexity of the measures, the challenges presented by their implementation and approaches for overcoming such challenges in practice.

The OECD Global Forum on Trade Facilitation was held in Colombo, Sri Lanka, on 18-19 October 2005, in order to provide an opportunity for representatives from government, business, research institutions, civil society and international organisations to discuss the implications of ongoing WTO negotiations on trade facilitation for developing countries. The Forum was organised by the OECD Trade Directorate, in collaboration with the government of Sri-Lanka. It was part of the OECD effort to contribute to the WTO members’ endeavours to “seek to identify ... trade facilitation needs and priorities, particularly those of developing and leastdeveloped countries, and ... also address the concerns of developing and least-developed countries related to cost implications of proposed measures“, as set out in Annex D of the WTO July Package, setting the modalities for negotiations on trade facilitation. Around 85 people representing 45 countries from all parts of the world participated in the event.