e. the challenges of implementing the trade facilitation ... · meeting the challenges of...

WORLD TRADE REPORT 2015

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E. The challenges of implementing the Trade Facilitation Agreement

This section of the report looks at the various challenges involved in ratifying and implementing the Trade Facilitation Agreement (TFA), particularly for developing and least-developed countries (LDCs). It first assesses the implementation needs of developing countries, then goes on to evaluate the costs associated with implementing the measures covered by the TFA. It proceeds to explain the role of the Trade Facilitation Agreement Facility in meeting the challenges of implementation and to review the key success factors identified in previous trade facilitation reforms. Finally, it underlines the importance of monitoring implementation of the TFA and its economic impacts.

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II. SPEEDING UP TRADE: BENEFITS AND CHALLENGES OF IMPLEMENTING THE WTO TRADE FACILITATION AGREEMENT

Some key facts and findings

• Trade facilitation is a high priority for developing economies and least-developed countries (LDCs), according to surveys of WTO members. However, the cost of implementing trade facilitation is difficult to quantify due to a lack of systematic data collection. Available data suggests that costs vary considerably depending on the type of trade facilitation measures considered and country specific circumstances. Trade facilitation reforms are, on average, less costly than broader initiatives, such as customs modernization, and upgrades of transport infrastructure.

• Strong political will at the highest levels and commitment to the process of trade facilitation are the most important success factors of any trade facilitation reform. Other key success factors include cooperation and coordination between ministries and border management agencies, private sector stakeholder participation, and adequate financial, human and material resources.

• The Trade Facilitation Agreement Facility will play a vital role in matching demands for capacity-building from developing countries and LDCs with the supply of capacity-building and assistance from donors.

• Efforts to monitor the progress of the TFA after it comes into force should include evaluations of both implementation costs and economic impacts.

Contents1 Overviewofimplementationchallenges 108

2 Assessingtheimplementationneedsofdevelopingcountries 108

3 Implementationcostsoftradefacilitationreform 116

4 TheTradeFacilitationAgreementFacility(TFAF) 124

5 Countryexperiencesofsuccessfulreforms:whatarethelessons? 127

6 MonitoringimplementationoftheTFA 132

7 Conclusions 132


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1. Overviewofimplementationchallenges

As the first multilateral trade agreement adoptedsince the conclusion of Uruguay Round in 1994, theWTOTradeFacilitationAgreement(FTA)representsalandmarkachievementfortheorganization.However,inorder to realize thegainspromisedby theagreement,membersmustnowturntothedualtasksofratificationand implementation. In the first place, the TFA willonly enter into force once two-thirds of the WTOmembership have formally accepted the Agreement.Oncethisinitialchallengeismet,andinordertoensuresuccessful implementation, it is important to identifythe main issues and challenges that members mayencounterwhenputtingtheAgreementintopractice.

A high degree of political commitment on the part ofdeveloped, developing and least-developed countriesis crucial for both rapid ratification and successfulimplementation of the TFA, but this support cannotbe taken for granted. According to the results of amonitoring exercise undertaken in the context ofthe Fifth Global Review of Aid for Trade, althoughdeveloping countries and LDCs give a high priorityto implementing trade facilitation, they still express agreatdealofuncertaintyabout itsbenefits.Theyalsoassigndifferentprioritieswhenitcomestorequestingtechnical assistance to implement specific provisionsof the TFA. Donor countries also continue to givehigh priority to trade facilitation, as reflected by theirrising aid commitments and disbursements, but manyare concerned about a potential lack of politicalwill in partner countries, that could hinder the fullimplementation of the measures covered by the TFA.Credible estimates of the likely benefits of the TFAsuchasthosefoundinSectionDofthisreportshouldbolstersupportfortheagreement.

Costs associated with implementing specific tradefacilitationprojectsandmeasurescouldalsobeseenasimpedimentstoswiftratificationoftheTFAanditsimplementation. Empirical evidence suggests that themagnitude of the inception costs associated with agiven trade facilitation measure can vary significantlyfromonecountrytoanother,reflectingeachcountry’suniquecircumstancesintermsofitsinitialstate,needs,priorities and level of ambition with regard to tradefacilitation. Overall, measures related to transparencyand to the release and clearance of goods tend toentailimplementationcostslowerthanthoseattachedto measures relating to formalities requirements,customsautomation, andcustomsandborderagencycooperation. However, the implementation costs oftrade facilitation reform remain smaller than thoseassociated with broader initiatives, such as customsmodernizationandtransportfacilitation.

Important lessons have already been learned fromexisting trade facilitation reforms that should makeTFA implementation easier. Empirical evidencesuggests that different, often interrelated, factorsplay a critical role in the successful implementationof trade facilitation reforms.While financial resourcesavailabilityandsustainabilityareessential,theydonotconstituteasufficientconditionforautomaticsuccessin implementing trade facilitation initiatives. Otherfactorsplayamajorroleinsuccessfultradefacilitationreforms, such as strong commitment at the highestlevel,cooperationandcoordinationbetweenministriesandgovernmentagencies,privatesectorstakeholders’participation,adequatehumanandmaterialresources,andtheadoptionofasequencingapproach.

The presence of strong special and differentialtreatmentprovisionsintheTFAshouldeliminatemanypotentialobstaclesto implementation.UndertheTFA,eachdevelopingcountryandLDCmemberwillhavetheopportunitytoestablishitsownuniqueimplementationschedule based on its capacity and needs. In thiscontext, the WTO, through the newly created TradeFacilitation Agreement Facility (TFAF), could play aunique role in supporting the implementation effortby matching and coordinating countries requestingtechnicalassistancewithcountriessupplyingcapacity-buildingandtechnicalassistance.

ThefactthatchallengesmayemergeatanytimeduringtheprocessofTFAimplementationhighlightstheneedfor ongoing efforts to monitor the operation of theagreement. An effective monitoring and evaluationof the TFA’s economic impact requires reliabledata, indicators and analytical tools, such as impactevaluationstudies.

2. Assessingtheimplementationneedsofdevelopingcountries

Section D of this report identified a wide range ofpotentialbenefitsfromtheTFAonceitisimplemented.In addition to reducing trade costs and increasingthe volume of trade between WTO members, theAgreementshouldraisemembers’ratesofGDPgrowth,promote job creation, diversify exports, increasecustoms revenue, and expand trade opportunitiesfor small and medium-sized enterprises (SMEs).Developing economies, and LDCs in particular, areexpected to benefit disproportionately from theTFA, especially under rapid and full implementationscenarios.

However, if the benefits of trade facilitation are solargeandobvious,thisraisesthequestionofwhysomecountries were reluctant to engage in negotiations

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on trade facilitation in the first place, and why somemightbeslow to ratifyand implement theTFA.Someof this hesitancy can be explained by uncertainty onthepartofmembers,notonlyaboutthemagnitudeofthegainsfromtheAgreementbutalsoaboutthecostsandtimingofimplementation.Byincreasingawarenessof the estimated costs and benefits of the TFA, thisreport should help members more accurately gaugetheir implementation needs, thereby advancing theratificationprocess.

Existing studies of trade facilitation reforms indeveloping countries, including Moïsé (2013) havefoundthat implementationcoststendtobeverysmallcompared to the benefits that these programmesdeliver. However, even modest implementation costsmay exceed the ability of least-developed and otherlow-income countries to pay. In order to address theparticular challenges facedbydevelopingeconomies,the TFA contains special and differential treatmentprovisionsthatallowthesecountriestodeterminewhentheywillimplementcertainprovisionsoftheAgreement,andtoidentifyprovisionsthatwillonlybeimplementedoncethenecessarycapacityhasbeenbuilt.Asalreadynoted inSectionB, thesecommitments fall into threecategories:

• Category A: “provisions that a developing countryMember or a least-developed country Memberdesignates for implementation upon entry intoforceof thisAgreement,or in thecaseofa least-developed country Member within one year afterentryintoforce”;

• Category B: “provisions that a developing countryMember or a least-developed country Memberdesignates for implementation on a date after atransitional period of time following the entry intoforceofthisAgreement”;and

• Category C: “provisions that a developing countryMember or least-developed country Memberdesignates for implementation on a date after atransitional period of time following the entry intoforceofthisAgreementandrequiringtheacquisitionofimplementationcapacitythroughtheprovisionofassistanceandsupportforcapacitybuilding”.

Category C commitments provide a specific rationalefor assessing the technical assistance needs ofdevelopingandLDCmembersinimplementingtheTFA.On two occasions, the WTO Secretariat conducted atechnical assistance needs assessment exercise tohelp developing and least-developed WTO membersidentify their needs and priorities with regard toimplementingtheTFA.Whiletheresultsoftheseself-assessments remainconfidentialandcannotbeused,

other existing and available, albeit limited, sources ofinformation provide insights on developing countries’aidpriorities,expectationandneeds.

(a) Reviewoftheliteratureontradefacilitationimplementation

Alimitednumberofstudieshaveattemptedtoassessthe status of trade facilitation reforms in developingcountriesandLDCs,includingtheirneedsfortechnicalassistance. A recent report by the United NationsConference on Trade and Development (UNCTAD,2014b) reviewed 26 national trade facilitationimplementationplansconductedtoassess,amongotherthings, the implementationstatusof39specific tradefacilitationmeasuresassociatedwithdifferentversionsof the consolidated negotiating text of the TFA. In amajority of the 26 participating countries, comprisingLDCs,landlockeddevelopingcountriesandsmallislandeconomies,manytradefacilitationmeasureswereatornearthemidwaypointofimplementation.

Other available studies focusingona smaller numberof countries confirm that most developing countriessurveyedhavealreadyimplementedanumberoftradefacilitationmeasuresand thatnonewouldbestartingthe implementation of the TFA from zero (UNESCAP,2014). In particular, the authors of a 2013 report bythe United Nations Economic Commission for Africa(UNECA, 2013) observed that African countries andRegional Economic Communities were already activeinputtinginplacemeasuresalignedwiththeTFA.Forinstance,theChirunduOne-StopBorderPostbetweenZambiaandZimbabwehasresultedinyearlysavingsofUS$486million(UNECA,2013).However,despitethefactthatmanycountrieshavealreadyundertakensometradefacilitationreforms,therearestillimportantgapsinthelevelsoftradefacilitationimplementation,withasubstantialmajorityoftheLDCssurveyed(73percent)havingimplementedonlyasmallnumberofTFA-relatedmeasures(UNCTAD,2014b).

(b) TradefacilitationinthecontextofAidforTrade

While it is extremely difficult to determine accuratelywhich measures of the TFA will be most challengingto implement and will therefore require assistanceuntil developing countries and LDCs actually submittheir category B and C commitments, useful insightscan still be inferred from information shared by WTOmembers.BesidesCategoryAnotificationsunder theTFA(seeBoxE.1),anotherrecentsourceofinformationon the priorities and challenges related to the TFAimplementationcanbe found in the replies to variousWTO-OECD questionnaires undertaken as part of


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Box E.1: Category A commitments under the TFA

AccordingtoSectionIIoftheTFA,eachdevelopingcountryandLDCmemberisrequiredtoself-designate,onanindividualbasis,CategoryAprovisionsoftheTFAforimplementationuponentryintoforceoftheTFA,orwithinoneyearafterentry into force forLDCs.AsofJune2015,a totalof60developingand five least-developedcountrymembershavesubmittednotificationsofCategoryAcommitments.

While the most notified TFA provisions cover, on average, measures that are less likely to be considered aschallengingand requiring technicalassistance, theTFAprovisions thatare leastnotifiedcouldbe viewedasmeasures that are likely to be more complex and costly to implement. Under this assumption, Category Acommitmentnotifications indirectlyprovide insightsondevelopingcountries’ foreseenprioritiesandtechnicalassistanceneedsintermsofspecificTFAmeasures.Inparticular,provisionsrelatedtosinglewindows(asingleentry point for the submission of trade documentation and notification of the release of goods from bordercontrol),authorizedoperators,advancerulings,testproceduresandborderagencycooperationare,onaverage,lessfrequentlynotifiedasCategoryAcommitmentsthanprovisionsrelatedtomovementsofgoods,detention,useofcustomsbrokers,pre-shipmentinspectionandfreedomoftransit(seeFigureE.1).Otherless-notifiedTFAmeasuresincludethoseinvolvingsettingupenquirypoints,establishingandpublishingaveragereleasetimes,andimplementingvariousspecificfeaturesofcustomscooperation,suchas informationexchange,protectionand confidentiality. Many of these less-notified TFA measures are considered as relatively complex and arefrequentlyidentifiedasareasofpriorityfortechnicalassistance.

Source: WTOSecretariat.

Figure E.1: Top five most and least notified TFA provisions under Category A commitments

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the Fifth Global Review of Aid for Trade monitoringand evaluation exercise. In particular, the analysis ofthe responses received from 62 developing and LDCmembers in various geographical regions, from 27bilateral donors, and from 23 development agenciesshedslightontheimportancethatdevelopingcountriesplace on the TFA, how they expect it to influencetheir tradecosts, andwhat challenges theyexpect toencounterduringitsimplementation.1

(i) Trade facilitation is a priority for developing countries…

Developingcountriesseemtoassignahighprioritytotradefacilitation,with65percentofpartnercountriessurveyed ranking trade facilitation in their top three

Aid for Trade priorities, higher than any other areas,such as trade negotiations, WTO accession, networkinfrastructure, transport infrastructure, cross-borderinfrastructure, competitiveness, export diversification,connecting to value chains, adjustment costs andregionalintegration.AsshowninFigureE.3,landlockedcountriestendtogiveanevenhigherprioritytotradefacilitation, while small island developing statesappear to prioritize other Aid for Trade areas. Inparticular, nearly 85 per cent of African and MiddleEasterndevelopingcountriesandLDCsrankedtradefacilitationamongtheirtopfivepriorities,comparedto75percent forLatinAmericancountriesand67percent for Asian developing economies, as depicted inFigureE.4.

Box E.1: Category A commitments under the TFA (continued)

Figure E.2 illustrates the average level of implementation over all TFA measures for countries that havesubmittedCategoryAcommitments.Rankingcountriesaccordingtothepercentageofmeasuresthatarefullyimplemented,fromlowesttohighest,providesanindicationofhowmuchoftheTFAisalreadyinplaceandhowmuchremainstobedone.

Figure E.2: Levels of TFA implementation implied by Category A commitments


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There were no stark differences in the priority levelassigned to trade facilitationbycountriesofdifferentincome levels. Figure E.5 suggests that high-incomedevelopingcountriesdoappeartoranktradefacilitationveryhighly,with50percentputtingitinfirstplaceand50 per cent in third place. However, since only twohigh-income developing countries responded to thequestionnaire,theseresultsarenotveryinformative.

IncontrasttotheWTO-OECDquestionnairesfromtheFifthGlobalReviewofAidforTrade,asurveycarriedoutbyUNCTAD(2014)distinguishedbetween39differenttrade facilitation measures and asked respondents to

assign priority levels to them. These results confirmthat trade facilitation is among developing countries’highestpriorities.

Despite differences between countries, these resultsconfirm the overarching consensus that has emergedin previous studies according to which governmentofficials and private sector agents in developingcountries recognize the potential of trade facilitation(UNESCAP, 2014). In particular, both developingcountriesandLDCstendtogivethehighestimportanceto the most comprehensive and ambitious reforms,such as single window or border agency cooperation,

Figure E.3: Ranking of trade facilitation in Aid for Trade priorities of landlocked countries and small island developing states, 2015

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Figure E.4: Ranking of trade facilitation in Aid for Trade priorities of partner countries by geographic region, 2015

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butalsotomoretraditionaltradefacilitationmeasures,such as risk management and documents publicationandavailability(UNCTAD,2014b).

Trade facilitation also continues to be on the agendaofdonors.More thanhalf (53percent)ofaiddonorsreport increased spending on Aid for Trade for tradefacilitation since 2012, while only a relatively smallfraction (8 per cent) confirm a reduction in spending.The remaining participating countries indicate eitherno change (24 per cent) or uncertainty. The rising

trend in aid flows is further confirmed by Figure E.6,which reports trade facilitation-related commitmentsand disbursements per the OECD Creditor ReportingSystem. Donor countries and multilateral agencieshave committed US$ 2.9 billion to trade facilitationand disbursed US$ 2.0 billion in constant 2012 USdollarssince2005.Only3percentofdonorsexpectto see their Aid for Trade spending fall over the nextfiveyears,andnoneanticipatesadropinspendingontradefacilitation,whichbodeswellfor implementationoftheTFA.Sharesofcommitmentsanddisbursements

Figure E.5: Ranking of trade facilitation in Aid for Trade priorities of partner countries by income group, 2015

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Figure E.6: Trade facilitation commitments and disbursements of aid donors by partner country group, 2005-13 (million constant 2012 US$)

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targeting LDC partners have been rising. The LDCshareofcommitmentsrosefromaround9percent in2005to39percentin2014,whiletheequivalentshareindisbursementsrosefrom20percentto33percent.

(ii) … but developing countries are uncertain about the benefits of the TFA

While most countries participating in the monitoringexercise seem to consider trade facilitation to be animportant Aid for Trade priority, half of these samecountries reported a high degree of uncertainty orinability to determine to what extent the TFA wouldinfluence their trade costs. As shown in Figure E.7, asmallnumber,madeupmostlyofLDCs,evenanticipateshighertradecostsfollowingtheimplementationoftheTFA,possiblyindicatingconfusionaboutthedistinctionbetween trade costs and implementation costs. Itis conceivable that a small country that was alreadyinvestingefficiently incustomsproceduresbeforetheTFAmightsee its tradecostsrise if itundertooknewcommitments as a result of the Agreement. However,theflexiblespecialanddifferentialtreatmentaffordedtodevelopingcountriesshouldminimizethispossibilitysince it allows developing countries and LDCs totailor thescopeand timingof implementation to theirparticularcircumstances.

The remaining countries surveyed expect the TFA toreducetheirtradecostseithermoderately(47percent)or greatly (39 per cent). As illustrated in Figure E.8,landlocked countries tend to be relatively moreoptimistic,with67percentexpectingadrop in tradecostsofmorethan10percent,whileonly20percentofsmallislanddevelopingcountriesexpectsuchalargedecline. Similarly, the majority of lower- and upper-

middle income countries foresee a moderate declinein trade costs of between 0 and 10 per cent (58 percentand67percent, respectively),while38percentof low-incomecountriesexpect tradecosts to remainunchangedorevenrise.

(iii) Obstacles to implementation and needs for technical assistance

Asdiscussedinthenextsubsections,whilesomeofthemeasurescoveredbytheTFAmightberelativelyeasyandstraightforwardtoimplement,othersmaybemorecomplex and/or costly to carry out. In particular, andas reported inFigureE.9,borderagencycooperation,followed by formalities connected with importation,exportation and transit, as well as informationpublication and availability have been identified bythe developing countries and LDCs surveyed as thehardest of the TFA’s disciplines to implement, andas those for which support would be most needed.Customs cooperation and advance rulings are amongthe other trade facilitation measures considered asbeingparticularlyhardtoundertake.

The ranking of the TFA provisions by difficulty ofimplementationispartiallyinlinewiththeleast-notifiedTFAmeasuresunderCategoryAcommitments,namelysingle windows, authorized operators, enhancedcontrols,testprocedures,averagereleasetimes,enquirypoints,borderagencycooperationandadvancerulings(seeBoxE.1).Othermeasures,suchasdisciplinesonfeesandtheopportunitytocommentbeforetheentryinto force of relevant laws and regulations, appear topresentlesserchallengestodevelopingcountriesandLDCs. However, low-income countries and Africancountries seem to be more concerned and anticipate

Figure E.7: Anticipated impact of TFA implementation on trade costs, all developing country respondents

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Figure E.8: Impact of TFA on trade costs anticipated by landlocked and small island states, survey responses

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Figure E.9: Which disciplines of the Trade Facilitation Agreement will prove hardest to implement?

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greaterdifficultywiththeimplementationoftheTFAasawholeandwithmostofthespecifictradefacilitationmeasures.

Overall,theserankingsoftheTFA’sdisciplinesconfirmthat challenges may arise when implementing certaintrade facilitation measures. According to individualdonor countries andmultilateral agencies, the lackofnational coordination and political will (70 per cent)followed by the absence of trade facilitation prioritywithin national development planning (68 per cent)areamong themost importantdifficulties thatwill beencountered in implementing theTFA.These findingsare in line with previous countries’ and experts’qualitative assessments of the obstacles to tradefacilitationimplementation(WorldBank,2006a).

Whilemeasuresrequiringthelargestshareoftechnicalassistanceareoftenthosewithlowestimplementationlevels, several trade facilitation measures have beenidentified by countries and experts as measurescalling only for additional political will in order tobe undertaken, without any additional technicalassistance.Thesemeasuresincludepriorconsultation,eliminationofconsular fees, freedomof transit routesand abolishment of the mandatory use of escorts forgoodsintransit(WorldBank,2006a).

The lack of an existing legal framework has alsobeen recognized as one of the biggest hindrances totrade facilitation implementation (UNCTAD, 2014b).Withoutaproper legal framework,manyspecific tradefacilitationmeasures,includingthosewhicharealreadyapplied informally, fail to deliver their full potential.Other important obstacles identified in the qualitativestudies include a lack of resources or organizationalframework, non-existent or limited understanding andknowledge of different trade facilitation measures, alack of cooperation and mistrust between governmentagencies and an absence of communication betweenprivateandpublicstakeholders(UNCTAD,2014b;WorldBank,2006a).Manyofthesedifferentobstaclescanbeconsideredastheothersideofthecointothesuccessfactors,whicharediscussedingreaterdetailbelow.

3. Implementationcostsoftradefacilitationreform

In contrast to the literature assessing the benefits oftradefacilitationreform,onlyalimitednumberofstudieshaveanalysedthecoststhatmayneedtobe incurredin order to implement trade facilitation measures.Yet the costs of introducing and implementing tradefacilitation measures remain of concern to manydeveloping countries and LDCs, which often haveto decide whether and to what extent part of theirlimitedfinancialresourcesshouldbeallocatedtotrade

facilitation reform.This typeofconcernoftenprevailswhengovernmentsfearthatthecostsassociatedwithtradefacilitationreformmightoutweightheanticipatedbenefitsresultingfromtheadoptionandimplementationoftradefacilitationmeasures.

Such perceptions tend to appear when the benefitsassociatedwithtradefacilitationreformaredifficulttoquantifyandareviewedfromashort-termperspective.While benefits in terms of increased revenue andtradewillsometimesmaterializecompletelyonlyinthemedium- and long-term, implementation costs havetobe incurred immediately.Suchsituationscanmakedecision-makers in developing countries and LDCsreluctant to embark on trade facilitation reform, eventhough the benefits associated with trade facilitationultimatelyoutweightheirimplementationcostsandcanthenbeusedtopursuefurtherreform.Understandingthenature, featuresand scopeof the implementationcosts of trade facilitation reforms are therefore ofparticular relevancenotonly togovernments,butalsotodevelopmentpartnersandtoprivatesectorpartnersinvolvedinfundingtradefacilitationinitiatives.

(a) Difficultiesinestimatingtradefacilitationimplementationcosts

The literature on trade facilitation provides limitedinformation on the costs associated with theimplementationoftradefacilitationreformbecausetheimplementation costs are often not easy to quantifyfor twomainreasons.First, tradefacilitationreformiscross-cutting by nature and, for that reason, is rarelycarried out independently of other broader policyobjectives aimed at enhancing revenue collection,reducingtradecostsandcreatingamoretransparent,efficient and predictable trading environment. Asillustrated in Figure E.10, trade facilitation measuresare often implemented in the context of broaderpolicy initiatives,suchas institutional reform,customsmodernization, electronic governance, regionalintegration, export promotion, and infrastructure andtransport development. As a consequence, thereis often no specific funding allocation dedicated tothe adoption and implementation of specific tradefacilitationmeasures,making itparticularlydifficult toidentifythecorrespondingcosts.

Second, the implementationcostsof trade facilitationcan take various forms, depending on the type oftrade facilitation measures considered. A distinctionis usually made between the initial upfront costsassociated with the introduction of trade facilitationmeasures, the upgrade and expansion costs, and theongoing operational costs. Eight different types ofinterrelated implementation costs have further beenidentifiedintheliterature:(1)diagnostic,(2)regulatory,

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(3) institutional, (4) training, (5) equipment andinfrastructure, (6) awareness-raising, (7) political and(8)operational.Someofthesecostsmaybeparticularlydifficult to express in monetary terms and identifyseparately(OECD,2005;Duval,2006;Moïsé,2013).2

Diagnostic and needs assessment costs ariseprior to theactual implementationof trade facilitationreform to identify the trade facilitation needs, setrealistic reform priorities and prepare a practicalimplementation strategy. Diagnostic costs usuallyinvolve time and national and/or external expertsto consult with relevant stakeholders and formulateconcrete action plans based on the informationcollected.

Regulatory and legislative costs may occurwhen existing pieces of national legislation have tobeamendedoranewlegislationhastobeadoptedinordertoimplementspecifictradefacilitationmeasures.For instance, in the absence of laws recognising thelegalstatusofelectronicdocumentation,anyelectronicdocuments must continue to be accompanied byits paper equivalent. A change in the legislation isthereforeoftenrequiredtoauthorizeandrecognizethevalidityofelectronicdatasubmissionbetweenagenciesanddigitalsignatures.Suchcostsusually involvetime(depending on the country’s legal framework), staffspecialized in legislative and regulatory issues, andsometimesexternalexperts.

Institutional and organisational costs may arisewhennewunitshavetobeestablishedorexistingunitshave to be re-structured in order to perform specifictrade facilitation functions more efficiently, either byredeployingexistingstafforrecruitingadditionalstaff.For instance, the introductionofpost-clearanceaudit,theapplicationofriskmanagementproceduresortheestablishmentofacentralenquirypointmight requirea dedicated team of administrative, operational andsupportstaff.

Human resources and training costsarisewhenusersinbordermanagementagenciesandthetrading

community have to learn new ways of complyingwith the trade facilitation formalities and operations.Trainingisoftenviewedasthemostimportantelementin implementing trade facilitation measures, sincetrade facilitation reform is mainly about changingborder agencies’ practices and behaviours. The leveloftrainingcostsdependsonwhethernewexpertstaffarehired, orwhether internalor transferredstaff aretrained on the job or in a training centre. Recruitingnewexpertstaff isusuallyconsideredtobethemostcostly option, because it not only often requires abudgetary increase but also the direct availabilityof skilled experts in the domestic labour market.Available empirical evidence suggests that countriestend to choose to train existing staff on the job toaccommodateandimplementthenewtradefacilitationrequirements(Moïsé,2013).

Equipment and infrastructure costs may occurfollowingthedecisiontoconstructoracquirefacilitiesand accommodation, and install and upgrade new oradditional implementation tools, including informationandcommunicationtechnologies(ICTs)suchasvirtualnetworks, automated solutions, and scanners. Asdiscussedbelow,ICTshavebeenidentifiedinanumberofcasestorieson trade facilitation reformsasoneofthe key factors in enhancing the effectiveness andefficiency of a number of specific trade facilitationmeasures,suchasx-rayscanners tocomplement riskmanagement procedures and computerized systemto submit electronically and process pre-arrivaldocuments. Although equipment and infrastructuredo not always constitute a prerequisite to implementmost trade facilitation measures, they are usuallyconsidered to be the most expensive components oftrade facilitation reform. The availability and provisionofreliablepowersupply, telecommunicationnetworks,computer hardware suppliers and local maintenanceservices, all of which are necessary in order to useinformation and communication equipment, areusually not considered as specific implementationcosts of trade facilitation reform, because they arealso necessary to other non-trade facilitation-relatedactivities(OECD,2009).

Figure E.10: Trade facilitation and broader policy initiatives

Institutional reforms

Transport facilitation

Export promotion

Customs modernization

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Regional integration

Trade facilitation



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Awareness-raising and change management costs may arise when transparency andcommunicationstrategiesareimplementedtopromotea greater involvement of all relevant stakeholders inthe public and private sectors, including through abetter understanding of the trade facilitation reform’selaboration and progress achieved. The support,participation and ownership of relevant stakeholderstendtofacilitatenotonlytheintroduction,butalsothesustainabilityofanumberoftradefacilitationmeasures.

The literature sometimes identifies political and resistance costs as an additional component ofimplementation costs which may arise as a resultof active or passive resistance and opposition fromrelevant stakeholders, including policy-makers,staff and the private sector, to the development andimplementationof specific trade facilitationmeasures(Duval,2006).Suchcostsarenot readilyquantifiablebecausetheytendtoimpactothercomponentsoftradefacilitationimplementationcosts,includingoperationalcosts.Asdiscussedingreaterdetailnext,politicalwill,nationalownershipandstakeholders’participationareamong the key elements in addressing resistance inimplementingsuccessfullytradefacilitationreform.

Operational and maintenance costs consistmainly of the remuneration of staff or experts andthe maintenance and replacement of equipment, suchas software or computers, once trade facilitationmeasures have been introduced. These operationaland maintenance costs are often absorbed in theadministrativebudget,makingitallthemoredifficulttoisolateandassessthemspecifically.Empiricalevidencesuggeststhatongoingoperationalcoststendtoentaillower costs than initial upfront and upgrade costs formosttradefacilitationmeasures,exceptmeasuressuchasprovidingonlinepublicationsandoperatingnationaltrade facilitation committees. The scant informationavailablesuggeststhatyearlyoperationalcostsoftradefacilitationmeasuresare,onaverage,upto52percentlessthantheirrespectiveinceptioncosts(Moïsé,2013).In somecases, theoperational costsof specific tradefacilitation measures are wholly or partially passedonto customers through the payment of user fees inexchange of the services provided. Similarly, part ofthe inception costs of some specific trade facilitationmeasures may be transferred to traders through thepayment of charges. In some cases, countries havealsodecidedtograntprivatefirmstheresponsibilitytoactuallyimplementspecifictradefacilitationmeasures.

(b) Overviewoftradefacilitationimplementationcosts

In light of the limited available information found inthe literature, data on the implementation costs of

trade facilitation projects and measures have beenassembled in order to gain insights into the potentialnature and magnitude of the costs of implementingthe TFA. Relevant figures have been collected fromvarioussources,includingfromcasestoriessubmittedtotheWTO,theThirdandFifthGlobalReviewsofAidfor Trade, the United Nations Economic Commissionfor Europe (UNECE), the United Nations Conferenceon Trade and Development (UNCTAD), the UnitedNations Economic Commission for Africa (UNECA)and the Economic and Social Commission for Asiaand thePacific (UNESCAP).Other important sourcesof information on implementation costs include tradefacilitation-related lending projects undertaken byindividualdonors;multilateralandregionalbankssuchas theWorldBank, theAsianDevelopmentBankandthe Inter-AmericanDevelopmentBank;andnon-profitorganizationssuchasTradeMarkEastAfrica.

Intotal,theimplementationcostsof198tradefacilitationmeasuresandprojectsundertakeninfour(2percentofthestudy)developedcountries,122(60percentofthestudy)developingcountriesand77(38percentofthestudy) LDCs were compiled.3 Of this total, 76 (39 percent)tradefacilitationmeasureswereadoptedinAfrica,64(32percent)inAsia/Pacific,32(16percent)inLatinAmerica,12(6percent)inEurope,10(5percent)intheCaribbean,and4(2percent)intheMiddleEast.

As illustrated in Figure E.11, the available informationonimplementationcostsalsocoversacomprehensiverangeoftradefacilitationareas,with66measures(33per cent) focusing on formalities and documentationrequirements such as single windows, 41 (21 percent) on customs automated systems, 34 (17 percent)on releaseandclearanceofgoodssuchas riskmanagement and authorized economic operators,32 (16 per cent) on customs and border agencycooperationsuchasone-stopborderpostprocedures,and25(13percent)ontransparencyandpredictabilitysuchasadvancerulingsandenquirypoints.Inordertoput the different implementation costs of these tradefacilitationmeasuresintoperspective,dataonthecostsofcustomsmodernizationandreforms(57projects)andtransportfacilitationinitiatives(197projects)werealsodrawnfrommultilateralandregionallendingprojects.

Before reviewing the data it is important to note thatany cost figure should be interpreted and comparedcarefullyforseveralreasons.

First, implementation costs vary according to eachcountry’s unique circumstances, including its tradefacilitation reform’s initial state, needs, priorities, anddesiredlevelofambition.Forinstance,somecountriesmightalreadyhaveintroducedcertaintradefacilitationmeasures but want to improve or expand thesemeasureswithadditionalinvestments.

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Second, the magnitude of the implementationcosts might depend on the speed and pace of theimplementationandtheuseofnationalorinternationalexpertise. Empirical evidence suggests that theimplementation costs of certain trade facilitationmeasures hinge on their appropriate sequencing(Moïsé, 2013), i.e. scheduling them within an orderedand appropriate implementation plan (De Wulf andSokol, 2005). In addition, quickly implementing whilerelyingfullyoninternationalexpertsmaybemorecostlythan following a gradual implementation pace withincreasingparticipationofnationalexperts (UNCTAD,2014b).

Third,thedataonimplementationcostscollectedmightnot be entirely representative of the actual range ofthe implementation costs of specific trade facilitationmeasures forwhich information isonlyavailable foracoupleofcountries.

Fourth, informationonimplementationcostsisusuallynotdetailedenough toenableapropercross-countrycomparisonby implementationcosts’components(i.e.diagnostic,regulatory,institutional,training,equipmentandawareness-raisingcosts).

An analysis of the available information on tradefacilitation implementation costs highlights fourimportant features. First, trade facilitation measuresdiffer in their implementation costs, as shown inFigure E.12. Second, implementation costs of tradefacilitation measures are characterized by significantvariability across countries. Third, trade facilitationmeasures related to transparency and the releaseand clearance of goods tend to involve smaller

implementation costs than measures related toformalities requirements, customs automation, andcustoms and border agency cooperation, which oftenentail awider rangeofcostscomponents, asdefinedabove. This ranking is in line with the results of theFifth Global Review of Aid for Trade questionnairesdiscussed in subsection E.1, as well as with thefew studies reviewing the qualitative assessmentformulated by a number of countries and expertsregarding the inception costs of selected facilitationmeasures (Duval, 2006; UNCTAD, 2014b; OECD andWTO,2015).Fourth,tradefacilitationmeasuresappearon average to be less costly than broader initiatives,suchascustomsmodernization,includingconstructionand upgrading of border facilities, and transportinfrastructure upgrading, such as road, rail, and portmodernizationandinfrastructure.

(i) Transparency and predictability

Costs of implementing trade facilitation measuresrelated to transparency and predictability seem to berelatively low compared to other measures, rangingfrom US$ 12,000 to US$ 3.6 million, as highlightedin Figure E.13. Many of these transparency-relatedmeasures,suchasthepublicationofrelevantlawsandregulations and implementation of advance rulingson origin, are already part of longstanding practicesin many developing countries. Their modification orextension, such as the publication of internationalprocedures and guidelines, introduction of a timeperiodbetweenpublicationandentryintoforceofnewlegislation,andpriorconsultation,arenotexpectedtocreate significant additional costs for countries withexistingpublicationmechanisms.

Figure E.11: Distribution of the data on trade facilitation implementation costs by region and area (trade facilitation measures)

Asia/Pacific, 64 (32%) Formalities and documentationrequirements, 66 (33%)

Africa, 76 (39%)Customs and border agencies

cooperation, 32 (16%)

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41 (21%)

Latin America, 32 (16%)Transparency and predictability,25 (13%)

Europe, 12 (6%)

Caribbean, 10 (5%)

Middle East, 4 (2%)

Release andclearance ofgoods, 34 (17%)

Source: WTOSecretariatbasedondataontradefacilitationimplementationcostscollected.


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Advance rulings on valuation also do not seem torequire significant additional resources aside fromthe recruitment of new staff and/or on-the-jobtraining of concerned staff. Transparency-relatedmeasuresrelyingonICTtendtoentailrelativelylargerimplementation costs. For instance, the creation ofcustoms website and enquiry points usually requiresfacilities, specific equipment and infrastructure, andsupportstaffandtechnicianstobefullyoperational.Inanumberofcountries,thecostofprovidinginformationelectronically is passed onto the users through a

specific fee. Other measures that often require neworupdatedITequipmentincludeexecutiveinformationsystemsandelectroniccargotrackingsystemsaimed,respectively, at monitoring customs operations in realtime and observing the movement of goods undercustomscontrol.

(ii) Release and clearance of goods

Amongthedifferenttradefacilitationmeasuresrelatedtothereleaseandclearanceofgoods,post-clearance

Figure E.12: Implementation costs of trade facilitation, customs and transport facilitation reforms

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Note: Eachboxplotdisplaystherangeoftheimplementationcostsfromthefirst(25percent)tothethird(75percent)quartiles.Thelinegoingacrosstheboxesisthemedian.Theendpointsoftwothinverticallines(“whiskers”)emanatingfromtheboxesshowtheminimumandmaximumvaluesofthedata.Datahasbeentransformedtonaturallogarithmtofacilitatethevisualcomparison.

Source: WTOSecretariatbasedontradefacilitationimplementationcostscollected.

Figure E.13: Implementation costs of trade facilitation reform related to transparency and predictability

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audit control and risk assessment proceduresappear tobe themeasureswith the relativelyhighestexpectedinceptioncosts,rangingfromUS$20,000toUS$ 11.9 million and from US$ 54,000 toUS$ 8.9 million, respectively. Some of the likely highset-upcostsofbothtypesofmeasuresareduetotheircomplex and technical nature. While post-clearanceaudit control procedures consist in verifying theaccuracyandauthenticity of declarations through theexamination of the relevant books, records, businesssystems and commercial data, risk managementsystems involve targetinghigh risk consignmentsandexpeditingreleaseof lowriskconsignmentsbasedonanappropriateselectioncriteria(e.g.HScodes,countryoforigin,andtypeofmeansoftransport).

As a result, both measures usually require therecruitment and training of specialized staff, and insome cases acquiring or upgrading equipment andIT systems, such as scanners. Although equipmentand ITmightplayan important role,pastexperiencesrevealthattheireffectiveuseultimatelyhingesontheperformanceofwell-trainedandskilledstaff.

Implementationcostsofauthorizedeconomicoperatorschemesandofpre-arrivaldataprocessingprocedures,which allow for the submission of required importdocumentationtobeginprocessingpriortothearrivalof the goods (De Wulf and Sokol, 2005), seem to berelativelylow,asindicatedinFigureE.14.Inbothcases,costs are primarily related to training activities andequipment. Advance data submission and pre-arrivalprocessing may also require prior availability of ICT,suchassomedegreeofcustomsautomation.

As will be discussed next, ICT is often only a tool toimplementtradefacilitationmeasuresmoreefficiently,thecostsofwhichare,orwouldbeeventually,assumedevenintheabsenceoftradefacilitationreform.Thereare other measures, such as the implementation ofthe principle of separation of release of goods fromcustomsclearancepriortothefinaldeterminationandpayment of customs duties or taxes, which might notpresent additional complexities besides increasingor reallocating resources towards training activities.However, such measures can still be challenging toimplement in some developing countries and LDCswheretheconfidencebetweenborderauthoritiesandtradersisbeingbuilt(Moïsé,2006).

(iii) Formalities and documentation requirements and customs automation

AsreportedinFigureE.15,theestablishmentofsinglewindowandcustomsautomationsystemsseem tobeamong the most costly trade facilitation measures,with inception costs ranging from US$ 100,000 toUS$27million,andUS$550,000 toUS$57million,respectively.4Thehighset-upcostsofbothmeasuresarisefromtherelativelyhighnecessityofICTincurringhardware costs to acquire network equipment andsoftwarecoststointegratetheparticipatingagencies’IT systems. In addition, both measures potentiallyrequire regulatory, institutional, infrastructural and/orhumanresourceschanges.Inparticular,administrativecapacity may need to be enhanced or changed, withthe recruitment of new staff and/or training activitiesfor the existing staff in order for the system to befullyoperational.Amarketingandpromotionplanmay

Figure E.14: Implementation costs of trade facilitation reform related to release and clearance of goods

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also need to be developed to raise awareness of thesinglewindowsystemandpromote itsuse.Comparedto other types of trade facilitation measures, bothmeasuresarenotonlycharacterizedbyrelativelyhighimplementationcosts,butalsobygreatercostvariation.Theheterogeneityofthesecostsstemsnotonlyfromthescopeandlevelofsophisticationofbothsystemsintermsoftechnologyandequipment,butalsofromthecountry’sinitialconditions,suchastheeconomy’ssize,theextentofexistingsystemsandtheneedfornetworkdevelopment.

A national single window system allows tradersto submit relevant documentation and/or datarequirements and be notified of decisions to releasegoods from border control through a single entrypoint. Yet, these functions can be fulfilled in severalways,withoutnecessarilyinvolvingICT.Insomecases,singlewindowschemesonly requiredocuments tobesubmittedatparticularborderpoints,whileothercasedatacanbesubmittedelectronicallyviaasystemthatconnectsseveralorall relevantborderagencies.Pastexperiences suggest that the implementation costsof electronic single window are expected to be lowerin the presence of advanced customs automationsystems. This is in line with the view shared by manydevelopingcountriesandLDCsthatasubstantialpartoftheimplementationcostsoftradefacilitationreformis attributed to installing, operating and upgradingcustomsautomationsystems.

As with many investments in IT equipment andinfrastructure, customs automation can serve otherpurposesbesides trade facilitation,suchas improvingregulation enforcement by preventing corruptionand smuggling, enhancing customs operations

productivity, and improving valuation methods andrevenue collection. Empirical evidence suggests thata large number of developing countries have alreadyintroduced automation in their main customs bordermanagementagencies,suchasairportsandseaports(OECD,2005).Althoughacertain levelofcustoms ITisalready inplace, theremightoftenstillbescope toupgradeandimprovetheefficiencyofsomeoperations,such as the information exchange between bordermanagement agencies and with the private sector.However, the lack of a stable electricity supply andtelecommunication infrastructure in certain LDCsmaypreventafullimplementationofcomplexcustomsautomated systems in the short to medium term(WorldBank,2006a).Similartoothertradefacilitationmeasures, part of the implementation and operatingcosts of both single window and custom automationsystems can be shouldered by the users through thepayment of fees and charges. In 2014, about 60 percentof thecustomsautomationprojects fallingunderthe auspices of the UNCTAD Automated System forCustomsData(ASYCUDA)Programmewerefinancedbydevelopingcountries’owncustomsadministrations(UNCTAD,2014b).

Eventhoughautomationisausefultoolfornormalizingandsimplifyingformsanddocuments,lessonslearnedfrompastcustomsmodernizationprojectsconfirmthatautomation does not achieve trade facilitation reformon its own (OECD,2005). In otherwords, automationis neither a precondition nor a sufficient conditionto undertake most trade facilitation measures. Forinstance,riskmanagementproceduresandauthorizedoperators programmes do not necessarily require anautomated system, although automation would maketheir implementation more effective. As discussed in

Figure E.15: Implementation costs of trade facilitation reform related to formalities and documentation requirements

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thenext subsection,other institutionaland regulatoryaspects, such as political commitment and availableskilled staff, are among the main factors associatedwiththesuccessfulimplementationoftradefacilitationmeasures. Ultimately any customs automation systemisonlyasefficientasthestaffthatrunit.

Although customs automation is often closelyassociated with the simplification of procedures,not all measures related to streamlining formalitiesand documentation requirements are necessarilycostly. For instance, simplifying or minimizing importand export documentation requirements does notseem toentail substantial inceptioncosts.Measuresestablishing the use of international standards forcustoms procedures, introducing periodical reviewsof import/export documentation requirements,eliminating the requirement for mandatory useof customs brokers, and prohibiting preshipmentinspection have also been considered as relativelyaffordable in terms of training and equipment costscomparedtoothertypeoftradefacilitationmeasures(Duval,2006;UNCTAD,2014b).

(iv) Customs and border agencies cooperation

AsdepictedinFigureE.16,thelevelofinceptioncostsof projects related to integrated border managementand one-stop border posts tend to fall in the samerange as the implementation costs of single windowsand customs automation systems, ranging betweenUS$ 840,000 and US$ 45.9 million, and betweenUS$ 609,000 and US$ 16.3 million, respectively.Integratedbordermanagementprogrammesharmonize,streamline, and simplify the border management

systems and procedures not only of customs, but ofallbordermanagementagencies,suchasimmigration,transport, quarantine, sanitary and phytosanitary,environment, standard and consumer protectionagencies. Some initiatives further promote bordermanagementcoordinationthroughinformationsharing,joint use of some facilities, administrative authoritydelegation,orcross-designationofofficials(McLindenet al. ,2011).

In some cases, integrated border managementinitiativesarefarmorecomprehensiveandincorporatethe establishment of one or more one-stop borderposts.Aone-stopborderpostconsistsofcoordinatingneighbouring countries’ import, export, and transitprocedures in order to avoid duplicating regulatoryformalitiesonbothbordersides.

Equipment and infrastructure, including ICT andrefurbishing border stations, are among the mostexpensivecostcomponentsofboth typesofprojects,along with training activities to ensure bordermanagementagencies’staffacquiretherightexpertiseand move away from a silo mentality towards anintegratedandcollaborativeenvironment.

While the magnitude of these implementation costsdemonstrate thechallenges thatdevelopingcountriesandLDCsmayfaceinimplementingmeasuresrelatedtoborderagencycooperation,otherformsofcooperationseemtobelessexpensiveintermsofinceptioncosts,suchas theestablishmentof jointbordercommitteesaimed at involving all relevant public and privatestakeholders inbothcountries in thedecision-makingprocess.

Figure E.16: Implementation costs of trade facilitation reforms related to customs and border agency cooperation

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(v) Other trade facilitation-related areas

As mentioned previously, information on theimplementation costs of trade facilitation reformsis limited and often available only at an aggregatedlevel, which is why the inception costs of a numberof trade facilitationmeasurescoveredby theTFAarenot readily identifiable (see Box E.2). In this context,the absence of available data on particular tradefacilitationmeasuresdoesnotimplythattheirinceptioncosts are necessarily small. That being said, the fewstudies reviewing countries and experts’ qualitativeassessment of various trade facilitation measureshaveidentifiedanumberoftradefacilitationareasforwhichinceptioncostsarelikelytobelow.Forinstance,measures related to disciplines on fees and charges,such as the elimination or limitation of charges andthe removal of consular fees, do not seem to call forsignificantadditionalresourcesorexpertise.

Other measures related to transit and temporaryadmission,suchastheguaranteeoffreedomoftransitroutes and the abolition of the mandatory use ofescorts forgoods in transit,havealsobeen identifiedasmeasuresnotrequiringnecessarilymajorresources

or new specific knowledge (Duval, 2006; UNCTAD,2014b).AsdiscussedinsubsectionE.1,manyofthesemeasures are among the most-notified Category Acommitments under the TFA, namely measures thatcan or should be implemented straightaway withoutrequiringanyparticulartechnicalassistance.

4. TheTradeFacilitationAgreementFacility(TFAF)

While the anticipated costs of implementing the TFAappearmodest relative to theexpectedbenefits, theycanstillprovechallengingforpoorcountriesthathavelimited resources and expertise. This was recognizedbyWTOmemberswhentheyformallyagreedtolaunchnegotiations on trade facilitation in July 2004. Theydecided that the principle of special and differentialtreatment (S&D) for developing countries and LDCs“should extend beyond the granting of traditionaltransition periods for implementing commitments. Inparticular, the extent and the timing of entering intocommitments shall be related to the implementationcapacities of developing and least-developedMembers.”5 These provisions in Section II (“Special

Box E.2: Obstacles to estimating the implementation cost of the TFA

Ideally,anystudyestimatingtheexpectedbenefitsofaparticular tradefacilitationprojectwouldalso includeestimates of associated set-up and operating costs. By the same token, a study that attempts to quantifythebenefitsof theWTOTFAas this reportdoesshouldalso take intoaccount thecostof implementing theAgreement if at all possible. This report hasattempted todo thisby collectingdata– scattered, scarceandincomplete though it is–on thecost of implementing various trade facilitation reforms, andbypresentinganumberof chartsanddescriptive statisticsbasedon this information.Asnoted in subsectionE.2, thiseffortyieldedinformationon198projectsrelatedto31tradefacilitationmeasuresgroupedintofivebroadcategories:borderagencycooperation,customsautomation,formalitiesanddocumentrequirements,releaseandclearanceofgoods,andtransparencyandpredictability.

Thisinformationisvaluableinthatitgivesanideaofthetypicalcostsofthevarioustradefacilitationmeasures,as well as the range of costs incurred by countries in different circumstances. Unfortunately, the number ofobservationsistoosmalltoderiveareliableglobalestimateofthecostofimplementingtheTFA.Attheoutset,matching thedata to theTFAcameatacost in termsof thenumberofusableobservations,withmore than42observationsonmeasuresnotcoveredby theactualAgreement, suchascustomsautomation,discarded.Among the remaining trade facilitation measures, many had only one or two observations, which made costestimationbymeasure impossible.Evenwhengrouped intobroadcategories,certain typesofmeasures(e.g.transparencyandpredictability)stillhadveryfewdatapoints.Includingothervariablesinregressionstocontrolforcountrycharacteristics (e.g.percapita income, import volume, regionand initial levelsof implementation)furtherreducedthenumberofusableobservationssincevaluescouldnotbematchedforallcountries.Finally,evenwhentherewassufficientdataforestimation,coefficientswerestatistically insignificantatconventionallevelsandR-squaredstatistics,indicatinghowwellthedatafitthestatisticalmodel,wereextremelylow,givingnoconfidenceintheresults.

The difficulty of estimating implementation costs underlines the importance of monitoring the status of theTFAafter itcomes intoforce.Asnoted insubsectionE.6,monitoringofagreements isacorefunctionof theWTOthatextendstoimplementationandoperationalcostsaswellaseconomicimpacts.Havingmorecompleteinformation on the costs of implementing the Agreement will help developing countries better gauge theirtechnicalassistanceneedsandobtainthenecessarysupportfromaiddonors.

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and Differential Treatment Provisions for DevelopingCountry Members and Least-Developed CountryMembers”) of the TFA were discussed in detail inSectionBofthisreport.

TheS&DprovisionsintheTFAimplyfargreaterlevelsof differentiation than other WTO agreements. Eachdeveloping or least-developed country member canhave itsownunique implementationscheduleas thetimingof implementationdependson theacquisitionofcapacity.Thiswouldbeconsistentwiththeprincipleoftailoringtradecommitmentsinlightofthespecificeconomic situation faced by the country. It is anidea forwhichonecan findsupport in theeconomicliterature (see Box E.3 on the economic rationaleforS&D).

Thereareincentivesfordevelopedcountrymemberstoprovide capacity-building to developing countries andLDCsso that theycanspeedup their implementationoftheTFA.AsexplainedinSectionC,inefficienttradeprocedures create deadweight losses that affect allparties involved in international trade.Amemberwithinefficienttradeprocedurescreatesdeadweightlossesfor both itself and its trade partners. By providingassistance and support for capacity-building todeveloping countries and LDCs so that they can fullyimplementtheTFA,developedcountriesalsoreduceoreliminatethelossesfacedbytheirfirms.

MakingsurethattheCategoryCcommitments6cometofruitionwillrequirematchingdemandsforcapacity-building fromdevelopingcountries andLDCs, aswell

Box E.3: The economic rationale for special and differential treatment

Economics and the theory of trade agreements in particular, provide justification for extending special anddifferential treatment of developing countries and LDCs in trade agreements. This is because developingcountries and LDCs are often small in size, face significant resource constraints and confront many marketfailures.

As discussed in Section B of this report, there are several explanations for why countries enter into tradeagreements. The terms of trade theory claims that trade agreements allow countries to escape a potentiallyruinoustariffwar(BagwellandStaiger,1999).Thecommitmenttheorystatesthattradeagreementsgiveweakgovernmentsintentonfutureeconomicreformcredibilitytoovercomeoppositionfromorganizedlobbies(MaggiandRodriguez-Clare,1998).

Horn et al. (2010) suggest that flexibilities should be afforded to countries that have fewer or less effectivedomesticpolicyinstrumentsattheirdisposalandthathavelesspowertomanipulatetheirtermsoftrade.Theseconditionsaremore likely toapply tosmallercountriesatearlierstagesofdevelopment than to larger,moreadvancednations.Further,strictdisciplinesshouldapply tocommitments involvingbordermeasures,suchastariffs,whilemorediscretionshouldbeallowedforcommitmentsinvolvingdomesticpolicyinstruments,suchassubsidies.

ConconiandPerroni(2004;2012)usethecommitmenttheoryoftradeagreementstoexplainwhyadevelopedcountry would accept asymmetric commitments in the form of longer transition times for a developing or LDCtrading partner. The capacity in the developing country’s or LDC’s import-competing sector depreciates slowlyandtheindustrylobbiesforthequasi-rents,ortemporaryreturns,thatcanbeearnedduringthattime.Hence,thetransitiontothelong-runcooperativeequilibriumofmarketopeningcannottakeplaceinasinglestep.Bylettingitsindustryreaptheserentsduringatransitionperiod,thedevelopingcountryorLDCcaterstoitsspecialinterestswhileatthesametimecrediblycommittingtowelfare-improvingmarketopeningatalaterstage.Intheabsenceofflexibilityaffordedtoitbyitsdevelopedcountrypartner,thedevelopingcountryorLDCwouldhavemaintainedhightariffsduetoitsdomesticcredibilityproblem.Ratherthannotobtaininganymarketopeningatall,thedevelopedcountryacceptsalowersurplusduringthetransitionperiod,inordertoensurealonger-termgain.

RosendorffandMilner(2001)andBagwellandStaiger(2005)notethattheefficiencyofflexibilityor“escapeclauses”increaseswiththelevelofuncertainty.IfdevelopingcountriesorLDCsareassumedtofacesystematicallyhigheruncertaintyoverthefuture,agenerallyhigherlevelofflexibilitymaybeappropriate.

Finally,flexibilityprovidesawayforcountriestominimizethecostofadjustingtotradereform.Theimplementationoftradeobligations,evenifultimatelybeneficial,maybeassociatedwithupfrontadministrativeandinfrastructurecosts that developing countries or LDCs may find difficult to finance in the short term (Finger and Schuler,1995; Maskus, 2000). Technical and financial assistance as well as longer time periods aimed at gradualimplementationofobligationsmaybeneededtoeffectthetransition.


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as a supply of capacity-building and assistance fromdonors.Sincethereisno“market”tomatchdemandandsupply,theWTOwillhavetoactasasubstitute,servingas clearing-house of information and matchmaker oflast resort.7 Filling this matchmaking role will requireknowingprecisely thedemandsorneedsofmembersto be able to implement the TFA and knowing thecapabilities and comparative advantages of bilateral,regional and multilateral donors and institutions indelivering technical assistance and expertise in tradefacilitation.(SectionBofthisreportidentifiedmanyoftheseinternationalorganizationsandtheircomparativeadvantagesintheareaoftradefacilitation).

These various coordinating functions have beenconcentrated in the newly created Trade FacilitationAgreement Facility (TFAF), which was launched inJuly 2014 by Director-General Roberto Azevêdo (seeBox E.4 for a desciption of its functions). The Facilityworkscloselywithindividualmemberstomakesuretheyarereceivingtheinformationandsupportneeded.Wherenecessary the Facility provides technical assistanceand/orassistsmembers to findsupport throughdonormembersorinternationalorregionalorganizations.

Thismatchingorcoordinating roleof theWTO isoneof the reasons identified in Section C why it madeeconomicsensefortradefacilitationtobeincludedina multilateral trade agreement. Beyond the matchingof demand and supply of capacity-building, there isanotherfacetofcoordinationthattheWTOwillperform.Whileitiscertainlypossibleforcountriesindividuallyto

drawuptradeproceduresthatareinkeepingwiththerequirementsoftheTFA,itwillbefarmoreefficienttodesigntheminaccordwithinternationalbestpractices.Inthisway,tradeproceduresaroundtheglobenotonlyfollow similar practices but those practices are alsobasedonthebeststandards.

The Facility has conducted a number of activitiesaimed at raising awareness and encouraging supportfor ratification and the entry into force of the TFA.Theseactivitiesaredirectedatmanylevelsofdecision-makers and stake-holders including parliamentarians,ministries, Geneva-based delegates, capital-basedtrade officials, and a broad range of interestedstakeholders.

WTO officials have made presentations on the TFAin numerous events organized by other organizations,including an international conference for members oftheInter-ParliamentaryUnionheldinearly2014.

The Facility worked to expand an existing WTOtechnical assistance program for parliamentarians tohaveagreaterfocusontradefacilitation.Sofarin2014,trade facilitationworkshops forparliamentarianshavebeen conducted for African countries (in cooperationwithMorocco),theEasternAfricanCommunity,ASEAN(in cooperation with Singapore), all Latin Americancountries,and thePacific Islands (incooperationwiththeWorldBankGroupandthePacificIslandsForum).8Future workshops will be conducted in other regionsasneeded.

Box E.4: What the Trade Facilitation Agreement Facility does

TheTFAF’sspecificfunctionswillinclude:

i) supportingLDCsanddevelopingcountriestoassesstheirspecificneedsandidentifypossibledevelopmentpartnerstohelpthemmeetthoseneeds;

ii) ensuring the best possible conditions for the flow of information between donors and recipients throughthecreationofaninformation-sharingplatformfordemandandsupplyoftradefacilitation-relatedtechnicalassistance;

iii) disseminatingbestpracticesintheimplementationoftradefacilitationmeasures;

iv) providing support to find sources of implementation assistance, including formally requesting that theDirector-Generalactasafacilitatorinsecuringfundsforspecificprojectimplementation;

v) providinggrantsforthepreparationofprojectsincircumstanceswhereamemberhasidentifiedapotentialdonorbuthasbeenunabletodevelopaprojectforthatdonor’sconsideration,andisunabletofindfundingfromothersourcestosupportthepreparationofaprojectproposal;and

vi) providingproject implementationgrants related to the implementationofTFAprovisions incircumstanceswhere attempts to attract funding from other sources have failed. These grants will be limited to “softinfrastructure” projects, such as modernization of customs laws through consulting services, in-countryworkshops,ortrainingofofficials.

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Finally, as shall be seen in the next subsection,there are many lessons that have been learned fromtrade facilitation reform. This wealth of knowledgeis an important resource that can smooth the wayfor countries embarking on customs reform for thefirst time. The WTO could help ensure that they aretransferredtoimplementingcountries.

5. Countryexperiencesofsuccessfulreforms:whatarethelessons?

Similartotheempiricalliteratureontheimplementationcosts of trade facilitation reforms, a limited numberof papers have reviewed in a consistent mannerthe operational aspects associated with theimplementation of trade facilitation measures. Tradefacilitation reformaddresses theoperational interfacebetween government and private sector, and as suchoftenreliesonaninterdisciplinaryapproachthatbringstogether legal, economic, political, technological andmanagement aspects. Yet, the obstacles preventingtradefacilitationreforms,suchasconflicting interestsand institutional limitations, have been the object oflimited attention in the literature (Grainger, 2008;McLindenet al. ,2011).

As highlighted previously, a number of countrieshave already been implementing trade facilitationreforms as part of multilateral, regional or unilateralinitiatives. These experiences can provide valuableinformation on the lessons learned and associatedsuccess factors in addressing and overcoming theobstacles and challenges that countries have facedin implementing trade facilitationprojects.Any lessonin trade facilitation reforms needs, however, to beapproached with care. Implementing trade facilitationreforms isnotsimplyamatterofcopyingandpastingothercountries’experience.Thereisnosinglemodeloftrade facilitation reform.Anapproach thathasprovedtobesuccessfulinagivencountrymightfailinanother.Ultimately,tradefacilitationlessonsdependonseveralfactors, including the type of trade facilitation reformand the country’s geography, level of development,legalframework, infrastructure,humanresources,andtypeandvolumeoftrade(DeWulfandSokol,2005).

Whileitisdifficulttodrawuniversallessonsfromtradefacilitationreforms,ausefulsourceofinformationcanbe found in case stories that explicitly identify andreportthesuccessfactorsofspecifictradefacilitationprojects. One hundred and fifty-five different casestories9 have been compiled by the WTO Secretariatfromvarioussources,includingthe2011and2012WTOsymposia on Practical Experience of ImplementingTrade Facilitation Reforms, the Third and Fifth Global

Reviews of Aid for Trade Review, UNECE’s TradeFacilitation ImplementationGuide, theUNNetworkofExpertsforPaperlessTrade(UNNExT)inAsiaandthePacific,theWorldBank,theAsianDevelopmentBank,theWorldCustomsOrganization,andtheAsia-PacificEconomicCooperation.

Ofthistotal,105(68percent)casestoriescovertradefacilitation initiatives in developing countries, 38 (24per cent) in LDCs, and 13 (8 per cent) in developedcountries. These case stories are also spreadgeographically with 62 (40 per cent) case stories ontrade facilitation initiatives inAfrica,39 (25per cent)in Asia/Pacific, 27 (17 per cent) in Latin America,11 (7 per cent) in the Caribbean, 10 (6 per cent) inEurope,6(4percent) inNorthAmerica,and2(1percent)intheMiddleEast.10

AsshowninFigureE.17,thecasestoriescoverabroadrangeofareasrelatedtotradefacilitationreform.Fifty-twocasestories reportonoverallandbroadcustomsand trade facilitation reforms, while the remaining103 cases cover more specific trade facilitationmeasures. Inparticular,53cases (34per cent) focuson formalities and documentation requirements, suchas single windows, and 17 (11 per cent) case storiescoverthereleaseandclearanceofgoods,suchasriskmanagement.Other trade facilitation areasdiscussedin the remaining case stories include customs andborderagencycooperation,reportedin17(11percent)stories, transit and transport mentioned in 10 (6 percent)stories,andtransparencyandpredictability,suchasadvancerulings,whicharecoveredinsix(4percent)stories.

Two caveats regarding these case stories have to beunderlined. First, these case stories are probably nottotally representativebecauseofapotentialselectionbiasandthetendencytopublishonlytradefacilitationinitiatives with positive outcomes. Second, this storycollection can suffer from omitted variables, sincemostcasestoriesarereportedbythosefinancingand/or participating in these trade facilitation initiatives(i.e. governments, donors, or experts), implying ahigher probability of being less objective than anexternal assessment. In this context, the absenceof any reference to a given success factor does notnecessarilyimplythatthisfactordidnotlaterturnouttobecriticalinexplainingthetradefacilitationinitiative’spositiveoutcome.Despitethesedrawbacks,thesecasestoriescanstillprovideinsightsintoimportantpatternsandnuancesofsomeofthefactorsthatcontributedtosuccessfultradefacilitationexperiencesatthenationalandregionallevel.

As shown in Figure E.18, the review of these155 case stories highlights a number of converging


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Figure E.17: Distribution of the trade facilitation case stories by regions and areas

Asia/Pacific, 39 (25%) Overall customs andtrade facilitation reform, 52 (34%)

Africa, 62 (40%)Customs and border agency

cooperation, 17 (11%)

Latin America, 27 (17%)

Middle East, 2 (1%) Transit and transport,10 (6%)

Europe, 10 (6%)

Caribbean, 11 (7%)

North America, 6 (4%)Transparency and

predictability, 6 (4%)

Release andclearance ofgoods, 17 (11%)

Formalitiesand

documentationrequirements,

53 (34%)

Source: WTOSecretariatbasedoncasestoriesontradefacilitationmeasurescollected.

Figure E.18: Main success factors reported in case stories on trade facilitation

Nat

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Political will and commitment

Ownership and accountability

Financial resources mobilization

Staff's skills

Human resource and organizational management

Inter-agency collaboration and coordination

IT and infrastructure issues

Leadership commitment

Engagement with stakeholders

Participation of private sector stakeholders

Phased approach

Diagnostic needs analysis

Enabling legal framework

Regional cooperation

Best practices and international standards

Monitoring, reporting and evaluation

Other lessons

Clear and coherent strategy

Flexible implementation

Transparency and communication

Number of case stories involving least-developed countries Number of case stories involving developing countriesNumber of case stories involving developed countries

27 71 4

19 38 2 59

57

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65

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16 36 5

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21 68 7

5 45 4

27 65 3

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19 40 6

16 29

14 26 1

1

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10 28 3

10 38 7

16 24 3

2 26 5

2 16

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5 117

Source: WTOSecretariatbasedoncasestoriesontradefacilitationmeasurescollected.

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success factors, despite the relative high number ofdifferent success factors identified. Many of thesesuccess factors are often interrelated, and in severalcases they are mutually supportive of each other. Inaddition, different trade facilitation measures ofteninvolve different types of success factors. Keepingthis in mind, the factors can be grouped in six broadcategories: (1) national ownership; (2) stakeholders’participation; (3) financial, material and humanresources; (4) sequencing approach; (5) transparencyandmonitoring;and(6)otherfactors.

(a) Nationalownership

Themostfrequentlyreportedsuccessfactor isstronghigh-level political will and commitment regarding thetradefacilitationprocessreform,mentionedin102outofthe155casestories.AshighlightedinsubsectionE.1,this finding is in line with the relatively high numberof donor countries that participated in the monitoringexercise of the Fifth Global Review of Aid for Tradeand identified the lack of “national coordination andpoliticalwilldemonstration”asonethemostimportantdifficultiesthatmightbeencounteredinimplementingthe TFA. Political involvement, at the ministerial,prime ministerial or presidential level, is often viewedas a manifestation of appropriation and ownership ofthe trade facilitation reform. Fifty-nine case storiesspecifically identify ownership and accountability ofthegovernmentbutalsoof thestaffbeingbrought toimplementtheinitiativeasasuccessfactor.

Political will frequently represents the overarchingfactor upon which most of the other success factorsrest and depend. In particular, active governmentinvolvementisoftenrequiredtoresolveanyconflictingpolitical priorities and allocate the appropriate levelsof financial, material and human resources neededto successfully implement trade facilitation reform. Inaddition,afirmpoliticalcommitmentisoftenessentialto overcome possible opposition and resistance bysome of the stakeholders in the public and privatesectors who gain from the existing system, includinginefficiencies and relationships, and whose vestedinterests could be defused with the trade facilitationreform (Brandi,2013;Holleret al. ,2014;WorldBank,2006b).

Continuity in strong political commitment is alsoimportanttosustainthemomentumfortradefacilitationreformsovertheyearsandmitigate,amongotherthings,the risks of changes in policy direction, and lack offinancialandhumanresources.Thiscouldexplainwhycase stories covering formalities and documentationrequirements, which are often viewed as an ongoingprocess,reportarelativelyhigherprevalenceofpoliticalwillasasuccessfactor.Relatedtopoliticalwillisalso

theexistenceofanactiveanddedicatedleadagency,teamorindividualinchargeoflaunching,implementingandoverseeingtradefacilitationreform,reportedin57case stories. Such strong and stable leadership canhelptoensuretradefacilitationreformremainsontheagendaofthedifferentstakeholders.

(b) Stakeholders’participation

Another key lesson, mentioned in 58 case stories,is the participation and commitment of relevantstakeholders in each phase of the trade facilitationinitiative.Asmentionedpreviously, trade facilitation isbynatureacross-cuttingissueaffectingtheinterestofvariousstakeholders inthepublicandprivatesectors.AsportrayedinFigureE.19,policy-makingentities(e.g.ministries of trade, foreign affairs, finance, transport),cross-borderagencies(e.g.sanitaryandphytosanitary,healthandenvironmental departments), implementingagencies (e.g. customs, port and airport authorities),the private sector (e.g. suppliers – including foreigninvestors–customersandintermediaries)andexternaldonorsareamong thepotentialstakeholders involvedintradefacilitationnotonlyatthenationallevel,butinsomecasesalsoattheregionalandinternationallevel.

Thesecondmostreportedsuccessfactor,mentionedin96casestories,istheactiveinvolvementandadherenceoflocalprivatesectorstakeholders,includingchambersof commerce, business associations, and civil societyengaged in tradeand transportactivities.Assomeofthe first and main beneficiaries of trade facilitationreform, providing traders and businesses with theopportunity to share views and make suggestionsduringtheneedsassessment,design,implementation,andevaluationofthetradefacilitationreformiscriticalto ensure that the initiative leads to concrete andpractical benefits. Yet there is rarely a single privatesectorvoice thatnaturallyemerges fromthedifferentindustries and sectors involved. Conflicting andopposing industry interests can thereforehamper theimplementationoftradefacilitationinitiatives(Grainger,2008).Afewcasestoriesunderscorehowimportantitis that the government remain neutral and not favourcertainfirmsorindustriesinordernottojeopardizethebroadsupportneededfromthebusinesscommunity.

Different approaches exist to consult and involve theprivate sector: establishing trade facilitation bodies;sendingopenconsultationletterscallinguponinterestedpartiestoexpresstheirviews;orcommissioningstudiesand surveys (Grainger, 2014). In particular, nationaltrade facilitation bodies can be proved to be useful inaddressingtradefacilitationissuesinacoordinatedway,accommodating conflicting interests and enhancingformaland informaldialogueandcooperationbetweenprivate-andpublic-sectorstakeholders(UNCTAD,2006).


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In the last 15 years, the number of bodies, such ascommittees, commissions and working groups, putin place to bring together relevant stakeholders,includingtheprivatesector,hasincreasedsignificantly.While different geographic, economic and culturalfactors influence trade facilitation bodies’ functions,performance, and sustainability, private sectorinvolvement and coordination among participants areconsidered by trade facilitation bodies as the mostcriticalfactorsinattainingtheirobjectivesandeffectivelydevelopingtheiractivities(UNCTAD,2014a).

In fact, the success of trade facilitation initiativesdepends also, as mentioned in 54 case stories, onthe involvement, commitment and readiness of thedifferent ministries and agencies operating at bordercrossings. Customs are not the only governmentagency involved in trade facilitation. Delineation andcoordination of the responsibilities of implementingagencies, including customs, but also airport andport authorities and border control agencies, suchas sanitary and phytosanitary and environmentalprotectiondepartments,canbeimportanttoeliminateany incompatible procedures, redundancy andduplication in thedesignand implementationof tradefacilitationmeasures.Forinstance,itisnotunusualthat,at times, agencies in charge of safety, phytosanitaryand quality standards proceed to different andseparateinspectionsandtestingtoensurethatimportsare in conformity with the relevant standards. Untilthese agencies give their approval, customs will notbe in a position to grant the release of the importedgoods. In the absence of coordination among these

agencies, any trade facilitation measures related tothereleaseandclearanceofgoods,suchaspre-arrivalprocessingand riskmanagement,will not fully realizeall of its potential benefits. As discussed previously,consultation mechanisms, such as national tradefacilitation bodies and multi-agency working groups,canconvenethedifferentviewsandintereststodefinea common strategy and assign priorities. Similarly,theestablishmentofa feedbackmechanismbetweenthegovernmentandstakeholderscanbeuseful tobeabletoidentifyandresolveissuesrelatedtothetradefacilitationreformimplementation.

(c) Financial,humanandmaterialresources

Anotherrecurringsuccessfactor,reportedin95casestories, istheimportanceofenvisagingandpreparinga realistic and sustainable funding mechanism toimplementthetradefacilitationinitiative,rangingfromdomestic funding to external financial support, or acombination of both. In particular, a relatively highernumber of case stories on trade facilitation projectsand programmes in LDCs underscores the key roleplayed by adequate, predictable and reliable donorfunding. As noted in subsection E.1, initiatives suchas Aid for Trade play an important role in mobilizingdonor support for capacity-building and trade-relatedinfrastructure (OECD and WTO, 2015). A few casestories also highlight the importance of public-privatepartnership as a means to fund trade facilitationreformand increaseprivatesectorparticipation.Moregenerally, the long-term sustainability of most trade

Figure E.19: Stakeholders in trade facilitation reform

Policy-making entitiesMinistry of Trade

Ministry of Foreign AffairsMinistry of TransportMinistry of Finance

…

Border control agenciesSanitary and phytosanitaryStandards Environment…

Private sectorExporters and importers

Chamber of commerceBusiness associations

Foreign investorsConsumersCivil society

…

Implementing agenciesCustomsPort authorityAirport authorityBoard patrolCoast guardPost offices…

Private sectorInternational organizations

Regional banks Donor countries

…


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facilitation reforms requires securing a steady annualbudgetallocationonceexternalfundingandtechnicalassistance cease, which in turn can be difficult toobtainwithoutstrongpoliticalwill.

Adequate human resources and organizationalmanagement, mentioned in 61 case stories, are alsoreportedas a critical element in enhancing thequalityandintegrityofstaffwithrespecttothetradefacilitationinitiative(WorldBank,2006b).Ashighlightedin37casestories,tradefacilitationoftenrequiresspecifictechnicalexpertise. In this context, on-the-job training, includingthrough technical assistance and capacity-buildingactivities, is key to ensuring that the staff concernedacquiretheproperskillsandremaincompetent.Besidestrainingandprofessionaldevelopment,theremuneration,incentives, promotion, rotation and relocation offeredtostaffmayhavetobeconsideredtoensurethat theyinternalizetheobjectivesofthetradefacilitationreformand accept their (new) role and responsibilities (WorldBank, 2006b). In some cases, organizational changesalso have to be pursued by reallocating resourcespreviously assigned to other tasks in order to providegreater flexibility, effectiveness and efficiency inoperationalmatters(McLindenet al.,2011).

The importance of information and communicationtechnology and infrastructure, including equipment,tomaterialize trade facilitation reformshasalsobeenhighlighted in 48 case stories. In particular, the useof ICTcancontributesignificantly tostreamliningandsimplifying customs procedures and documents, asreported in many case stories on single window andpaperlesstradeinitiatives.ItfollowsthatdeficienciesinICTcanpreventthefullimplementationofcertaintradefacilitationmeasures that tend to relyon ICT,suchassinglewindows.Afewcasestoriesfurtherunderscorethe importanceofdesigning trade facilitation reformsattunedtothecountry’sactualITcapacities.

(d) Sequencingapproach

Another critical factor in implementing a successfultradefacilitationinitiative,reportedin65casestories,istoestablishandfollowpropersequencing.Sufficienttime is often needed between the elaboration ofthe trade facilitation measures and their actualimplementation in order to prepare the ground, bringall stakeholders on board and build internal capacitythroughoutreachand trainingactivitiesandpotentialadditionalinvestment(e.g.infrastructure,ITupgrades,etc.).Moregenerally, tradefacilitation reform isoftenviewedasalong-termandgradualprocessthatshouldnot be too slow, so as not to erode the initiative’smomentum,andnot toofast,soasnot toexacerbateresistanceandunderminethereform’ssustainability.Inthiscontext,aflexibleimplementationplan,mentioned

in 41 case stories, can be crucial for adapting andresponding to external factors, such as the globalrecession,thatcanleadtodelaysandchangepriorities.User-friendlinesshasalsobeenidentifiedinanumberofcasestoriesasanimportantelementofsuccessfultradefacilitationreforms.

Ashighlightedin46casestories,thestartingpointofthe sequencing often takes the form of an accurateandcomprehensiveassessmentofthetradefacilitationneedsandprioritiesofthecurrentsituation,takingintoaccount, among other things, the country’s specificoperating environment, administrative competencies,resources availability, technological levels andpolitical system, with a view to identify the situation’sshortcomings (DeWulf andSokol,2005).Diagnosingneeds is frequently considered as a prerequisite tobe able to define not only realistic objectives butalso a clear and coherent strategy tailored to thesituation, as mentioned in 41 case stories. Evidencesuggeststhat,asmosttradefacilitationmeasuresareinterrelated,theymayfailtoachievetheirfullpotentialeffectiveness when the measures in question areimplementedpartially,inisolationandintheabsenceofanappropriatesequencingofmeasures (DeWulfandSokol,2005;Moïsé,2006).

(e) Transparencyandmonitoring

Keeping policy-makers and relevant stakeholders,includingtheprivatesector,informedontheelaborationof a trade facilitation initiative, progress achieved,difficultiesencounteredandsurmounted,andmeasuresproposed to address delays and changed conditions,can also contribute to its success, as reported in55 case stories. For instance, a number of nationaltrade facilitation bodies has adopted a communicationstrategytoshareanddisseminaterelevantinformationtostakeholdersandthegeneralpublic(UNCTAD,2014a).Such transparency mechanisms can often foster thetrust necessary to convince and obtain the support,participationandownershipofallrelevantstakeholders.A number of case stories further underscore theusefulness of raising awareness and promoting tradefacilitation initiatives inordertosustainthemomentumandgaingreatersupportamongallstakeholders.Inthisregard,andasmentionedin43casestories,monitoring,reportingandevaluatingtradefacilitationinitiativescanbeanimportantsuccessfactorbykeepingstakeholdersinformed of the results achieved, and of whetherthe initiative is on track or needs to be adjusted. Anefficient monitoring mechanism often starts with theestablishment of clear performance indicators (WorldBank,2006b).Monitoringcanalsobeessentialtosecureexternal funding, as it is a way to assess the project’seffectivenessandconvincedonors(Holleret al.,2014).


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(f) Othersuccessfactors

A limited number of other success factors has beenexplicitlyidentifiedinafewcasesstories.Forinstance,33 case stories stress the role of an adequate,enabling and clear legal framework. As discussed insubsection E.2, some trade facilitation measures mayentail a change in laws, regulation and administrativeguidelines to fully support trade facilitation reformimplementation, such as authorizing electronic datasubmission and exchange among agencies. Otherspecific measures may already be applied informallyby customs or border agencies in some developingcountries, but require a proper legal framework andinstitutionalsupporttobecomemainstream(UNCTAD,2014b).Theimportanceofadoptinginternationaland/or regional best practices and of aligning the legalframework and trade facilitation procedures, such asdata and documents harmonization, with internationalstandards, guidelines and recommendations, has alsobeenhighlightedin23casestories.Similarly,regionalcooperation and coordination, reported in 18 casestories, can prove to be useful to build on regionalexperiences and enhance regional integration, andthuscomplementcooperationandcoordinationat thedomesticlevel.

6. MonitoringimplementationoftheTFA

Finally,giventhelargeestimatedbenefitsfortheglobaleconomyofimplementingtheTFA,itisvitaltomonitorits implementation. This will help gauge the progressthat has been achieved, identify the problems thathavebeenencounteredbyimplementingmembersandassess how well the flexibilities in the Agreement fordevelopingcountriesorLDCshaveworked.

Monitoring the implementation of WTO agreementsis one of the core responsibilities of members. In thespecificcaseoftheTFA,theAgreementwillestablishaCommitteeonTradeFacilitationwhichistoreviewitsoperationandimplementationfouryearsfromentryintoforce,andperiodicallythereafter.TheWTOSecretariatcan complement WTO members’ monitoring effortsthroughthecollectionofeconomicinformationandtheevaluationofeconomicoutcomes.Evenifgovernmentsin poor countries are able to translate multilateralcommitments into national law and practice, theadministrativecapacitytocarrythemouteffectivelymaynotbesufficient,thusproducingadivergencebetweenexpectationsandoutcomes.Economicmonitoringwillhelp ensure that such problems are caught early andsolutionsfound.Itwillalerttheinternationalcommunityto obstacles that prevent developing countries andLDCsfromacquiringimplementationcapacity.

Resources will be needed to increase capacity indevelopingcountriestoimplementtheTFA.Toensurethat theyareallocatedefficiently, oneneeds toknowwhat types of capacity-building initiatives are mosteffective, and under what circumstances. These aretypicallythetypesofquestionsthat impactevaluationstudiesarebestequipped toanswer.Therehasbeensome work on developing methodologies for impactevaluation of trade-related interventions, includingtradefacilitationmeasures(seeforexampleCadotet al.(2011)andFernandeset al.(2015)).Theyshowpromisesuggestingthat rigorous impactevaluation ispossibleeven without randomized trials, which are typicallyconsideredtobethegoldstandard.

Good data, indicators and analytical tools are requiredtoeffectivelymonitorandevaluatetheeconomicimpactoftheTFA.Oneimportantconstraintencounteredinthisreport is the paucity of data on implementation costsdespite itsobvious importancefordevelopingcountriesandLDCs.This reporthasalsomadeuseofanumberof indicators and economic tools to estimate the likelybenefits of the TFA. While there is no question abouttheir reliability and usefulness, they are by no meansperfectbecauseof,amongotherissues,limitedcountryandhistorical coverage.Thisshouldmotivate theWTO,in conjunction with other international organizationsandregionaldevelopmentbanks,topoolresourcesandexpertise so that more and better data are collected,existing indicatorsandanalytic tools are improvedand,wherenecessary,newonesdevelopedsoastoeffectivelymonitorandevaluateimplementationoftheTFA.

7. Conclusions

This section underscored the high priority given totrade facilitation by developing and least-developedWTO members, as expressed through surveys.Countries have been implementing trade facilitationmeasures forseveral yearsandnocountry isstartingfromzero.At thesame time,manyof thesecountriesvoice concerns about the uncertainty related to thebenefitsandcostsassociatedwiththeimplementationof the TFA. Measures related to border agencycooperation, trade-related formalities,and informationpublicationandavailabilityhavebeenidentifiedasthemost challenging measures to implement. Althoughlimited, information compiled on the implementationcosts of trade facilitation initiatives shows that themagnitude of the trade facilitation reforms’ inceptioncosts is country-specific and depends on the type oftradefacilitationmeasureconsidered.Tradefacilitationmeasuresrelatedtotransparencyandthereleaseandclearanceofgoodstendtoentaillowerimplementationcoststhanthoserelatedtocustomsandborderagencycooperation, customs automation, and formalities,

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whichoften relyon ICT infrastructureandequipment.Butoverall, theanticipatedcostsof implementing theTFAappearmodestrelativetotheexpectedbenefits.

The section also highlighted the TFAF’s key rolein matching and coordinating countries requestingtechnicalassistancewithcountriessupplyingcapacity-building and technical assistance. An analysis of alarge number of case stories on trade facilitationinitiatives confirms that, while financial resourcesavailability and sustainability are essential, they donot constitute a sufficient condition to ensure thattrade facilitation initiatives will be successful. Strongpolitical commitment at the highest level appears tobethemostimportantsuccessfactorinimplementing

trade facilitation measures. Other key factors includecooperation and coordination between ministries andgovernment agencies, private sector participation,adequacy of human and material resources, adoptionof a sequencing approach, and transparency andmonitoring. Looking ahead, it is essential to monitorimplementation of the TFA once it comes into force.Good indicators, including information on tradefacilitation needs and implementation costs, as wellasanalytical toolsare required toeffectivelyevaluatethe economic impact of the TFA. In this context,cooperation between international organizations andregional development banks is vital to further poolresourcesandexpertisesothatexistingindicatorsandanalytictoolsareimproved.

Endnotes1 Summarystatisticsforgroupsofcountriesarecomputedby

mappingresponsestocountrycharacteristics(e.g.percapitaincome,landarea,geographicalregion,landlockedstatus,etc.).StandardWTOgeographicalregionshavebeenmodifiedduetoinsufficientdatainparticularregions.Forexample,AfricaandtheMiddleEastwerecombinedduetothefactthatonlyoneMiddleEasterncountryrepliedtothequestionnaire.LatinAmericawasalsousedratherthanSouthAmericaforthesamereasonsinceMexicowastheonlyNorthAmericandevelopingcountrythatrepliedtothequestionnaire.

2 Duval(2006)identifiesthepotentialreductioningovernmentrevenuefollowingthereductionofthenumbersanddiversityoffeesandchargesresultingfromtheadoptionofsometradefacilitationmeasuresasanothercomponentoftheimplementationcosts.

3 Forcomparisonpurposes,costsdatahadtobeadjustedtoacommonmeasure.Costsexpressedinnominaldollarsweredeflatedintoconstant2014USdollarsusingtheconsumerpriceindexprovidedbytheFederalReserveBankofSt.Louis(USA).Similarly,costsexpressedinnon-UScurrency(e.g.euro,Britishpound)weretransformedintonominaldollarsusingtheyearlyexchangerateasreportedbytheOECDandsubsequentlydeflatedintoconstantdollars.Periodaverages(e.g.1998-2002,2008-12)wereassignedfortheobservationsnotreportingtheimplementationyear.Thetotalnumberofobservationsdoesnotincludetradefacilitationmeasuresforwhichonlyoperationalcostsareavailable(10observations).Althoughmostobservationsrefertotradefacilitationmeasuresadoptedbyasinglecountry,alimitednumberoftradefacilitationprojectsareregionalinitiativescoveringtwoormorecountries,someofwhicharedevelopingcountriesandothersleast-developedcountries.Asaresult,thepercentagesdonotalwaysaddupto100percent.

4 Dataonautomationcostsincludetwooutliers.First,MozambiqueentrustedaprivatecompanytoinstallacustomsautomationsystemforasymbolicpaymentofUS$4in1997(Moïsé,2004).Second,thecostofautomationoftheRussianFederation’sCustomsDevelopmentProject(2003-09)wasestimatedatUS$133million(OECD,2005).

5 SeeAnnexD(ModalitiesforNegotiationsonTradeFacilitation)in“DohaWorkProgrammeDecisionAdoptedbytheGeneralCouncilon1August2004”,WTOdocumentWT/L/579,2August2004andMoïsé(2006).

6 TheseareprovisionsoftheTFAthatadevelopingcountrymemberorLDCmemberdesignatesforimplementationonadateafteratransitionalperiodoftimefollowingtheentryintoforceofthisAgreementandrequiringtheacquisitionofimplementationcapacitythroughtheprovisionofassistanceandsupportforcapacity-building.

7 Theeconomicliteraturehasstudiedthequestionofnon-marketmatchingandidentifiedcrucialdesignprinciplesthatwouldaidinachievingoptimaloutcomes(seeGaleandShapley(1962)andRoth(1984;1985)).Consumersarepresumedtohavearankingofdonorswithwhomtheywanttobematched.Onecanimaginethisrankingtoreflectconsumers’perceptionoftheirowntechnicalneedsandthecomparativeadvantageofdonorstomeetthoseneeds.Donorshavetheirownrankingofthecountriestheywanttoassist.Astableoutcomeisamatchingofconsumersanddonorssuchthatnoconsumer-donorpairwouldprefertobematchedwitheachotherratherthanstayingwiththeircurrentmatches.Astablematchingisoptimalinthesensethattheredoesnotexistanyalternativepairingofconsumeranddonorthatwouldleaveeitherpartnerbetteroffthanwiththeircurrentpartner.Ifthepoolofconsumersanddonorsisnottoolarge,thismatchingcantakeplaceinadecentralizedfashion.Ifoneorbothsidesofthemarketislarge,thereisawell-knownalgorithm(theGale-Shapleyalgorithm)thatarrivesatthestableoutcome.

8 Materialsfortheseworkshops,andawealthofotherinformation,areavailableontheFacilitywebsite(www.TFAFacility.org).

9 Technically,179casestorieswerecollected,butanumberofthosecasestoriesrefertothesametradefacilitationinitiative,andassuchareonlyconsideredonceinthestatistics.

10 Afewcasestoriesreportontradefacilitationinitiativesindifferentcountriesand/orregions.Asaresult,thepercentagesdonotnecessarilyaddupto100percent.

e. the challenges of implementing the trade facilitation ... · meeting the challenges of...

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