Establishing Well Functioning National Trade Facilitation Bodies (NTFBs)

In the OIC Member States

1.2.2.

The NTFBs & Costs: Costs resulting from lack of trade facilitation measures

and of their implementation

In brief, because NTFBs play a positive role in the creation and maintenance of frameworks for trade

facilitation measures, the establishment of NTFBs translates into reducing trade costs. However, it

can be challenging in specific instances to determine which costs are higher – those that trade

facilitation measures will help to reduce, or the costs incurred for the implementation of trade

facilitation measures. Moreover, there are certain public policies that can assist in paying them off.

However, OECD findings suggest that the costs directly incurred as a result of implementing trade

facilitation measures are more than offset by the savings resulting from those trade facilitation

measures (savings in terms of rationalisation of staff at the border, enhanced control and revenue

collection)

(OECD, 2005). More recent OECD estimates on the benefits – in terms of reduction in

trade costs – resulting from implementation of the WTO’s Trade Facilitation Agreement are

reproduced in the following sub-section.

Accordingly, it follows that the establishment and maintenance of well-functioning NTFBs – as a

trade facilitation measure in itself and as a measure that supports the implementation/functioning of

other trade facilitation measures – implies a reduction in the cost of trading, even when

implementation costs are taken into account. In addition, the OECD notes that more and more

technical and financial assistance is available to developing countries in order to implement trade

facilitation measures

and thus the upfront and recurring costs of implementation may be lower for

developing countries. Any cost-benefit evaluation of introducing trade facilitation measures

(including NTFBs) should take account of this availability and should also make predictions on the

basis of a long time frame (i.e. to take account of the fact that large upfront, one-off costs may deliver

long-term benefits).

1.2.2.1.

Costs resulting from lack of trade facilitation measures

Liberalization of international trade has resulted in more goods crossing more borders. However,

there are costs associated with goods crossing borders: These goods are required to comply with the

specific formalities and procedures of different authorities. Noticeably, the increase in the traffic of

goods has created several difficulties that both public and private sectors face and must find ways to

overcome. A significant challenge for public administrations can be the lack of extra financial and

human resources to cope with the growth of international trade (in terms of volume and associated

complexities resulting from relevant trade laws). For the private sector, complicated trade

procedures and requirements imply longer delays for goods to cross borders, resulting in extra costs.

The co-existence of multilateral and preferential rules (mainly, rules of origin) increases the level of

complexity as firms have different locations for manufacturing, sourcing components, and releasing

the final product.