Establishing Well Functioning National Trade Facilitation Bodies (NTFBs)
In the OIC Member States
8
Inefficient border procedures and unpredictable regulations generate increased costs for both the
private and public sector. The private sector eventually passes these costs on to consumers.5 For the
public sector, the implications of inefficient border procedures and unpredictable regulations are lost
government revenue, a greater chance of smuggling, and difficulty in implementing trade policy due
to the inaccuracy of collected trade statistical data. Last but not least, a country with such practices
becomes less attractive for foreign investors and leads to reduced competitiveness for that country's
exports.
Developing countries, least-developed countries (LDCs), and, specifically, landlocked countries are
remarkably susceptible to the above-mentioned challenges. For landlocked countries, this is due to
their dependence on neighbouring regulations. Small and medium-sized enterprises (SMEs) – which
tend to be the profile of developing country firms – stand to gain more from trade facilitation because
costs may be proportionally higher for SMEs than for larger firms.
Trade facilitation measures mitigate these costs/challenges detailed above by bringing about simple,
harmonious, and transparent procedures, based on international standards (SWEPRO, 2015). With
respect to estimations on the gains to be achieved through implementation of the WTO’s Trade
Facilitation Agreement (TFA) in particular, the OECD has made estimations of the benefits of its
implementation.6 In this regard, it should be recalled that one of the non-negotiable commitments
that WTO Members made under the TFA is to NTFBs in order to promote implementation of the TFA
(see the discussion below). Relying on data from 152 countries, the OECD estimates that: (i)
implementation of the TFA could lead to a 12.5% - 17.5% reduction in worldwide trade costs; (ii)
countries that implement the TFA in full will benefit from a greater reduction in trade costs than will
be experienced by countries that only implement the minimum requirements of the TFA (i.e., those
that implement in full will benefit from a 1.4 – 3.9% greater reduction in their trade costs); (iii) the
largest reductions in trade costs are available to low and lower middle income countries as many
higher income countries already implement measures that relate to the less hard, “best endeavour
obligations” of the TFA.
The OECD prepared the following helpful figure7 on the potential trade cost reductions depending on
the income group, which also distinguishes the potential for trade cost reductions when the
provisions of the TFA are fully implemented as opposed to implementation of only the mandatory
provisions of the TFA.
5 At first blush, it may seem that the costs of implementation are mostly borne by the authorities that have the responsibility of
executing these modifications. However, these expenses are actually shared among all participants in the trade chain.
6 See OECD Policy Brief, Implementation of the WTO Trade Facilitation Agreement: The Potential Impact on Trade Costs , June 2015,
7 Ibid.