Perhaps it is not surprising that trade with emerging economies is often more complicated, time consuming, and costly than one would want. In addition to lacking some of the necessary physical infrastructure to transport goods, emerging economies frequently have complex and opaque regulatory requirements that create additional delays and increase transaction costs at their borders. According to data provided by Doing Business, it takes three times as many days, nearly twice as many documents, and six times as many signatures to import goods in poor countries than it does in rich ones.
For developing countries, such delays undermine their competitiveness as they increase the cost of exports and reduce the reliability of supply. To remedy this problem, governments and development professionals have supported trade facilitation reform to improve border management procedures. However, despite agreement that border management regimes need to be improved, there is little effective guidance available for those charged with implementing reforms. Key questions need to be more fully answered, such as how to identify the main reform priorities, how to secure genuine political commitment, and which institutional structures are the most appropriate.
These are precisely the questions addressed in the most recent edition of the Economic Premise series, “Collaborative Border Management: A New Approach to an Old Problem.” Based on the World Bank’s recently released Border Management Modernization Handbook, author Gerard McLinden argues in favor of a more cross-dimensional reform and modernization agenda based on the concept of collaborative border management (CBM). As McLinden explains, “The CBM concept shifts the focus beyond the traditional customs-specific trade facilitation agenda to a new and more comprehensive “whole-of-government” approach to reform that relies less on institution-specific reform and more on a wider trade supply chain–focused approach designed to tackle the major barriers traders face.”
Indeed, attention should be focused on collectively modernizing the systems and procedures employed by all border management agencies—not just customs. In fact, it is not uncommon for over 30 different government agencies to be involved in the processing and clearance of goods—from agencies dealing with health, agriculture, and quarantine policies to the police and immigration authorities. What’s more, the border processing chain is only as strong as its weakest link: a breakdown anywhere along the chain will have a direct effect on border clearance time.
Accordingly, I agree with the recommendations put forth in this week’s Economic Premise. Tough decisions are needed on where to spend limited resources to pursue border management reform. To this end, a well defined business case—weighing costs and benefits—needs to be prepared and sold to key stakeholders. Fortunately, the CBM model can help, as it offers a more comprehensive approach to tackling the issue and enhances trade facilitation outcomes for developing countries.
First appeared at World Bank Growth and Crisis blog and Huffington Post