Benefits

There are great potential gains to receive from trade facilitation. Time and money are wasted because of outdated trade procedures that hamper business, stifle growth and hold back economic development. Unnecessary and excessive data and documentation requirements, lack of transparency in customs, excessive clearance times, lack of coordination, and the absence of modern techniques, are just a few of the problems contributing to this. The importance of ensuring that trade can flow with minimum impediments, with higher security levels and more efficient government control methods, has been the focus of attention.

Trade facilitation benefits all stakeholders involved – the business community as well as governments. The business community gains from trade facilitation through faster delivery and reduced transaction costs. It is important for traders that the application of rules is predictable. This will allow them to know what to expect in their everyday contacts with customs and other authorities. Simple and efficient trade procedures lift the burden of bureaucracy for companies and they can instead focus on their core activity. This is particularly important for small and medium sized enterprises (SME:s) that face proportionally higher costs for complying with cumbersome procedures than larger companies. In a transparent trade regime market participants have a clear view of the rules applied on the respective markets. Their production can thus be based on an accurate assessment of potential costs, risks and market opportunities. Transparency is also essential for attracting foreign investments. A country with a transparent trading regime and efficient procedures is more likely to attract foreign investments and increase its international trade [1].

The government will also gain from having a transparent trading regime in which the rules and the procedures are clearly communicated. In this kind of trading regime there will be less risk for corruption and discretionary decision by individual officials. Corruption is increasingly recognised as an important problem that hampers trade and growth. National government administrations are able to utilise modern procedures to enhance control, ensure proper collection of revenue and at the same time contribute to the economic development through increased trade. According to the experience of many countries, the positive results of trade facilitation will furthermore be both greater and more quickly achieved through the implementation and use of information and communication technology (ICT).

When one days extra delay at the border in the financial downturn of 2008 led to about an additional 0,5 % fall in exports to the United States, when in average cutting one signature on both sides of the border would increase trade by 10 % and when the OECD finds that measures like advance ruling and information availability have a high impact on trade flows , then trade facilitation seems like a good idea!

It is difficult to assess the gains from trade facilitation in quantitative terms. Trade facilitation reduces the costs associated with trade (so called transaction costs). Transaction costs can be further divided into direct and indirect costs. Direct costs are fees and charges which provide government revenue and employment. Indirect costs, on the other hand, constitute a deadweight loss and do not create any revenue. According to the Organisation for Economic Cooperation and Development, the OECD, the transaction costs account for between 1–15% of the total transaction value of goods
 * Benefits in Quantitative Terms**

being traded [2].

[1] WCO, www.wcoomd.org “Benefits of Trade Facilitation”. [2] OECD, Policy Brief: “The Costs and Benefits of Trade Facilitation”, Oct 2005.