Tom Keighley

Member Article

Inefficient borders can knock GDP by 5%

Border customs requirements and administrative procedures can seriously impact the value of traded goods, a report from the OECD highlights.

Some countries’ revenue losses from inefficient border procedures could be as much as 5% of GDP, and policy makers should take a pragmatic approach to this.

The report looks at the stumbling blocks in the international trade chain, and also looks at “behind the border” factors, including non-tariff regulatory measures; market access restrictions; trade finance availability and general costs.

Even where goods are sold domestically the unpredictability of trade finance and cost of market entry are fundamental to transactions.

The proliferation of regulatory components such as import quotas, rules of origin and sanitary measures can become a “severe obstacle for firms” and can hurt competitiveness, as production becomes increasingly globally fragmented.

While the importance of such non-tariff measures (NTMs) is noted, the researchers suggest removal of them should only occur where it would not cause significant welfare losses.

Transport and infrastructure logistics are also determining cost factors, and the provision of high-quality infrastructure is only beneficial when teamed with competitive logistics services.

Report authors, Evokia Moïsé and Florian Le Bris, said: “Most underlying causes of trade costs run through most if not all stages of the international trade chain.

“Many trade cost components boil down to issues of uncertainty, or, on the contrary, reliability and predictability in delivery: policymakers thus need to address them in a comprehensive manner.

“At the same time, countries at different stages of development have specific circumstances and implementation capacities that need to be considered. The sequencing of reforms and policy measures should take these specificities into account in order to efficiently reduce trade costs.”

This was posted in Bdaily's Members' News section by Tom Keighley .

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