Trade Facilitation
in the level of implementation can create sizable losses for the region in the form of forgone tax revenue, lowered standards, and increased threats to health or security. Even worse, when border tax revenues are an important source of government revenue, there may be an incentive to practice beggar-my-neighbor tactics by attracting imports from partner countries in a PTA. Finally, some public goods important for regional facilitation do not need to be supplied by each country; gateways such as ports, pipelines, and airport hubs can be used by all countries in the region but are not needed in each country. This does not have to be major infrastructure— specific equipment may also be shared among a group of countries. In such cases the challenge is for countries to agree not to duplicate efforts and instead to concentrate on a best-shot effort. In summary, the promotion of regional trade facilitation requires a careful analysis of the types of regional efforts that are needed. The PTA provisions will need to reflect the various forms of cooperation that are required to supply the regional public goods. In some instances, coordination of policies will have to be the prime objective; in other circumstances, implementation will have to be carried out in only a subset of countries; and in still others, countries will have to make tangible contributions involving cross-border transfers of expertise, and funds will have to be designated. Finally, for some regional efforts, all of the above actions will be needed. Institutional Arrangements for Facilitation of Regional Trade The question of regional public goods raises implicitly the question of what institutional format would be best suited for delivering them. In fact, there is a varied array of regional institutional arrangements designed to tackle trade facilitation problems. Bilateral cooperation agreements in the fields of customs, standards, and transit are common. These agreements aim primarily at improving specific areas of enforcement and generally have narrow objectives. Some recent agreements push new forms of cooperation. For instance, the United States and China have an agreement permitting U.S. officers stationed in China to perform inspections related to standards. This concept is similar to that of the container security initiative, under which U.S. customs officers are stationed in participating ports. In the case of the EU, customs cooperation agreements seem to be confined to those between large trading partners and developed or emerging partners, and their aim is essentially to develop advanced forms of cooperation.
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Transit corridor agreements are ad hoc regional agreements that have the single objective of managing international trade corridors. They take very different forms, and, as shown in Arnold (2006), no single model prevails. The corridor arrangements are very much works in progress and have been influenced by the problems they were meant to address. In particular, the role of governments in corridor arrangements varies greatly, from that of sole parties to being only one actor. The active involvement of the private sector is an interesting feature of such arrangements. A distinction can be made between shallow and deep PTAs. The former contain only very limited provisions related to customs enforcement of preferences, whereas the latter tend to increasingly include extensive trade facilitation provisions. The big differences between them and ad hoc cooperation agreements are that in deep PTAs other sectors are liberalized in parallel and the institutions behind the PTA tend to be more complex—providing, for example, for dispute settlement—and to be closer to political decision centers. Customs unions enable a more advanced form of trade facilitation cooperation. The fundamental tenet of a customs union is the uniformity of the external tariff. This has implications for customs management: the quality of border enforcement has to be identical across the customs union to ensure that the weaknesses of one party do not undermine the tax collections of others (through the diversion of imports to the border where enforcement is the least stringent) or hinder the fulfillment of other border control objectives, since not all countries in the union may be concerned about the same issues. Finally, there are single common markets, such as the EU. Although the experience of the EU is far removed from some of the preoccupations of developing countries, it shows that even in the context of a common market, where internal borders are dismantled, the management of external borders remains challenging, and the integration of border procedures is accompanied by significant reforms. We next examine in more detail two forms of regional arrangements that are most relevant for regional trade facilitation reform: transit corridors and PTAs. Transit Corridors Access to global trade is an important development challenge, both for individual countries and for neighbors wishing to access their markets. This challenge is especially important for landlocked countries and land-based crossing of borders. Experience shows that trade facilitation projects and reforms are complex to design and carry out and that they are not always successful because they require