The Complex Political Economy of Trade Corridors
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Who is more to blame? Who needs to make the first move toward reform? Whatever the origin, the challenge is to find ways that can draw both parties away from the traditional mindset toward setting in motion a virtuous cycle, where constructive actions by one party encourage the other to comply more closely with the rule of law and, thereby, consolidate a cooperative rather than combative behavior pattern. Public voice can play an important role. If momentum for change is to be created and sustained, stakeholders need to be mobilized who have the most to gain from reforms that make trading systems more efficient and less corrupt. At an early stage, governance mechanisms need to be identified that will protect their interests. Those with most at stake are the import and export community and transport companies operating internationally. Along with other civil society bodies, they need to promote and encourage champions for change.
Changing the Incentives for Cooperation and Mutual Benefit Game theory offers some basic tenets that are highly relevant to this problem. The classic example is the prisoner’s dilemma in which two prisoners would be able to minimize their sentences if they both told the same alibi. But if neither knows what the other will say, each prisoner’s options will lead him to betray the other, with the result that they both lose. This is a “win-win” game, in the sense that both can gain if they coordinate their actions, compared to the outcome if they act independently. Win-win games require that the parties have information about what the other party intends to do and have mutual trust that they will stick to the agreed plan. The same logic applies to trading relationships. For instance, customs endeavors to enter in a trust-building relationship with compliant operators in which facilitation of trade will be the counterpart of some verifiable commitment to compliance. The resulting trade expansion and increased revenue will be a win-win situation. This concept, called “authorized operator” by the World Customs Organization, will be introduced in chapter 5. Unfortunately, the political economy of corridors is too complex for the win-win paradigm to apply to all agents. It is not likely that the incentives of all agents can be aligned. For instance, not all traders or service providers would be able to participate in cooperative schemes that would require and provide compliance standards and regulation of entry. Not all traders, especially small-scale importers or traditional networks, might be interested in the quality-based regulations that would be of interest to exporter and logistics companies that were part of global supply chains. It is