Possible dangers of implementing such standards and procedures that balance security and TF needs are added costs, especially for developing countries. Security proposals can affect global supply chains by requiring costly changes in business practices, process redesigns, and new equipment. Developing countries often lack the expertise, manpower and the resources to conform to the new requirements. Costs incurred for securing the facility stemming from the ISPS code are expected to be $963 million in Year 1,and $535 million annually thereafter. The paperwork alone would require 1.7 million hours in Year 1, and 1 million hours per year thereafter. The threat of exclusion remains large – the possible relocation of production and commerce to ‘safe areas’ can adversely affect certain countries. The 24-hour rule could shun those countries unable to provide the cargo manifest information in the time allotted.

At the same time, the prospect of reducing future threats through technology-intensive customs inspections and other advanced methods should be viewed as an investment in greater trade efficiency. Reduction in smuggling and corruption, and an increase in detection rates are likely outcomes. The use of innovative technologies like gamma ray detection facility and smart containers for ports for example, will reduce the need for physical inspection of cargo as well as make ports more secure. Modern customs methods of profiling consignments or traders based on risk-assessment techniques can help expedite cargo clearance<sup>37</sup> . The Swedish StairSec program, developed in customsbusiness partnership, saw compliance costs for some Swedish accredited operators reduced by 76% while Customs witnessed an increase in hit rates from 5-45%<sup>38</sup> .

The costs of inaction on the integrated agenda for balancing security and TF issues far outweigh the cost of implementation in the long run. Care has to be taken to ensure that trade security does not become a new non-tariff barrier. New security protocols have the potential to streamline trade transactions as well as promote safety and security. For proper security of ports and more efficient trade, security and supply chain management (SCM) has to go hand in hand. The integration of SCM and security has to be done in a way that minimizes disruptions to routine operations, reduces chances of port closures, develops security services and border-less supply chains, and achieves an end to end cargo transparency (smart cargo) by linking different networks. TF and security have to be incorporated in the national and regional trade strategy (e.g. APEC STAR initiative). Use of standardized and harmonized documentation and focus on implementation of new and old TF tools should be encouraged. A risk management technique that identifies high-risk goods based on information provided at an early stage of the supply chain by a credible source can also be integrated.

For complete security of the supply chain, partnerships at various levels in the global security campaign action are needed. Private-Public partnerships through integrated and secure supply chains can also go a long way in making trade efficient and secure. All organizations and agencies involved in transport, ports must collaborate with country

> 37 Detail on impact of security on Trade Facilitation in terms of costs, benefits, recommendations can be found in <u>Global Economic Prospects 2004</u> (World Bank).

> 38 For more on the private sector approach to tacking security, refer to presentation by <u>HPH</u> (Hutchison Ports Holdings) on Smart and Secure Tradelanes.

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