# **1 Introduction**

The decline of tariffs and other policy-related trade barriers has shifted the focus of global trade policy towards trade facilitation. At the 2013 WTO ministerial in Bali member countries signed the Trade Facilitation Agreement (TFA), which commits them to pursue a range of border management policies that are currently considered best practice. But how much improvement should be expected in the time and cost needed to clear customs? And if there is progress, how valuable would it be? Direct evidence - in the form of impact evaluations of specific procedural reforms - is still lacking. In this paper we conduct a cross-country empirical analysis of customs performance.<sup>1</sup> We link measures of customs performance to quantitative indicators of border management policies, and to other variables that might affect outcomes at the border. This framework offers a guide to the quantitative impact of trade facilitation policies on customs performance.

The customs performance outcomes that primarily interest us are estimates from the _Doing Business - Trading Across Borders_ (TAB) database.<sup>2</sup> These indicators provide estimates of the time and cost of various trading activities.<sup>3</sup> In this paper we focus on measures of the time and cost required to clear customs, as these would seem to be the outcomes most affected by the TFA. TAB data have been used in many studies as independent variables, with the typical study asking how time-in-trade affects bilateral trade flows.<sup>4</sup> By contrast, we are interested in the TAB measures as outcome variables. Our central questions are: to what degree do border outcomes depend on border management policies like those in the TFA? and, to what degree can policy change be expected to improve customs performance? We also conduct a more speculative exercise in which we attempt to attach economic values to the TFA at both global and national levels.

The measures of trade facilitation policy that we employ are the OECD Trade Facilitation Indicators, as discussed in Mo ̈ıs ́e et al. (2011) and Mo ̈ıs ́e and Sorescu (2013). These indicators are quantitative representations of 12 different aspects of border management policies (e.g. automation,

> 1Throughout the paper we will describe the outcome variables as measures of ‘customs performance.’ In reality, clearance of goods by customs agencies often requires the assent of other governmental agencies, including the border police and several ‘technical’ agencies such as those responsible for food safety or environmental protection. We shall refer throughout to ‘customs’ performance but the reader should interpret this as the performance of all relevant agencies. In most countries the customs agency plays the central role in coordinating the activities of all the relevant inspecting agencies. Border inspection agencies have important objectives besides trade facilitation, and we acknowledge that our study is limited in that regard.

> 2We also consider a similar measure from the World Bank’s Logistics Performance Index.

> 3One important reason for our interest in the TAB indicators is that they are used by the World Bank and other such institutions as relevant indicators for the choice of aid projects in the area of trade facilitation, and for the _ex post_ evaluation of such projects in some cases. As such, these indicators are important for determining the flow of international aid money.

> 4We will subsequently review these in some detail. The initial study was Djankov et al. (2010).

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