practice for customs valuation),<sup>14</sup> and mutual recognition of rulings (e.g. for transit operations) and of certification and testing (e.g. for standards). Such cooperation is not necessarily regional or bilateral and can also be achieved multilaterally. It may, however, be the case that a large part of these extra costs be better addressed at the regional level because of the political economy and _complexity_ of such arrangements (such as mutual recognition) is most probably better managed among a limited number of countries. Secondly, implementation of cost reduction measures will often involve some form of regional cooperation on the ground: for example, the creation of joint border posts enables neighboring countries to share facilities, learn from each other and carry joint inspections thus potentially reducing cost and time spent at the border.<sup>15</sup> Economies of scale can also be realized on the administrative procedures and private services delivering trade facilitation. It is however unclear to what extent there is a scale barrier to efficient border administration, including modern practices such as single windows and risk management. The cost of collecting customs taxes in Rwanda is relatively low, amounting to 2.5% of receipts in 2005 with capital costs representing only a small fraction (2.6%) of these costs.<sup>16</sup> It is also unclear to what extent compliance with new security measures imposed by large developed countries pose a new challenge in that respect. Overall there is good evidence that customs reform projects can be self-sustaining through increase in revenues brought by facilitation (Moïsé, 2005) suggesting that economies of scale are exhausted at the country level.<sup>17</sup> Arguably this tends to rather relate to still relatively modest levels of reform, and in particular do not involve many elements of deep integration with trading partners. Although customs operations do not seem to be overly subject to important economies of scale in most cases, one can nevertheless argue that there are important costs associated with the surveillance of borders. A motivation for Norway, Sweden and Finland to sign cross border cooperation agreements (starting in 1960) was “division of labor”; i.e. to share the cost of individually manning the 1,630 km long border between Norway and Sweden, and the 739 km long border between Norway and Finland.<sup>18</sup> Small administrations may not be able to

> 14 For a discussion, see Chapter 8 in De Wulf & Sokol (2005).

> 15 The benefits of joint border posts should however not be overstated. Practical implementation has proven problematic as the incentives for the border agency of each country to cooperate on joint inspection may not exist as import and export controls remain very different as incentives to control them (the emphasis is generally on imports and their contribution to tax revenue).

> 16 Source: Rwandan Customs, http://www.rra.gov.rw/en/about/performance.pdf.

> 17 In Mozambique, the investments made during the initial stages of the program were recouped within 14 months from additional revenue receipts. In Peru, increased revenue collection has helped solve many funding problems of the administration.

> 18 See the communication by Norway to the WTO Trade Facilitation Negotiating Group on _Border Agency Cooperation_ , TN/TF/W/48, 9 June 2005. In 1995 Norway calculated the savings associated with the two agreements: 10 new customs offices would have had to be opened on the Norwegian side of the border. 100 new customs officers would have had to be employed. This would have cost about 8 million USD in additional investment costs and 8 million USD in recurring annual costs for the customs authorities for new

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