Optimizing the Impact of Trade Facilitation: Engaging Border Communities

United States Agency for International Development (USAID) has a long history of designing and implementing trade facilitation (TF) programs that can have a significant positive impact on national economies, but the organization has done relatively little research on how to ensure that the border communities closest to these reforms also benefit. An initial paper commissioned by USAID to research local economic actors active at or near border areas in developing countries concluded that TF measures and border management reforms which can induce positive economic growth and trade outcomes, can sometimes also have disruptive effects on border communities’ livelihoods. However, it may be possible to mitigate these disruptive effects by considering border communities in the design of TF activities.

Border communities are economically significant and often constitute a large fraction of a country’s population. Economic actors located at or near border areas have historically generated vital economic benefits for border regions, providing a range of products and services and catering primarily to businesses transacting in slow-moving, inefficient border environments. In some cases, by expediting cross-border procedures, TF initiatives may reduce the demand for such ancillary services and inadvertently shift the economic incentives and opportunities for these communities. TF efforts can also stimulate new opportunities for border businesses to provide products and support services to cross-border traders or participate in export activities. However, most donor-funded TF projects, as well as projects with a broader economic growth scope that include TF elements, have not explicitly included activities designed to address the potentially disruptive effects of TF and to smooth the transition to new income opportunities or to take advantage of the economic development potential of TF efforts in border areas.

This paper suggests preliminary standard approaches for optimizing trade facilitation programming to benefit local border communities. Integrating border communities into TF efforts would notably increase the impact of these initiatives. Moreover, it would minimize their disruptive effects—by providing pathways for border communities to experience income and employment growth in an evolving border environment. Finally, by building on the competitive advantages that border businesses already have—favorable location, existing market infrastructure, and specialized knowledge—donors such as USAID can ensure that these populations enjoy the economic benefits of trade facilitation.