Do Customs Trade Facilitation Programs Help Reduce Customs-Related Corruption?

Abstract

Customs-related corruption costs World Customs Organization (WCO) members at least $2 billion in customs revenue each year. Using recent data only about bribe payers' actual experiences in paying bribes, we show that trade facilitation would only help reduce corruption and improve efficiency — in a large number of customs agencies —— if the customs agency's director undertakes a big-bang approach to reform. We also find support for the corruption clubs theory — that customs agencies in the process of reform are either moving toward Organization for Economic Cooperation and Development (OECD) levels of integrity and efficiency; or they are sliding toward a “red zone” group of countries. Such a sliding results from the incentives corrupt customs officers have to stymie reform. As such, countries undertaking customs programs — such as those endorsed by the World Customs Organization — should not adopt reform measures piecemeal. They need to engage in anti-corruption and efficiency-enhancement programs deeply enough to ensure they benefit from trade facilitation.