Governments are introducing new traceability requirements for traded goods faster than border implementation systems are adapting to them. Fewer than 20% of new environmental and social requirements are accompanied by comprehensive border implementation arrangements, highlighting a growing gap between regulatory ambition and implementation readiness, according to a new OECD report.
Better Borders for Trade, Traceability and Enforcement finds that increases in the number of traceability-related requirements and the level of compliance information required have been particularly rapid in areas such as environmental performance, where notifications of environment-related technical requirements have increased by more than 60% over the past decade, while around 86% of identified social and environmental due diligence measures have been introduced since 2015.
Currently, however, only 55% of the border-related challenges associated with environmental lifecycle requirements are addressed by OECD economies. This highlights that border processes do not yet fully reflect the complexity of supply chains through which compliance information is generated, shared and verified.
Trade facilitation reforms have reduced trade costs by up to 5% over the past decade. However, sustaining these gains as demand for supply chain information grows will require closer integration between traceability requirements and the systems used to facilitate trade.
“For goods to flow, trusted information needs to flow. But collecting and reviewing that information comes with costs for both businesses and governments, and that cost is increasing,” OECD Secretary-General Mathias Cormann said. “Streamlined processes, smarter use of data and stronger regulatory co-operation can help governments achieve policy goals while making trade faster and less costly.”
Implementation gaps require particular attention in strategic sectors such as critical minerals, medical products and advanced technology goods, where governments and businesses are placing greater emphasis on diversification, resilience and maintaining access to trusted markets.
An estimated USD 4.8 trillion in global trade could benefit from existing international regulatory co-operation arrangements, but fragmented implementation, limited awareness and integration challenges can hinder their effective use.
Governments should work together not only to collect more information but also to ensure that it is usable, reliable and integrated into existing border systems. Greater use of existing trade facilitation tools and digital systems, as well as using traceability information more strategically for risk management need to be prioritised. Deepening domestic and international co-operation on relevant standards, secure data sharing and regulatory practices is key to avoiding unnecessary costs and delays for businesses.
For more information on the OECD’s work on global value and supply chains, visit: https://www.oecd.org/en/topics/policy-issues/global-value-and-supply-chains.html.
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