Trade Facilitation and Competitiveness
Dr Rose Marie Azzopardi
Outline of Presentation
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Defining trade facilitation
Types of trade hindrances
Trade facilitation and the WTO
Costs and benefits of trade facilitation
The state of play of specific countries
Technical assistance and capacity building
The role of easier trading for competitiveness
Concluding remarks
2
Defining trade facilitation
• “Facilitating trade is about streamlining and
simplifying international trade procedures in order
to allow for easier flow of goods and trade at both
national and international level.”
(OECD)
“The simplification and harmonisation of international
trade procedures (referring to) activities, practices
and formalities involved in collecting, presenting,
communicating and processing data required for
the movement of goods in international trade”.
(WTO)3
Principles
• Transparency
• Predictability
• Non-discrimination
• Simplification
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Approaches
• Harmonisation
• Risk management
• Automation
• Best practice and experiences
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Type of trade obstacles and restrictions
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Tariffs and non-tariff barriers
Border measures
Quotas
Government bureaucracy
Fees, licences, formal procedures
Standards
Health and safety regulations
Technical regulations, product labelling
6
WTO
• 1 August 2004 – July Package – Annex D
• Trade facilitation one of four Singapore issues
• Focus on clarifying and improving aspects of Articles of
GATT 1994
• Article V – freedom of transit
• Article VIII – fees and formalities
• Article X – publication and administration of trade regulations
(transparency)
• “shall address the concerns of developing and least-developing
countries related to cost implications of proposed measures”
• In addition:
• Technical assistance and capacity building
• Cooperation between customs and other relevant bodies (for
example one window system)
7
Yet apprehension exists
• Fear of developing countries because of
substantial investment in infrastructure and human
resources
• Especially as they need to compete with developed
countries who mostly have such measures in
place, which measures were developed according
to own needs and priorities
• For lesser developed countries revenue is derived
from customs activities and other ancillary
bureaucratic services
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Ease of doing business in....
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Starting a business
Dealing with construction permits
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Closing a business
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Trading across Borders...185 countries (2012)
Indicator
Best
Performer
Worst
Performer
Singapore
Uzbekistan
Documents to export (no.)
4
13
Time to export (days)
5
80
456
4,585
Documents to import (number)
4
14
Time to import (days)
4
99
439
4,750
10
Cost to export (US$ per container)
Cost to import (US$ per container)
Trading across borders...2012
Country
Bahamas
Barbados
Mauritius
Malawi
Rwanda
Tanzania
Uganda
Swaziland
Malta
Singapore
Rank
X docs
X time
X cost
M docs
M time
M cost
58
31
15
168
158
122
159
141
5
5
5
10
8
6
7
8
19
9
10
34
29
18
33
18
930
810
660
2175
3245
1040
3050
1880
6
6
6
9
8
10
9
8
13
8
10
43
31
31
33
27
1405
1615
695
2870
4990
1565
3215
2085
34
6
11
855
7
7
970
1
4
5
456
4
4
439
11
Methodology
• Deriving quantitative estimates of costs (but more
so for benefits) are difficult mainly because of the
lack of reliable and precise data coupled with the
complexity of underlying issues
• Two methodologies have been adopted
• Computable General Equilibrium models
• Gravity Models
• Other approaches are qualitative in nature such as
expert surveys, case studies on the micro level.
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Costs
1. Infrastructure and facility costs (new facilities and
equipment, clearance systems, IT, ICT)
2. Human resource costs (enhancing administrative
capacity, training, new recruitment of skilled staff)
3. Regulatory and legislative costs (changes in existing
laws or implementation of new ones)
4. Institutional costs (additional institutions or authorities)
5. Reduced revenue from fees and charges (border
charges, licences, customs procedures)
6. Political costs (resistance by staff and loss of power of
political class) – essential for the will to succeed, but
likely to delay changes needed
7. Recurring and operational costs (ongoing maintenance
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costs, software, staff, systems)
Some studies
• Quantitative studies generally show that reductions
in trade transaction costs may result in global
welfare gains of similar or larger magnitude than
those expected from tariff liberalization (APEC
2002)
• Very few or no countries lose from global TF, and
that developing countries have the most to gain
from TF measures, also variations are expected
across countries, sectors and types of traders
(OECD 2003, Francois et al. 2005)
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Costs of exporting (days and dollars)
Documents
preparation
Customs
clearance
7
4
5
21
9
8
9
5
300
275
285
285
450
270
225
190
3
1
1
2
6
4
6
3
130
150
75
150
175
250
300
85
7
2
2
4
4
4
6
4
200
25
175
240
320
320
375
285
2
2
2
7
10
2
12
6
300
360
125
1500
2300
200
2150
1320
19
9
10
34
29
18
33
18
930
810
660
2175
3245
1040
3050
1880
Malta
6
280
1
50
2
275
2
250
11
855
Singapore
1
116
1
50
1
150
2
140
5
456
Bahamas
Barbados
Mauritius
Malawi
Rwanda
Tanzania
Uganda
Swaziland
Ports/terminal
handling
Inland
transportation
TOTAL
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Costs of importing (days and dollars)
Documents
preparation
Bahamas
Barbados
Mauritius
Malawi
Rwanda
Tanzania
Uganda
Swaziland
Customs
clearance
Ports/terminal
handling
Inland
transportation
TOTAL
7
3
5
19
9
15
10
5
300
440
295
280
450
575
350
130
3
1
2
3
4
5
7
3
130
400
100
150
375
250
325
85
2
2
2
9
10
10
8
11
675
415
175
240
540
540
390
450
1
2
1
12
8
1
8
5
300
360
125
2200
3625
200
2150
1420
13
8
10
43
31
31
33
27
1405
1615
695
2870
4990
1565
3215
2085
Malta
4
260
2
50
2
410
1
25
9
970
Singapore
1
99
1
50
1
150
1
140
4
16
439
If...
• Inefficiencies in...
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Transport
Cargo handling
Information flows
Border processes
• Necessitate...
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One stop shop to cut red tape
Competition in transportation
More synergy in logistics
More online information for exporters and importers
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Good Practices of Trading Across Borders
• Electronic submission and processing (even paying
online)
• Linkages through an electronic single window
(sharing of information across different agencies)
• Risk-based inspections (assessing of potential risks
and scanners)
• Regional cooperation to overcome physical barriers
• Participation of the private sector to encourage
competition
• Minimize costs through more transparency (regarding
processes, tariffs and border information)
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Study by Asia-Pacific Research and
Training Network on Trade
• “Most proposals recognize that the introduction and
implementation of TF would eventually reduce
government expenditures through
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enhanced transaction efficiency and transparency,
elimination of duplicative or bureaucratic functions,
more economical allocation, and
more reasonable and efficient use of administrative
resources”
(Duval 2006:4)
Relevance
• “No noticeable discrepancies in the opinions on TF
implementation costs and benefits between
developed countries and developing countries,
including the LDCs”
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Costs of implementation
• Some costs can be low but others may be high
• Most are considered to be modest
• Differences vary according to the type of TF
measure and also the state of the country
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Examples of costs of implementation
• Internet publication of trade regulations and
establishment of enquiry points usually require high
resource input, particularly for some developing
countries (since this depends on IT modernization
level of country)
• Few TF measures actually generate pure benefits
without any significant implementation costs, such
as consular transactions (ie the need for consulate
in exporting country to approve goods to enter the
importing country)
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Variations according to country
• Differences in existing infrastructure and facility
• The IT modernization level
• The professional qualifications of customs staff
• The degree of development of regulatory system
• Legal framework and legislative structure
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Benefits
• Are more long term in nature
• Long-term savings far exceed the set-up and
operating costs
• Benefits also depend on the sequencing of
measures, rather than simultaneous initiations
• Need to be part of an overall national TF
programme and not stand alone measures
implemented in spasms or isolation
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Best practices: Case 1
• Public resources saved through the development of
border agency cooperation by Norway with
Sweden and Finland
• 1960: customs border agreement signed, involving
18 Norwegian and 21 Swedish customs officers on
the border.
• 1969 one signed with Finland.
• 1997 an agreement signed with EC
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Case 1: Benefits
• 1995: Calculation of what it would have cost if previous
agreements had not been approved by the EU.
• 10 new customs offices would have needed to be
opened on Norwegian border
• 100 new customs officers would have had to be
employed
• NOK 100 million ($16 million) additional costs for
customs authorities (new buildings, salaries etc), 50%
one time investment, and 50% annual cost.
• NOK 250 million ($39 million) additional costs borne by
economic operators (waiting time, double stops at
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borders etc)
Case 2: Establishment of express
clearance system
• 1995: ‘Regulations government import and export
customs clearance procedures for express
consignments’, with Customs offering 24hour/7day
services
• 1998: An ad hoc task force set up by Customs to
improve the express clearance system. Express
Division later established
• 2000: Directions come into force.
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Case 2: Benefits
• Average clearance time dramatically reduced, from
48 hours in 1996 to only 2 hours in 2006
• Volume of express entries increased sharply
• While regular import/export entries grew by 11.4%,
express entries increased by 58%
• Ratio of express entries to total entries also rose
steadily
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Case 2 : Costs
• 20 new processing lines were established, each
equipped with an X-ray scanning machine. Some
of the initial infrastructure costs were shared with
express shipment providers
• A total of 117 officers at Express Division were
involved, working to provide round the clock
services. Most officers relocated from other
divisions, thus no need for substantial new
recruitment. Some operational costs also borne by
express shipment providers
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Technical assistance and capacity
building
• Given potential savings, it is important that
developing countries are provided with technical
assistance and aided in their capacity building
process
• Assistance in the form of international experts for
HR training or grants for infrastructure and
equipment
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Impact on competitiveness
• Savings in terms of time
• Less financial costs
• Less resources needed for bureaucratic form filling
• Transparent environment, predictable
• Companies more flexible and able to use resources
more efficiently
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WTO state of play
• TF chair Eduardo Ernesto Sperisen-Yurt submitted
a full draft negotiating text on 21 April 2011.
• A 35 page, two section agreement
• First Section: members obligation to make it
easier and faster to move goods through customs
• Second Section: SDT provisions for developing
and LDCs (obligation is linked to adequate funding)
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Obligations
1. timely publication of procedures, applied tariffs,
fees and charges, import and export restrictions,
2. measures to enhance transparency,
3. information on delays or detention of goods,
4. risk management and
5. many other aspects of efficient management of
imports and exports.
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SDT
1. “The extent and the timing of entering into
commitments shall be related to the
implementation capacities of developing and least
developed country (LDC) members, who would
not be obliged to undertake investments in
infrastructure projects beyond their means.”
2. Developed countries ‘shall provide’ support and
assistance, and if they fail to do so, LDCs and
developing countries be exonerated from fulfilling
their obligations.
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Concluding comments
• Any type of change is usually resisted, especially
by those who stand to lose in the process, in this
case protected, inefficient producers
• The GATT/WTO, and the lowering of barriers and
removal of obstacles to trade, have brought
significant to countries who have opened up their
markets and especially their borders.
• Globalization is a positive process for all countries
engaged and integrated in international trade
• Any simplification and facilitation of the movement
of goods, services, capital and labour is beneficial
for consumers and efficient businesses
• Countries who engage in freer trade become more35
competitive