What are Trade Costs? - Lutte anti

Trade Facilitation and Intra-African Trade
Conference on Anti-Malaria policy
Bujumbura 15-16 Oct,2010
Presented by: Jerome NTIBAREKERWA ,
Outline of Presentation
 Introduction of PMAESA
 The facilitation of Trade in Africa.
 Regional Initiatives to tackling the
challenges of Trade Facilitation in Africa.
 Overview of Transit Corridors in the region
Concluding Remarks.
Who we are
Port Management Association of Eastern & Southern Africa (PMAESA) is a
regional grouping of ports in the eastern and southern Africa with
membership composed of state representatives from:
• Port Authorities
• Maritime transport departments
• Port Operators
• Maritime regulators
Established under the auspices of the UNECA with the following objectives
among others:
• Offer platform to exchange ideas and information where
members can interface with one another in transport and
trade facilitation
• Assist development organs by modernization to enhance
productivity and service delivery and trade facilitation
• Establish and maintain relations with other development
partners and transport authorities for the study of matters
beneficial to members
FOCUS of the Association
• Visibility – Communications
• Development of Human Resources
• Port development
• Development of Ports Activities integrated to Transport Corridors
• Respect for international norms/conventions
Strategic Objectives
Objective 1
Improve visibility and image of the Association, by implementation of an
appropriate communication policy among the members of the Association
and partners
Objective 2
Contribute to the development of maritime and port expertise in the subregion
Objective 3
Improving the financial resources of the Association and ensure their
efficient usage
Corridor Partnerships
PMAESA ports facilitated a volume of 270.0 million tons of cargo in 2008 up
from 249.2 million tons in 2007, representing 90% of the total traffic.
Nine transit corridors provide linkage and flow of traffic to and from the
ports in the region:
• Northern Corridor
• Central Corridor;
•Djibouti corridor
• The Trans-Kalahari Corridor
• The Maputo Corridor
• The Durban Corridor
The Northern Corridor only facilitated 17 million tons in 2009. The bulk of this
traffic is handled by truck operators. This emphasis the significant role
played by the truck drivers in the maritime sector.
 Despite Africa’s determination to dismantle trade
restrictions in order to create a common market
within the framework of regional and sub-regional
agreements, barriers to intra-regional-economiccommunity trade development are numerous.
 These barriers are mostly the consequences of the
economic structure of the countries; institutional
policies, weak infrastructure; weak financial and
capital markets and failure to implement trade
The Links between Trade, Growth
and Poverty Reduction
Baldwin (2003), has demonstrated that countries
with few restrictions on trade achieve faster
economic growth than countries that have more
restrictions on trade.
This is because trade liberalization reduces
distortions in relative prices, and allows those
activities with a comparative advantage to
expand and consequently faster economic
An Economic Case for Trade
What is Trade Facilitation? According to the
simplification and harmonization of international
trade procedures” covering the “activities,
practices and formalities involved in collecting,
presenting, communicating and processing data
required for the movement of goods in
international trade.”.
An Economic Case for Trade
Facilitation (II)
Why does Trade Facilitation Matter? The
importance of trade facilitation stems from the
fact that global trade has grown rapidly in recent
years because of the progressive reduction of
tariffs and quotas as a result of trade
liberalisation. This implies that more goods are
crossing borders and having to comply with
Customs formalities, putting a strain on the
resources of custom officials and other
government officials.
An Economic Case for Trade
Facilitation (III)
The Literature shows that:
 There is a positive link between trade facilitation and
trade. Modest reductions in trade transaction costs
significantly increase trade flows.
 Trade in both rich and poor countries stand to gain from
improvements in trade facilitation. However, trade gains
are higher in developing countries than in developed
countries because of comparatively less efficient
customs administrations and ports in developing
An Economic Case for Trade
Facilitation (III)
 Countries that undertake trade facilitation reforms stand
to gain substantially from enhanced efficiency of
customs procedures.
 The potential gain from increasing port efficiency is
considerably larger than for increasing efficiency of
customs procedures. Nevertheless, improved customs
procedures significantly increase trade flows.
 Inefficient movement of goods across borders is a
serious impediment to trade and growth.
What are Trade Costs?
 The literature defines total trade costs broadly
as all costs incurred in getting a final good to
a final user – other than the cost of producing
the good itself.
 In general, exporters or importers incur trade
costs at all stages of the processes involved in
exporting and importing goods.
 The costs begin to tally with obtaining
information about market conditions in a
foreign market and ends with receipt of final
payment for a good.
Estimates of Trade Costs in
Industrialized countries
Estimates of Trade Costs in
Industrialized countries(II)
Anderson and Van Wincoop (2004) calculate that
the average trade costs for industrialized
countries are equivalent to an ad-valorem term of
The estimated trade costs represents the total for
three components: a 21% ad-valorem equivalent
for transportation costs, 44% for border-related
trade barriers, and 55% for retail and wholesale
distribution costs
Transport Cost (freight costs as a
percentage of total import value)
Transport Cost (freight costs as a
percentage of total import value) (II)
Africa in general, and SSA in particular, has the
highest cost rates in the world.
This is further supported by the World Bank’s
(2008) Doing Business Report which suggests
that the trading costs for African countries are
about twice as high than as those in high-income
OECD countries.
Why are trade costs higher in Africa?
 Poor Road and Rail Transport Infrastructure.
 Poor Port and Maritime Transport.
 Poor Vehicle use and management.
 High Transport cost
 Cumbersome Customs procedures
Why are trade costs higher in Africa? (II)
 Unwarranted road blocks.
 Product Standards and Technical Regulations.
 Information and communication costs.
 Poor and inadequate payment mechanism
 Costs associated to preferential trade: rules of
Proportion of paved and unpaved roads in
Transport costs from selected cities to
Rotterdam, Netherlands
Number of Exports and Imports
Delays in days, compared by world
regional and country groupings
Checkpoints on selected Eastern and
Western African Highways
Number of
Mombassa –
Dar Es Saalam
per 100
Internet Diffusion worldwide (users per
1,000 populations)
• Development agencies such as the World Bank
(SSATP), the AfDB, the EU etc place emphasis on the
facilitation of inter-State trade along corridors.
• Increasingly funding corridor developments along
corridors Borders delays, a proliferation of road
checkpoints and other practices that increase monetary
and time costs.
• Various initiatives have been designed to both monitor
the performance of corridors and to eliminate the nontariffs barriers (NTBs);
• The objective is to enhance the efficiency and costeffectiveness of the main transport corridors into
landlocked countries
Regional Initiatives (cont..)
• In eastern and southern Africa, Corridor Management
Committees are emerging as strategic institutions for
addressing all aspects of transport and transit of goods
throughout a given corridor,
• Some Agreementssigned by all participating countries
and private sector stakeholders to deal with a wide range
of issues such as infrastructure, customs, bottle-necks
and user charges.
• Number of corridor management institutions have been
set up such as Walvis Bay Corridor Group, Maputo
Development Corridor ,North-South Corridor in Southern
Regional initiatives (cont…)
• The Northern Corridor Transit Agreement ( NCTA, 1987) has been
signed by five countries: Kenya, Uganda, Rwanda, Burundi and
DRC to guarantee each other free passage through their respective
territories of transit traffic and trade.
• The NCTA has led to the establishment of A Northern Corridor
Transit Transport Coordination Authority
• The Djibouti Corridor in the Horn of Africa is a multi-modal network
of routes linking the Port of Djibouti to the landlocked Ethiopia;
• Corridor management Institutions (CMIs) are therefore promoting
and developing various transit corridors across Africa ;
• Challenge remains to set up a critical forum of consultation and
coordination given the diversity of stakeholders and a large number
of government agencies that oversee different activities within a
Northern corridor network
Northern Corridor missing link
Central corridor network
1- Mtwara corridor, 2- DSM TAZARA corridor,
3- DSM Central corridor, 4- Tanga corridor
Maputo Corridor
Concluding Remarks
Improved Trade facilitation can:
 Significantly lower trade costs, especially reducing
 Bring about significant increases in the volume of
trade, imports and exports, that may be even greater
than the direct gains from trade policy reform;
Concluding Remarks (II)
 Allow for increases
collection efficiency;
 Generally contribute to welfare improvements and
economic growth
Concluding Remarks (III)
Trade Facilitation is relevant in the context of regional
integration because:
 Reducing the costs of trade will tend to stimulate
increased trade, particularly for landlocked countries.
 It supports regional integration as many of the measures
relate to cross-border procedures.
 Measures related to Customs procedures tend to
increase the efficiency of revenue collection and are
therefore typically associated with increases in revenue.
Thank you!
Merci beaucoup,
Asante Sana! God bless you all !!!
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