Advance Trade Facilitation

Around the globe, trade facilitation is increasingly seen as a top priority. Often referred to as the “plumbing” of international trade, trade facilitation consists of reforms to make the movement of merchandise from one country to another faster, cheaper, and more reliable.

As international trade grows relative to GDP, the efficiency of trade logistics becomes more important. Rising competition and falling tariffs in markets around the globe have laid bare the cost of inefficient customs and ports. In fact, studies have shown that inefficient trade logistics in many developing countries adds anywhere from 5% to 25% to the cost of trade.

A country’s competitiveness in world markets can advance notably with a focus on trade facilitation. Singapore, for example, has been identified by the World Bank as a world champion in this realm: it takes just four documents, $400, and an average of five days for a shipping container to clear Singaporean customs. In Chad, by contrast, the same exercise takes more than 100 days and costs approximately $5,500, according to the World Bank’s “Doing Business” project.

According to a recent World Bank report entitled Connecting to Compete: Trade Logistics in the Global Economy, trade facilitation runs the gamut from “customs procedures, logistics costs, and infrastructure quality to the ability to track and trace shipments, timeliness in reaching destination, and the competence of the domestic logistics industry.”

While the trade facilitation agenda has traditionally focused on customs and infrastructure, the “Connecting to Compete” report suggests that liberalizing services markets is equally important. High-quality, competitive private services such as trucking, warehousing, and customs brokerage make supply chains more robust and reliable, which in turn contributes to greater investment and more export opportunities.

The business community has come to regard trade facilitation as a top priority. Over the past two decades, the Asia-Pacific Economic Cooperation (APEC) forum has made good on trade facilitation promises and allowed its 21 member economies to secure the benefits of increased trade. APEC launched its Trade Facilitation Action Plan in 2002, setting specific, outcome-tied goals. The APEC economies met their initial target of a 5% reduction in transaction costs in just three years and are continuing to build on this performance.

Latin American and Caribbean nations are pursuing similar goals. The Association of American Chambers of Commerce in Latin America (AACCLA), a Chamber affiliate, found that more than 90% of regional business leaders responding to a survey rated trade facilitation reforms as either very important or important—beating out all other responses.

In the troubled WTO’s Doha Development Agenda negotiations, trade facilitation has been the negotiating group that has seen the most progress. While trade facilitation can bring great benefits if adopted unilaterally, the global, rules-based model of a WTO agreement offers the advantages of certainty, stability, and a common approach.

Specific reforms that major trading companies have identified include greater use of information technologies and electronic delivery of customs information, harmonizing data requirements for export and import declarations, reviewing the bond guarantee requirements for expedited release of goods from customs, and swift clearance for low-risk imports.

The U.S. Chamber believes trade facilitation should advance on multiple tracks. APEC’s work should continue, and it should be emulated by other world regions, such as Latin America, the Caribbean, Africa, and Central Asia. The productive trade facilitation negotiations in the Doha Round should either be secured in a swift conclusion of the round, or it should be implemented on a stand-alone basis.

One additional place to focus is ratification and implementation of the World Customs Organization’s revised Kyoto Convention, which is recognized as an international standard by the global customs community. The convention provides for the simplification and harmonization of customs procedures. Seeing more countries ratify and fully implement this agreement is an important goal.

Increasingly, big trade agreements are difficult to conclude and slow to arrive. Trade facilitation offers a large potential payoff that can deliver benefits quickly. It should be a top priority in the years ahead.

Chamber Recommendations

• The successful efforts within APEC to advance trade facilitation should continue and serve as a model for other world regions, such as Latin America, the Caribbean, Africa, and Central Asia, where trade transaction costs are relatively high.
• The nearly completed trade facilitation agreement in the Doha negotiations should be secured in a swift conclusion of the round or implemented on a stand-alone basis.
• Governments should be encouraged to ratify and implement the World Customs Organization’s revised Kyoto Convention as a tool to simplify and harmonize customs procedures.