Trade helps drive inclusive growth and poverty reduction. For developing
Asia, strong value added from trade-related activities contributes to economic
growth and development. Global trade helps reallocate capital and labor toward
sectors holding comparative advantage.
And international trade is one important
way to help meet the United Nations Sustainable Development Goals (SDGs). The
beneficial links between trade and investment catalyzes economic transformation,
job creation, and skill development-which all support SDG 8 (promoting decent
work and economic growth), SDG 9 (building resilient infrastructure, promoting
inclusive and sustainable industrialization and fostering innovation), SDG 10
(reducing inequality within and among countries), and SDG 17 (revitalized and
enhanced global partnership). Trade facilitation eases the cross-border movement
of goods by cutting costs and simplifying trade procedures (OECD, 2005). It
rests on four core pillars:
Transparency promotes openness and accountability; it involves publicizing
easily understood regulations so stakeholders can provide feedback prior to
enforcement. Simplification eliminates unnecessary elements and duplications,
focusing on essential aspects of trade and critical processes.
aligns national procedures, operations and documents among trading partners. And
Standardization aims to develop international best practices (UNECE, 2012).
Based on these principles, trade facilitation focuses on five key areas:
- publicizing and administering policies related to trade issues;
- establishing rules and procedures for import and export;
- creating product standards that conform to WTO guidelines on standards;
- building trade-related infrastructure and supplying quality services that
trade costs; and
- balancing fast customs clearance with adequate security and protection
Trade facilitation particularly benefits landlocked and island countries, where
it boosts participation in international supply chains. They can diversify
production of intermediate and final goods to cater to the global market,
thereby benefiting other regions as well.
Impact Of Trade Facilitation
Everyone gains from easier trading processes (OECD, 2005b)�trade facilitation
brings governments higher revenues from reduced fraud; businesses become more
competitive and efficient, raising profits; and consumers save from lower
prices. Inefficient trade procedures add significant costs, usually shouldered
by the taxpayer or buyer, and it makes investment less attractive.
Trade facilitation increases trade flows and ultimately sustainable and
inclusive growth. It lowers direct costs by raising efficiency among interacting
businesses and administering agencies. Prices fall as they indirectly benefit
from simpler, transparent border procedures. Even modest cost reductions show a
positive link between trade facilitation and increased trade. All countries
especially those developing� stand to gain. Countries that improve border
procedures would benefit most.
Trade facilitation can have a greater impact on specific product groups, firms,
and economies. For example, agro-food products have higher cross-border costs
than manufactured goods, as they are subjected to special border procedures
(costing 1%-15% of product value). Long border delays raise final costs by
Small and medium-sized enterprises (SMEs) are more vulnerable to financial and
efficiency costs than large enterprises. The larger the international trade
within a firm, the more economies of scale and comparative advantage exist for
logistics and administrative coordination.
In a highly competitive environment, SMEs have to address the constraints of
limited human resources, information, and capital. They are also often
classified as high-risk and are required to comply with additional documentary
and cargo checks. An Organisation for Economic Co-operation and Development
(OECD) report (OECD, 2003) estimates that using simplified trade facilitation
procedures would cut SME trade costs by 50%.
This is especially true for non-OECD countries with high trade-to-gross domestic
product (GDP) ratios� and thus highly sensitive to changes in import and export
costs. Developing countries would experience the largest relative gains from
trade facilitation. Those best able to ease border flows with minimal financial
resources show how small investments in trade facilitation can bring high
relative returns. Additional investments would amplify the benefits.
Estimates Of Gains From Trade Facilitation
The benefits from trade facilitation vary by degree, particularly in efficiency
gains. Certain product groups and countries�small and medium enterprises and
developing countries, for example�benefit more from trade facilitation than
- For agriculture and food products, sanitary and phytosanitary measures,
additional documentation and physical inspections are required for border
clearance. For example, agricultural product exporters from India currently
face a 37% cost disadvantage to those firms.
- In Bangladesh, export earnings could increase 30% with higher port
- In Japan, use of electronic data led to a 7% reduction in costs and a 4%
shorter waiting time for goods subject to similar procedures.
- In Australia, paperless trade resulted in a 1.5% savings for bulk sea
shipments and 15% for air cargo.
- In Thailand, the 2008 implementation of a National Single Window brought
savings of about $1.5 billion annually and cut time-to-export from 17 days
to 14 days.
- Singapore's single-window system reduced documentation costs by more
- In New Zealand, processing time fell from 10 days to 12 minutes over a 4
year period after the automation of customs procedures.
Particular Implications For Sustainable Development
If addressing TF issues were to attract the investment that its proponents
suggest, this could help increase investment in developing countries, increased
investment in those countries being a necessary (but not sufficient)
pre-condition for sustainable development. However, there are at least two
potentially negative outcomes that should be avoided.
First, the TF related focus on harmonization of standards should not intrude
upon the guarantees for the setting of national standards already set out in the
TBT and SPS Agreements. In particular, a TF agreement, if developed, should not
be allowed to have any impact on environmental, human health and other public
welfare legislation and regulation, matters much better left for the TBT and SPS
Agreements and the GATT 1994.
Second, it must be recognized that many multilateral environmental agreements,
as well as agreements relating to illicit drugs, organized crime activities and
so on rely upon measures at the border to detect and prevent illegal activities.
In the environmental context, this includes such critical agreements as the
Basel Convention on hazardous wastes, the Montreal Protocol on ozone depleting
substances, the Convention on International Trade in Endangered Species and
others. TF should not become a barrier to the effective implementation and
further development of such agreements.