2004 Phnom Penh – Trade Facilitation
The Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI), a private business organization that aims to promote Asian intra-regional trade through regional cooperation, maintains that an important priority for international trade negotiators in the World Trade Organisation (WTO) and in regional or bilateral fora must be re-balancing the attention given to trade facilitation and to trade liberalisation.
Trade facilitation and trade liberalisation are not mutually exclusive: pursuing one (usually trade liberalisation) need not come at the expense of the other (usually trade facilitation reform).
Rather, both trade facilitation reform and trade liberalisation offer substantial commercial and economic dividends.
CACCI notes research by the Canadian Government that tariff reductions from the WTO Uruguay Round of trade negotiations are likely to be worth around 2 per cent of world trade.
By comparison, the potential gains from trade facilitation reform are likely to be worth some 2 to 3 per cent of world trade – that is, at least equal to, if not greater than, the gains from trade liberalisation.
CACCI notes with concern the findings of two substantial international studies into trade transaction costs which support the case for trade facilitation reform.
According to the Organisation for Economic Co-operation and Development:
“… an average trade transaction goes through 27 to 30 parties, including brokers, vendors, banks, carriers, sureties and freight forwarders. It needs at least 40 documents, not only for government authorities, but also for related businesses. Over 200 data elements are typically requested, of which 60 to 70 per cent are re-keyed at least once while 15 per cent are re-typed up to 30 times.”
The World Trade Organisation made similar findings:
“Non-harmonized and excessive documentation requirements in certain countries increase paperwork four-fold, while the time lost waiting for border release in many regions accounts for up to 20 per cent of total transport time and up to 25 per cent of total transport costs. At the same time, it is questionable whether the large number of information requirements is effective in curtailing dishonest practices.”
CACCI is particularly concerned that the burdens of such inefficiencies tend to fall more heavily on smaller businesses and hence they have more to gain from substantial trade facilitation reform.
Smaller businesses carry a greater burden than larger businesses from inefficiencies in the trade facilitation system for several reasons.
Compliance costs tend to be fixed and generally do not vary by the value of the products traded, so small value consignments bear a disproportionately high cost burden. Such cost burdens for small firms can be as much as 30 to 45 per cent higher than those incurred by larger firms.
Interest costs (associated with capital committed to a trade-exchange) are generally more important for smaller than for larger firms, with the ‘dead-time’ associated with inefficient trade processes particularly frustrating for smaller exporters and importers, and even work to discourage their participation in international trade and commerce.
CACCI believes the trade facilitation reform agenda essentially involves a program of continuous improvement in the processes, and thus reducing the costs, of trading across national borders.
Key elements of such any meaningful trade facilitation reform agenda must include:
- Simplifying and reducing the costs of international trade transactions;
- Ensuring relevant activities occur in an efficient, transparent and predictable manner, based on recognised international standards and best practices; and,
- Ensuring the dividends of reform are distributed to traders and consumers.
The benefits from reform are likely to be distributed across governments, the trading community and, through them, to ordinary citizens and consumers.
For governments, the benefits can mean increased and more efficient revenue collections, and more effective detection of fraud, evasion and other non-compliance practices.
For the trading community – both exporters and importers, and those providing them with services, such as the transport industry – it holds out the prospect of faster and more predictable movements of goods and services, and more efficient transit procedures.
And, for nations as a whole, including their citizens, trade facilitation reform means enhanced trade competitiveness, better economic performance, greater foreign direct investment and, through these, expanded employment opportunities and higher incomes.
CACCI calls on the Asia Pacific Economic Co-operation (APEC) process, the World Trade Organisation in its current Doha Round, and other regional and bilateral trade arrangements to give greater attention to trade facilitation in their respective programs of work.
Trade facilitation should no longer be considered less important than trade liberalisation. Substantial progress in both areas are important to commerce and industry, and especially those engaged in international trade, commerce and investment.
Achievements in one area does not excuse absence of progress in the other; and absence of progress in one area can undermine the dividends from achievements in the other.
While priorities will differ between countries and regions, CACCI regards several areas as being of general importance to expanding international trade relations.
These include: port logistics; customs procedures; domestic regulatory arrangements; standards harmonisation; business mobility; electronic business activity; and, administrative transparency.
More generally, the World Trade Organisation could usefully consider the negotiation of a discrete multilateral Agreement on Trade Facilitation, as part of its broader work on developing consistent rules for international trade, with Member States taking into account the issues raised by CACCI in this Statement.
CACCI will keep under continuous review how chambers of commerce can positively contribute to further trade facilitation.
CACCI calls on governments that have adopted model trade facilitation measures to allow officials from other countries to study their systems and, if necessary, extend training.
