Reaping benefits from trade facilitation - UNCTAD Policy Brief No. 42

REAPING BENEFITS FROM TRADE FACILITATION Agreement Trade Facilitation (TFA) World Trade Organization (WTO), reached Bali, Indonesia 2013, represents great opportunity developing countries. Experience shows trade facilitation reforms improve country’ trade competitiveness enhance revenue collection. , advance development goals strengthening governance formalizing informal sector. addition, trade facilitation-related challenges solutions regional, implementation solutions boost regional integration. policy examines potential impact trade facilitation reforms trade competitiveness development, including number specific Sustainable Development Goals (SDGs), revenue collection public policy objectives. identifies policies developing countries reap full development- related benefits trade facilitation reforms. UNCTAD’ research experience technical assistance programmes shown trade facilitation reforms comprehensive ambitious. Trade facilitation linked investments transport infrastructure trade-supporting services. linkages trade facilitation reforms implementation capacities, development partners focus support vulnerable economies, making full promises possibilities technical assistance TFA. . Trade facilitation: matters global trade Global trends trade logistics Numerous studies estimated positive impact TFA global trade income. trade liberalized, obstacles trade gained importance, today’ trade logistics context, facilitation important . inclusion trade facilitation WTO agenda reflects number specific trends international trade logistics, : 1) increased trade manufactured goods, including imports exports developing countries, longer providers raw materials, increasingly import raw materials intermediate goods produce manufactured goods export. share developing countries global imports tripled 1970.1 trade facilitation measure advance rulings (article 3 AT TFA) important manufactured goods raw materials. , smart watch border customs officer decide jewellery watch, computer toy, importer appreciated binding advance ruling hand. 2) Trade increasingly part global chains. Businesses trade intermediate goods, growing share intra-company trade. logistics expenditures, companies increasingly spend transport reduce expenditures inventory holdings. deliveries increasingly planned time, waiting times borders -existent predictable, . context, trade facilitation measure helps understanding speeding processes, pre-arrival processing publication average release times, increasingly important country’ participation global chains. PO LIC RIE FNo.42DECEMBER  2015 1 UNCTAD, 2015, Review Maritime Transport 2015 ( York Geneva, United Nations publication). Key points • share developing countries global imports tripled 1970, trade facilitation increasingly important participation global supply chains. • trade, trade facilitation reforms advance SDGs related strengthening governance formalizing informal sector. • strong links trade facilitation reforms implementation capacities; development partners focus support vulnerable economies. greater impact trade growth trade liberalization. Incorporating country’ position container shipping network significantly improves predictive power trade models. benefits containerization lost lack trade facilitation interrupts movement, breaking seals reloading content. measures matter early 2014, WTO members notifying WTO trade facilitation measures category , “provisions developing country member developed country member designates implementation entry force Agreement, case developed country member year entry force”.2 mid-November 2015, total 73 developing countries notified category provisions WTO.3 analysis number category measures notified country shows close correlation exists implementation levels TFA articles indicators trade, trade efficiency income. statistical correlation prove causality, data suggest implementing article 2 consultations article 6 fees charges stronger bearing country’ Business indicator trading borders , , article 4 procedures appeal review, shown figure. 3) Regional integration crucially depends facilitation cross-border trade , time, cross-border operations depend cooperation neighbouring countries. advantage multilateral TFA regional integration requiring spaghetti bowl regional trade agreements. 4) parallel growing intraregional trade, diversification trading partners, including intensifying South–South trade. businesses sell source , benefit trade facilitation measures publication Internet international standards. TFA helps counts: measures publication Internet (article 1.2) businesses obtain information globally; article 10.3 stipulates countries international standards; TFA helps standardize terminologies expectations regard border procedures. 5) technologies: Points 1) 4) illustrate growing demand trade facilitation; facilitation benefits supply tools. Measures customs automation, electronic documents single window easier implement today trade facilitation negotiations started WTO decade . technology deserves special mention: container. studies shown introduction containerization Agreement Trade Facilitation: Implementation trade, gross domestic product capita Business indicator trading borders 0% 10% 20% 30% 40% 50% 60% Article 1 Publication information Article 2 Consultation Article 3 Advance rulings Article 4 Appeals procedures Article 5 Impartiality Article 6 Fees charges Article 7 Customs procedures Article 8 Agency cooperation Article 9 Inland customs transit Article 10 Formalities Article 11 Freedom transit Article 12 Customs cooperation Trade gross domestic product Gross  domestic  product  capita Business indicator trading borders Source: UNCTAD secretariat calculations, based individual notifications (WTO), Business indicator trading borders (World Bank) gross domestic product capita (UNCTAD). values axes represent partial correlation coefficient, varies -1 +1. +1 implies variables move 100 cent, correlation coefficient 0 implies variables correlated. 2 WTO, 2014, Agreement Trade Facilitation, WT//931. 3 Trade Facilitation Agreement Facility, 2015, http://www.tfafacility.org/wto-assistance. -discriminatory easily accessible manner; easily achieved traders access Internet, stipulated SDG target 9.. addition, article 6 TFA includes requirement avoid conflicts interest assessment collection penalties duties, reduce corruption bribery, covered SDG target 16.5. Finally, trade facilitation measures informal businesses participate foreign trade, supporting SDG target 8.3 formalization growth micro, small medium-sized enterprises. . Policy implications Targeting improvements trade competitiveness Policymakers mainstream trade facilitation trade policies. trade facilitation measures relevant types trade. relevant imports, exports. target reefer cargo fruit meat, relevant global chains interest small medium-sized enterprises. important linkages measures implementation planning sequence reforms. Targeting sustainable development Policymakers aim achieving SDGs mind implementation specific trade facilitation measures effective tool meeting specific SDG targets. obligations international support TFA opportunity engage reforms economic activities transparent small traders enter formal sector. National trade facilitation committees starting point reforms functioning national trade facilitation committee.4 coordination public private sectors users providers trade-supporting services. committee place obligation article 23 TFA, policymakers international community include creation strengthening steps full implementation TFA. challenges developed countries developed countries greater assistance middle-income developing countries field. challenge statistical correlation indicator causality: category notifications positively correlated country’ gross domestic product capita, points linkages country’ level development trade facilitation implementation capacity. Put differently, exists dynamic feedback developed countries find easier implement trade facilitation reforms , time, implemented reforms, enhance development, revenue collection trade competitiveness. . development dimension Human, institutional enterprise development Trade facilitation reforms positive steps human institutional development. small traders enter formal sector, economic activities transparent accountable, promote legal reforms, strengthen information technology capabilities generally modernize societies. Specific trade facilitation measures inter-agency coordination, appeal establishment enquiry points form part national reforms context international trade, broader public sector modernization programmes aim , , -governance reforms legal system. Protection public interest Trade facilitation protection public lost revenues health hazards complementary policy objectives. large number specific trade facilitation measures ease business fight counterfeit trade, smuggling undervaluation ( costs revenue). Measures advance information, post-clearance audits, authorized economic operators risk assessments reduce physical inspections increase likelihood detecting fraud. Trade facilitation Sustainable Development Goals measures TFA direct link adopted SDGs. , article 1 covers publication availability information import, export transit procedures; country complies article 1 closer achieving SDG target 16.10, , inter alia, aims ensuring public access information. article 5 TFA, , inter alia, requires Governments publish announcements 4 UNCTAD, 2015, Trade facilitation bodies world, http://unctad.org/TFC. TA / / /2 0 1 5 /1 6 ( . 4 2 ) procedure, commercial travel, .”. fifty years, work UNCTAD trade facilitation variety forms, constantly adjusting priorities diverse membership. Expert Working Group Trade Efficiency, work led adoption Ministerial Declaration Trade Efficiency Columbus, Ohio, 1994. declaration, turn, instrumental inclusion trade facilitation agenda WTO Ministerial Conference, held Singapore 1996. Today, UNCTAD trade facilitation package includes support TFA implementation broader, ambitious transit, transport trade facilitation reforms. Specific products cover customs automation, -tariff measures, port training, trade portals transit. development partners design implementation assistance manner ensures aid efforts countries . coordinated effort development partners, avoid gaps overlaps. UNCTAD technical assistance UNCTAD extensive expertise experience area trade facilitation, dating mandate Final Act session United Nations Conference Trade Development 1964, recommended UNCTAD “promote, United Nations family, arrangements [] intergovernmental action research improved marketing techniques, organization trade fairs, dissemination market intelligence simplification formalities relating customs Contact Jan Hoffmann Chief, Trade Facilitation Section Trade Logistics Branch Division Technology Logistics Tel: 41 22 917 2032 jan.hoffmann@unctad.org Press Office Tel: 41 22 917 5828 unctadpress@unctad.org unctad.org