Trade facilitation and development: Driving trade competitiveness, border agency effectiveness and strengthened governance

Transport Trade Facilitation Series . 7 AT TRADE FACILITATION AND DEVELOPMENT Driving trade competitiveness, border agency effectiveness strengthened governance Trade facilitation development Driving trade competitiveness, border agency effectiveness strengthened governance United Nations Conference Trade Development 2 | / / / 2 0 1 6 / 1 NOTE designations employed presentation material imply expression opinion part United Nations legal status country, territory, city area, authorities delimitation frontiers boundaries. Material publication freely quoted reprinted, acknowledgement requested, copy publication quotation reprint UNCTAD secretariat. UNCTAD/DTL/TLB/2016/1 Copyright © United Nations, 2016 rights reserved UNCTAD | 3 Table contents List figures............................................................................................................................4 Executive summary..................................................................................................................5 Introduction .............................................................................................................................5 1. Trade competitiveness.........................................................................................................7 Specific trends trade logistics ..................................................................................7 measures matter ..........................................................................................8 Small medium-sized enterprises................................................................................10 Trade facilitation, trade economic growth: literature review .......................10 2. Revenue collection protection public interest .......................................................12 Revenue collection............................................................................................................12 Safety, security, health public policy objectives ..............................................13 3. Human institutional development..............................................................................14 Human, institutional enterprise development ..........................................................14 Trade facilitation Sustainable Development Goals .............................................16 challenges developed countries ..................................................19 4. Implementing trade facilitation .........................................................................................20 Timeline notifications ...................................................................................................20 Cost implementation ....................................................................................................20 Sequencing linkages trade facilitation measures ...................................21 Opportunities sections II III Agreement Trade Facilitation..............22 5. Conclusions ............................................................................................23 Dynamic nature trade facilitation development ...................................................23 .....................................................................................................................23 UNCTAD technical assistance ...........................................................................................24 References .............................................................................................................................25 United Nations Conference Trade Development 4 | / / / 2 0 1 6 / 1 List figures Figure 1: Agreement Trade Facilitation implementation: Correlation trade Business Index indicator trading borders .............................9 Figure 2: Correlation category notifications () gross domestic product capita, () Human Development Index, () Corruption Perceptions Index () Internet usage......................................................................................................14 Figure 3: Agreement Trade Facilitation implementation: Correlation gross domestic product capita Human Development Index .....................15 Figure 4: Trade facilitation provisions notified category , time passed notification...........................................................................................................20 Figure 5: Dendrogram category notifications, Agreement Trade Facilitation article .............................................................................................................................21 UNCTAD | 5 Trade facilitation development Executive summary Trade facilitation reforms improve country’ trade competitiveness effectiveness border agencies. addition, advance development goals strengthening governance formalizing informal sector. present study identifies policies reap full development-related benefits trade facilitation reforms. UNCTAD research experience technical assistance programmes shown reforms comprehensive ambitious advance trade development objectives countries. Trade facilitation linked investments transport infrastructure, information communications technologies broader trade-supporting services. trade facilitation challenges solutions regional, implementation included regional integration schemes. linkages trade facilitation reforms implementation capacities, development partners ensure support leave vulnerable economies, full promises possibilities technical financial assistance Agreement Trade Facilitation World Trade Organization (WTO), reached Bali, Indonesia 2013. Introduction trade liberalized tariffs quotas, focus policymakers shifted impediments cross-border movement goods, administrative logistical nature. Transport connectivity, quality logistics services border management play growing roles determinants international trade flows. Trade facilitation identified tool increased smoother trade countries. background WTO included topic trade facilitation negotiating agenda 2004. 10 years negotiations, Agreement Trade Facilitation reached November 2014, Protocol Amendment insert Agreement annex 1A WTO Agreement adopted. UNCTAD promoted trade facilitation reforms decades, dating mandate session United Nations Conference Trade Development (UNCTAD ) 1964. organization’ extensive work area resulted adoption Ministerial Declaration Trade Efficiency Columbus, United States America, 1994, , turn, instrumental inclusion trade facilitation agenda WTO Ministerial Conference, held Singapore 1996. UNCTAD steps led conclusion Agreement Trade Facilitation. Today, UNCTAD continues support broad ambitious trade facilitation reforms. support driven main motivations: Trade facilitation implementation good trade. relevant participation developing countries global chains, trade manufactured goods regional integration. Small medium-sized enterprises, , perishable, time-sensitive intermediate goods sectors developed countries landlocked developing countries, benefit reduced transaction costs times. mile – land transit landlocked country trade journey port airport United Nations Conference Trade Development 6 | / / / 2 0 1 6 / 1 premises small medium-sized enterprises – remains developing countries area trade facilitation difference small businesses. specific trade facilitation measures ensure revenue collection enforcement health, safety relevant regulations. frequent misconception exists balance trade- trade facilitation hand risks public interest . trade facilitation protection public lost revenues health hazards competing policy objectives. contrary, large number specific trade facilitation measures ease business fight undervaluation, counterfeit trade smuggling. -designed trade facilitation measures improve effectiveness control agencies. , reduce physical inspections, increase likelihood detecting fraud. Trade facilitation reforms positive steps human, enterprise institutional development. small traders, women, enter formal sector, economic activities transparent accountable, promote good governance, generate quality employment, strengthen information technology capabilities generally modernize societies bringing benefits related administrative efficiency. trade facilitation measures informal businesses participate foreign trade, supporting target 8.3 Sustainable Development Goals formalization growth micro, small medium-sized enterprises. Important challenges remain. full benefits Agreement Trade Facilitation realized developed countries developing countries position implement measures Agreement. developed countries require technical assistance developing countries. tend trade volumes; return investment trade facilitation reforms countries trade. developed countries absorption capacity comprehensive technical assistance programmes, institutional reforms required implement complex trade facilitation measures. challenge UNCTAD development partners design implementation-related assistance manner ensures aid efforts reach countries . coordinated effort bilateral multilateral development partners, UNCTAD continues play important role supporting member States endeavours. present study, trade facilitation reviewed context development objectives. discussion literature review combined quantitative analysis 73 notifications developing countries trade facilitation implementation capacities context Agreement Trade Facilitation. study examines potential impact trade facilitation reforms trade competitiveness (chapter 1), revenue collection public policy objectives (chapter 2) human institutional development, including number Sustainable Development Goals (chapter 3). implementation trade facilitation reforms discussed chapter 4, concluding chapter presents policy implications considerations . UNCTAD | 7 1. Trade competitiveness Barriers trade barriers development (Kituyi, 2014). Global trade involves transport-related transaction costs unavoidable , practice, higher due unnecessarily bureaucratic trade procedures documentation requirements. Higher trade costs direct hindrance trade, numerous studies estimated positive impact Agreement Trade Facilitation global trade income impact lowering trade costs (Organization Economic Cooperation Development (OECD), 2015; World Economic Forum, 2014; WTO, 2015a). trade automatically contribute growth poverty reduction; topic amply discussed (Rodrik, 2011; UNCTAD, 2014a; UNCTAD, 2015a). trade – liberalization, trade facilitation, -tariff measures investments transport infrastructure – necessarily achieve development objectives. , trade part development strategy, speed, transparency reliability important today’ trade logistics environment. trade liberalized, obstacles trade gained importance. Facilitating trade good trade; reasons discussed chapter. Specific trends trade logistics today’ trade logistics context, implementing trade facilitation reforms important . standardization, harmonization simplification trade procedures trade easier, reducing costs trade. inclusion trade facilitation WTO agenda reflection number specific trends international trade logistics. trends show increasing role trade facilitation plays increasing trade competitiveness. 1. Trade manufactured goods Globally, trade manufactured goods, including imports exports developing countries, longer providers raw materials, increasingly import raw materials intermediate goods produce manufactured goods export. Based data port traffic, , UNCTAD (2015b) estimates share developing countries volume seaborne imports tripled 1970. trade facilitation measure advance rulings (article 3 Agreement Trade Facilitation) important manufactured goods raw materials. , smart watch border customs officer decide jewellery watch, computer toy, importer appreciated binding advance ruling hand. 2. Globalized production processes Trade increasingly part global chains. Businesses trade intermediate goods, growing share intracompany trade. regard logistics expenditures, companies increasingly spend transport reduce expenditures inventory holdings. deliveries time waiting times borders minimized predictable. Improvements global logistics networks, including reductions transport communications costs innovations managerial procedures, allowed countries specialize tasks final products. Firms operate global supply chains, added countries reaching final market (World Economic Forum, 2012). context, trade facilitation measure helps understanding speeding processes, pre-arrival processing publication average release times, increasingly important country’ participation global chains. United Nations Conference Trade Development 8 | / / / 2 0 1 6 / 1 3. Regional integration countries part regional integration schemes, intraregional trade growing faster global trade regions. number regional trade agreements continues rise, number agreements incorporating trade facilitation measures. perspective trade facilitation, regional trade agreements lead spaghetti bowl agreements, require certificates origin order benefit preferential tariffs. Obtaining submitting certificates origin, turn, requires paperwork potential waiting times. Regional integration crucially depends facilitation cross-border transit trade. time, cross-border operations depend cooperation neighbouring countries. Agreement Trade Facilitation specifically includes articles inter-agency collaboration customs cooperation regional collaboration setting enquiry points. Agreement specific reference transit number articles, including article 11 (freedom transit). Transit included obligation publish relevant information (article 1) provide traders opportunity comment proposed regulations enter force (article 2). benefits measures accrue making transit trade easier, regional collaboration efforts implementation. advantages multilateral Agreement Trade Facilitation regional integration requiring spaghetti bowl regional trade agreements. 4. Trade diversification parallel growing intraregional trade, diversification trading partners. businesses sell source , benefit trade facilitation measures making information Internet international standards. advanced economies consular offices commercial representations , traders developing countries increasingly depend access information Internet. Agreement Trade Facilitation helps ways: measures making information Internet (article 1.2) businesses obtain information globally; article 10.3 stipulates countries international standards; Agreement helps standardize terminologies expectations regard border procedures. Agreement contributes global harmonization procedures. 5. Potential technologies abovementioned trends illustrate growing demand trade facilitation; facilitation benefits tools due technological advances. Measures customs automation, electronic documents single window easier implement today trade facilitation negotiations started WTO decade . Traders invest latest technologies expect counterparts control agencies . technology deserves special mention: container. studies shown introduction containerization greater impact trade growth trade liberalization (Bernhofen al., 2012). Incorporating country’ position container shipping network significantly improves trade models. benefits containerization lost lack trade facilitation, breaking seals reloading content, interrupts movement. measures matter early 2014, WTO members notifying WTO trade facilitation measures category , “provisions developing country member developed country member designates implementation entry force Agreement, UNCTAD | 9 case developed country member year entry force” (WTO, 2014). mid-November 2015, total 73 developing countries (including developed countries) notified category provisions WTO secretariat (WTO, 2015b). Agreement Trade Facilitation covers range trade facilitation measures, grouped 12 articles section . Notifications category country’ -declared capability readiness implement measures assistance entry force Agreement. date entry force , practice meant countries notified measure category measure implemented. analysis number category measures notified country shows close correlation exists implementation levels articles Agreement indicators trade efficiency trade. statistical correlation prove causality, data, shown figure 1, suggest implementing article 2 article 6 stronger bearing country’ Business Index indicator trading borders , , article 4. Figure 1: Agreement Trade Facilitation implementation: Correlation trade Business Index indicator trading borders Source: UNCTAD secretariat calculations, based individual category notifications (WTO, 2015b), Business Index indicator trading borders UNCTAD estimates trade goods gross domestic product (GDP) 2014. values axes represent partial correlation coefficient, varies -1 +1 ( figure correlations positive, values 0 +1 shown). +1 implies variables move 100 cent, correlation coefficient 0 implies variables correlated. terms individual provisions country groups, analysis OECD suggests -income countries, harmonization simplification documents strongest impact increasing trade flows. middle-income countries, streamlining procedures estimated significant aspect trade facilitation enhances trade flows. results valid manufactured goods (OECD, 2012; OECD, 2015). World Customs Organization (WCO, 2014) notes specific transparency predictability enhancing provisions articles 1–4 Agreement Trade Facilitation. measures, , beneficial business sector. provisions target reduction formalities documentation requirements, measures article 10, estimated 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 Business Index indicator trading borders United Nations Conference Trade Development 1 0 | / / / 2 0 1 6 / 1 bring significant cost reductions border procedures. Referring OECD estimates, WCO states cost reduction 14 cent -income countries, 15 cent middle-income countries 13 cent upper middle-income countries. measures important terms policy priorities, implementing individual measures, care mind sequencing synergies ( chapter 4 implementation). Small medium-sized enterprises debate trade facilitation provisions improve performances small medium-sized enterprises, large firms part global chains chains benefit trade facilitation reforms forms trade. Goods traded global chains sensitive improvements logistics performance types goods. link logistics performance trade global chains products 50 cent stronger goods (Hoekman Shepherd, 2013). Small medium-sized enterprises account 95 cent firms economies significant share employment. , account small share international trade (WTO, 2015a). time, small medium-sized enterprises difficulties overcoming bureaucratic hurdles international trade multinational firms. perspective, benefit trade facilitation measures improve transparency ease cross-border operations. view , small medium-sized enterprises benefit reduced transaction costs times. contrast large multinational corporations – resources develop solutions operational bottlenecks globe – small medium- sized enterprises depend solutions public administrations. reducing trade costs, trade facilitation provisions promote entry small medium-sized enterprises export markets, trade place global chains, allowing specialize tasks types inputs, diversifying exports. analysis 118 developing countries, increase 3 cent number products exported shown result reduction 10 cent costs aspects trade facilitation (Hoekman Shepherd, 2013). Estimates impact trade facilitation exports firm level suggest small firms benefit soft aspects trade facilitation – cross-border management, information communications technology risk assessment – large firms reap greater benefits infrastructure investments road quality upgrades (WTO, 2015a). ensure small medium-sized enterprises benefit trade facilitation reforms, accompanying measures related private sector development, export promotion awareness raising . UNCTAD collaborates area International Trade Centre. Trade facilitation, trade economic growth: literature review Trade facilitation contribute reducing wedge export import prices. reducing trade costs, prices consumers firms import inputs production decrease , turn, real disposable incomes / profits increase. Empirical evidence suggests extra cost delays, bureaucratic inefficiency , instances, corruption add 15 cent price goods, undermining competitiveness goods countries. National income effects improved trade facilitation times great result removing tariffs manufactured goods globally (Hoekman Shepherd, 2013). Customs procedures transportation costs delays largest factors preventing developing countries integrating global chains. Empirically, shown trade facilitation reforms country’ inclusion global chains, integration global logistics networks, productivity growth employment levels diversification exports. factors lead increase foreign investment (World Economic Forum, 2014). UNCTAD | 1 1 full implementation Agreement Trade Facilitation provisions estimated lead increase average economic growth developing countries 0.9 cent annually, developed countries, 0.25 cent additional growth GDP (WTO, 2015a). groups countries, rapid implementation provisions beneficial implementation slower pace years. Distance, logistics performance, connectivity border management major determinants trade costs, tariffs. Trade costs exogenous (based matters largely country’ control, remoteness) endogenous (linked primarily national policies). Endogenous costs higher developing countries developed countries, influence participation global chains affect regional integration. estimated reduction trade costs full implementation trade facilitation provisions Agreement estimated range 9 23 cent. developed countries developing countries highest levels deficiencies, obtain greatest levels improvement. Full implementation Agreement provisions estimated greater impact trade costs reducing tariffs 0 cent, minimum estimate reduction trade costs (9 cent) compared current average -favoured nation tariff (9 cent) WTO members (WTO, 2015a). Countries incur trade costs depending degree industrialization, level development income, geographical location, cross-border procedures, logistics connectivity. Empirical evidence suggests developing countries 2010, trade costs manufactured products equivalent applying 219 cent ad valorem tariff international trade, implying US$1 cost manufacture product, US$2.19 added form trade costs; high-income countries, product, US$1.34 added (WTO, 2015a). Trade costs developing countries estimated average 1.8 times higher developed countries. highest trade costs incurred African countries, 260 ad valorem tariff equivalents, additional 40 cent trade costs incurred remote landlocked countries. fact, 10 countries highest trade costs Africa small island developing States, 10 countries lowest trade costs Western North America Europe (WTO, 2015a). region expected benefit implementation Agreement Trade Facilitation provisions Africa, estimated 16.5 cent reduction costs. income group, developed countries expected achieve greatest reduction, 17 cent (WTO, 2015a). United Nations Conference Trade Development 1 2 | / / / 2 0 1 6 / 1 2. Revenue collection protection public interest frequent misconception balance trade- trade facilitation risks public interest. trade facilitation protection public lost revenues health hazards competing policy objectives. contrary, large number specific trade facilitation measures ease business fight undervaluation, counterfeit trade, smuggling entry market substandard products. Trade facilitation measures advance rulings, authorized economic operators, risk management post- clearance audits reduce physical inspections, increase likelihood detecting fraud. Customs performance importance countries revenues rely duty tax collection borders, developed countries developing countries. investing modern operations, customs control authorities reduce operating costs, efficient strengthen capacities confront increasingly complex environment international trade takes place. Revenue collection Customs authorities responsible collection duties number taxes borders. survey 34 developed countries WCO 2014 showed duties taxes collected borders accounted 45 cent government tax revenue, 19 cent customs duties (WTO, 2015a). dependency represents major concern developing countries concern met negative impacts areas, health education. WCO, customs revenue constitutes substantial portion government tax revenues, import tariff rates cut world. main customs-related challenges detecting avoiding fraud, impact revenue collection, include misinvoicing ( overvaluation), voluntary misclassification, smuggling misdeclarations transit origin. estimate suggests fraudulent misinvoicing trade transactions largest component illicit financial flows developing countries, accounting 77.8 cent illicit flows (Global Financial Integrity, 2014). Agreement Trade Facilitation specific provisions aimed avoiding recovering revenue loss, including article 7.5 (post-clearance audit) articles 12.2–12.12 (exchange information verification). changing global trade environment, role customs administrations complex. Multimodal transportation --time distribution impact freight logistics put pressure supply chains. customs operate efficiently handling workloads minimizing delays, automation information communications technologies important tools. enable reliable revenue collection system accurate transparent regulatory framework, facilitating trade (McLinden, 2005). increase decrease customs revenue due single factor based variety factors play substantial roles, stakeholder compliance, tariff revenue structures, trade patterns, regulatory frameworks degree implementation Agreement Trade Facilitation provisions. Measures reduce corruption, increase transparency implement automation processes intrinsically related. Outdated, inefficient practices burdensome processes discourage stakeholders complying regulations laws, leaving room corruption. , customs reforms undertaken Plurinational State Bolivia, Morocco, Mozambique, Peru, Philippines, Turkey Uganda covered components customs administration: organizational structure; legal framework; strategic management; information technology; system procedures. customs reform modernization Peru, , -year period, reduced cargo clearance time 15–30 days 1–2 days quadrupled revenue collection (McLinden, 2005). examples : UNCTAD | 1 3 Canada, post-clearance controls, customs authorities collected US$128 million fiscal year 2010, (WCO, 2014) Japan, post-clearance controls, customs authorities collected US$300 million fiscal year 2012, equivalent 1 cent annual customs revenue (WCO, 2014) Taiwan Province China, customs authorities recovered US$26 million revenue evaded duties fiscal year 2010–2011 (WTO, 2015a) Cameroon, customs revenues represent 27 cent national revenues. Aiming reduce corruption longstanding barrier performance, 2007, customs authorities launched reform modernization initiative began implementation UNCTAD Automated System Customs Data, supported WCO World Bank (Cantens al., 2010). System processing consignment tracked criteria relevant reforms measured. introduction simple, immediately effective. initial reluctance number customs officials System caused losses raised doubts efficiency, simplification procedures raised concerns officials tasks longer relevant, engendering criticism opposition. , monitoring frontline operations produced prompt results, officials noted managers supervise quality work System. Indicators (related activity, performance, control risk management) put place measure economic activity, including time process files, effectiveness controls compliance customs law practices. automation processes brought gains customs revenue January 2007, 15 cent higher January 2006 (Cantens al., 2010). Lack transparency trade regulations increases likelihood errors declarations, leading additional delays discouraging legitimate trade. time spent clearing customs procedures negative correlation trade-related corruption. Global import revenue losses due customs-related corruption estimated amount US$2 billion (WTO, 2015a). Customs cooperation article 12 Agreement Trade Facilitation detect discrepancies declarations invoiced values imports. Safety, security, health public policy objectives changing security paradigm contributed reshaping practical trade facilitation measures. Border security agencies adopting strategies result border control processes undertaken State’ borders. Individual nodes supply chain extensions border network , proactively efficiently planned executed, frustrate objective facilitating trade. Put differently, specific trade facilitation measures pre-arrival processing, electronic submissions customs cooperation effectively achieve levels risk faster border procedures. trade facilitation assessments show , , control agencies customs prepared implement Agreement Trade Facilitation provisions. Ministries health agriculture, standards bureaux, , lack information technology capacities full measures pre-arrival processing, risk assessment automated processes. implementation trade facilitation measures facilitate control incoming products conformity standards sanitary phytosanitary measures. Agreement includes provisions positive effects increasing compliance traders simplifying customs procedures strengthening controls. Article 6.3 (penalty disciplines) article 7.7 (trade facilitation measures authorized operators), , customs authorities perform duties efficiently costly manner, traders merchandise released shorter time. positive impact likelihood duties paid helps reduce informal trade. United Nations Conference Trade Development 1 4 | / / / 2 0 1 6 / 1 3. Human institutional development Implementing trade facilitation reforms entails number direct benefits country’ human institutional development investments capacity-building public sector reforms. Specific measures involving transparency, capacity-building institutional modernization direct bearing achievement number Sustainable Development Goals. implementation trade facilitation measures reflected category notifications statistically correlated development indicators GDP capita trade. , likelihood developing country implementing trade facilitation reforms capacity implement reforms motivation increase volume foreign trade. Human, institutional enterprise development Statistically, exists close correlation implementation articles Agreement Trade Facilitation indicators development GDP capita Human Development Index United Nations Development Programme (figure 2). practice, underlying causalities move directions; developed countries find easier implement reforms, implementation measures direct bearing country’ human institutional capacity development. Figure 2: Correlation category notifications () gross domestic product capita, () Human Development Index, () Corruption Perceptions Index () Internet usage ) ) ) ) Source: UNCTAD secretariat calculations, based Human Development Index, individual category notifications (WTO, 2015b), International Telecommunication Union data Internet , Transparency International Corruption Perceptions Index UNCTAD estimates GDP capita 2014. UNCTAD | 1 5 Figure 3 depicts detail partial correlation GDP capita Human Development Index category notifications Agreement Trade Facilitation articles. , correlation articles higher broader measure Human Development Index GDP capita. highest correlation article 10. Figure 3: Agreement Trade Facilitation implementation: Correlation gross domestic product capita Human Development Index Source: UNCTAD secretariat calculations, based Human Development Index, individual category notifications (WTO, 2015b) UNCTAD estimates GDP capita 2014. values axes represent partial correlation coefficient, varies -1 +1 ( figure correlations positive, values 0 +1 shown). +1 implies variables move 100 cent, correlation coefficient 0 implies variables correlated. Trade facilitation reforms positive steps human, enterprise institutional development. , trade facilitation measures inter-agency coordination, appeal enquiry points form part general national reforms context international trade, broader public sector modernization programmes. making trade easier transparent, specific trade facilitation reforms effectively small traders enter formal sector, economic activities accountable, promote good governance, strengthen information technology capabilities generally modernize societies. Articles 1–5 Agreement Trade Facilitation provide crucial steps promoting transparency. Implementation provisions articles – articles 1 2 – bring important benefits terms administrative efficiency. Global standards trade transport transfer good practices technologies developing countries. contributes development, enhances electronic governance, improves information technology connectivity streamlines processes save time financial costs. major transformation administrative culture expected, conveyed mandatory provisions Agreement Trade Facilitation. field publication transparency, reforms developed countries developing countries induce ways business. reforms linked information technology intelligent systems; result working methods public offices adapt world easily information. skills, knowledge mindsets required. Public sector competencies evolve control monitoring regulatory functions, intelligence activities good governance practices ensure, instance, safety security standards operation transparent -distorted trade transport markets. 0% 10% 20% 30% 40% 50% 60% 70% 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 Gross domestic product capita Human Development Index United Nations Conference Trade Development 1 6 | / / / 2 0 1 6 / 1 Similarly, mandatory provisions articles 6–10 Agreement Trade Facilitation, focusing customs procedures documentation, lead shift physical controls border crossings, entailing delays interference movement goods, information treatment, resulting higher levels security smoother flows commerce. customs rules incorporate customs practices recommended WCO, adopted implemented countries advanced administrative reforms. Trade facilitation Sustainable Development Goals measures Agreement Trade Facilitation direct link adopted Sustainable Development Goals (UNCTAD, 2015b). , article 1 covers publication availability information import, export transit procedures; country complies article 1 closer achieving target 16.10 Goals, , inter alia, aims ensuring public access information. article 5, , inter alia, requires Governments publish announcements -discriminatory easily accessible manner; easily achieved traders access Internet, stipulated target 9. Goals. addition, article 6 includes requirement avoid conflicts interest assessment collection penalties duties, achieve target 16.5 (substantially reduce corruption bribery forms). Finally, making trade easier opaque, trade facilitation measures encourage informal businesses declare transactions participate formal foreign trade, supporting target 8.3 Goals formalization growth micro, small medium- sized enterprises. effective implementation Agreement Trade Facilitation provisions, WTO members required “establish / maintain national committee trade facilitation designate existing mechanism facilitate domestic coordination implementation provisions” (WTO, 2014). mechanism crucial ensuring political buy- relevant stakeholders public private sectors, including users providers trade supporting services, members national trade facilitation committees (UNCTAD, 2016a). measure helps meet target 17.17 Sustainable Development Goals (encourage promote effective public, public–private civil society partnerships, building experience resourcing strategies partnerships). simplification procedures standardization fees charges applicable trade foster predictable, higher levels revenue collection customs. implementation removal inefficiencies bureaucratic impediments. Trade facilitation measures achieve target 1. (ensure significant mobilization resources variety sources, including enhanced development cooperation, order provide adequate predictable means developing countries, developed countries, implement programmes policies poverty dimensions). list articles Agreement Trade Facilitation identifies linkages Sustainable Development Goals. Article 1 Compliance provisions publication availability information , inter alia, transparent predictable trading environment, encourages stakeholder partnerships enhances communications traders, government agencies private sector improvement access Internet related information communications technology infrastructure. specifically, compliance article 1.2 (information Internet) helps achieve target 9. (significantly increase access information communications technology strive provide universal affordable access Internet developed countries 2020) target 16.10. UNCTAD | 1 7 Article 2 opportunity comment legislation regulations enter force hold consultations traders builds trust public administrations, increases transparency improves governance. Compliance article helps achieve target 16.7 (ensure responsive, inclusive, participatory representative decision-making levels) target 16. (promote enforce -discriminatory laws policies sustainable development). Article 3 Advance rulings create transparent reliable global trading system, encourage developed countries developing countries part system build capacities negotiate multilateral settings, strengthen international cooperation closer integration enriched aid trade agenda. Compliance article supports target 17.10 (promote universal, rules-based, open, -discriminatory equitable multilateral trading system WTO, including conclusion negotiations Doha Development Agenda) target 17.14 (enhance policy coherence sustainable development). Article 4 Procedures appeal review build effective, accountable transparent national institutions improve trust multilateral trading system. Clear transparent appeal procedures traders, large small. Compliance article helps achieve target 16.3 (promote rule law national international levels ensure equal access justice ). Article 5 Measures enhance impartiality, -discrimination transparency build strong national institutions, promote policy coordination coherence contribute good governance, helping reduce corruption encourage private sector involvement. Compliance article achieve target 16.5 related article 1 target 9.. Article 6 Disciplines fees charges imposed connection importation, exportation penalties include requirement avoid conflicts interest assessment collection penalties duties, making public resources effective efficient, build trust business sector foster closer regional integration, ultimately promoting sound reliable trading system. Compliance article achieve target 17.1 (strengthen domestic resource mobilization, including international support developing countries, improve domestic capacity tax revenue collection). Article 7 timely release clearance goods contributes, inter alia, modernization trade transport sector, encouraged invest measures electronic submissions declarations reduce time goods spend borders. Compliance article achieve target 8.2 (achieve higher levels economic productivity diversification, technological upgrading innovation, including focus high added labour- intensive sectors). Article 8 Border agency cooperation strengthens capacities institutions fosters inter-institutional cooperation, freeing public resources allocated strengthening regulatory public planning functions. Compliance measure helps achieve target 16.6 (develop effective, United Nations Conference Trade Development 1 8 | / / / 2 0 1 6 / 1 accountable transparent institutions levels) intrinsically linked achievement target 16.5. Article 9 movement goods import customs control incentives business sector, encouraging greater intraregional trade cooperation involved institutions. global challenge inefficient import procedures; simplification leads efficient - targeted controls maximizing time resources improving transport services. Compliance article helps achieve target 9.1 (develop quality, reliable, sustainable resilient infrastructure, including regional transborder infrastructure, support economic development human -, focus affordable equitable access ). Article 10 Formalities connected importation, exportation transit essential integration informal trade formal economy. informal cross-border traders information , easier comply legal operations. , simplification international trade procedures encourages small medium-sized enterprises foreign trade operations. important developed countries developing countries, trade largely carried small-scale traders, encounter border management bottlenecks trading products, lead lessened gains traders gains recorded national revenue accounts. Compliance article helps achieve target 8.1 (sustain capita economic growth accordance national circumstances , , 7 cent GDP growth annum developed countries) target 17.11 (significantly increase exports developing countries, view doubling developed countries’ share global exports 2020). addition, simplifying trade operations helps promote national foreign investments, turn spill fostering employment. promotes, inter alia, target 8.3 formalization growth micro, small medium-sized enterprises. Article 11 Improving efficiency transit operations requires close coordination multitude agencies sides border. developed countries developing countries, including landlocked developing countries, benefit reducing bureaucratic tasks related transit. Agreement require investments infrastructure, objective facilitating international transit helps achievement target 9. (facilitate sustainable resilient infrastructure development developing countries enhanced financial, technological technical support African countries, developed countries, landlocked developing countries small island developing States). Transit requires collaborative efforts landlocked developed countries transit countries, win-win scenarios pursued. , Vienna Programme Action Landlocked Developing Countries Decade 2014–2024 pursues achievement developments context Sustainable Development Goals. Article 12 Customs cooperation essential export import procedures formalities easier. Customs administrations trading partners cooperate mitigate fraud illegal trade. Implementation article helps achieve target 16. (strengthen relevant national institutions, including international cooperation, building capacities levels, developing countries, preventing violence combating terrorism crime) contributes achievement target 16.5. UNCTAD | 1 9 Section II Agreement Trade Facilitation includes approach special differential treatment commitment international community support implementation Agreement measures technical financial assistance. line target 10. (encourage official development assistance financial flows, including foreign direct investment, States greatest, developed countries, African countries, small island developing States landlocked developing countries, accordance national plans programmes). Finally, article 23.2 section III establishment national committee trade facilitation, crucial mechanism ensuring effective implementation Agreement provisions, facilitate domestic coordination relevant stakeholders public private sectors, helping achieve target 17.17. challenges developed countries expected benefits Agreement Trade Facilitation realized developed countries developing countries position implement measures Agreement. issue negotiations provisions section II, deals special differential treatment developing country developed country members. 2004, members agreed Annex decision adopted WTO General Council Doha Development Agenda work programme, incorporated thinking mandate start negotiating trade facilitation. decided link, time, obligation comply actual capacity compliance, placing emphasis assistance capacity-building condition implementation. practice, innovative approach translated establishment categories provisions implementation capacities developed countries developing countries. category provisions (category ) significant, involves provisions developing country developed country member requires technical financial assistance transitional period fully acquire compliance capacity. anticipated , 2012 2013, UNCTAD carried technical assistance activities develop national trade facilitation implementation plans 29 developing countries, order prepare notifications categories identify terms technical capacity-building assistance. Analyses plans confirmed developed countries assistance area middle-income developing countries. largest group developing countries developed countries compliant 41–60 cent Agreement Trade Facilitation provisions, 60 cent developed countries compliant 21–40 cent measures (UNCTAD, 2014b). Broadly speaking, compared developing countries, developed countries face challenges. developed countries: Require trade facilitation-related technical assistance Tend trade volumes, return investment trade facilitation reforms countries trade. , start base, -cost trade facilitation measures significant positive impacts absorption capacity comprehensive technical assistance programmes, institutional reforms required implement complex trade facilitation measures Tend share aid assigned trade facilitation, competing demands investment health, education infrastructure United Nations Conference Trade Development 2 0 | / / / 2 0 1 6 / 1 4. Implementing trade facilitation capacity implement trade facilitation reforms closely linked country’ level development. costs difficulties implementing trade facilitation measures concern negotiators prior Agreement Trade Facilitation. Implementation costs sources, including institutions organizations, human resources training, regulations legislations, diagnostics assessments, awareness raising change management, equipment infrastructure, operations maintenance political resistance. Timeline notifications WTO members notified category measures largely advanced developing economies, Colombia, Hong Kong (China), Mauritius Singapore. Countries notified notified higher number measures category . Countries notified average advanced implementation trade facilitation (figure 4). trend surprising preparation notifications requires assessment. assessments undertaken WTO -assessments, UNCTAD trade facilitation implementation plans forms gap analysis. Experience assessments confirms linkages level development country capacity prepare notifications WTO. country level development category measures, finds difficult identify notify categories. Figure 4: Trade facilitation provisions notified category , time passed notification Source: UNCTAD secretariat calculations, based individual category notifications (WTO, 2015b). notification category measures Hong Kong (China) April 2014. mid-November 2015, Nepal latest WTO member notify category measures. Cost implementation Setting enquiry point, training customs officers, automating procedures drafting regulation requires initial investment. Applying methodologies, OECD, UNCTAD World Bank reached similar results order magnitude required resources. Depending range factors, average developing country invest US$5 million–US$15 million achieve compliance Agreement Trade Facilitation. Care interpreting figures present estimates order magnitude; amount varies significantly country size, ambition, current level implementation factors, estimates view compliance, practice countries aim ambitious, costly, reforms. Subsequent maintenance costs offset cost savings efficient operations. , , charge services advance rulings single window. 0 5 10 15 20 25 30 35 40 0 100 200 300 400 500 600 um ra de fa ci lit io ea su tif Days passed notification UNCTAD | 2 1 total, human monetary benefits implementing Agreement Trade Facilitation provisions outweigh costs. Trade facilitation reforms tend high return investment. Cost time savings gained traders operators private sector public sector. specific trade facilitation measures, pre-arrival processing, risk assessment, electronic submission automation, reduce time needed process trade transactions. implementation Agreement provisions, investment transport, transit trade facilitation costly. -front set- costs borne, investing infrastructure. high costs incurred hard infrastructure, studies suggest cost–benefit balance strongly positive (Hoekman Shepherd, 2013). positive return investments infrastructure projects significantly enhanced complemented investments costly soft trade facilitation reforms. Sequencing linkages trade facilitation measures analysis category notifications shows measures implemented (figure 5). expected, measures technically linked. , measures article 7 article 10 require comprehensive customs modernization; notifications articles . Article 1 article 6 implemented . contrast, implementation article 9, article 11 article 12 independent implementation articles. Figure 5: Dendrogram category notifications, Agreement Trade Facilitation article Source: UNCTAD secretariat calculations, based individual category notifications (WTO, 2015b). vertical axis shows partial correlation, varies -1 +1 ( figure correlations positive, values +0.2 +1.0 shown). Article 9 Article 11 Article 12 Article 5 Article 4 Article 8 Article 3 Article 2 Article 7 Article 10 Article 1 Article 6 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Similarity United Nations Conference Trade Development 2 2 | / / / 2 0 1 6 / 1 Trade facilitation important component national development plans. Depending country’ development strategy, measures higher priority . data notifications give indication measures candidates part trade facilitation implementation programme. important bear mind ongoing planned programmes. , countries process public sector reform programmes, entail enquiry points means enhance transparency. instances, regional programmes promote transit involve transport markets infrastructure, aspects article 11 Agreement. Opportunities sections II III Agreement Trade Facilitation special differential treatment provisions section II Agreement Trade Facilitation provide unique opportunity country’ development consideration planning implementation Agreement provisions. Developing countries opportunity notify specific trade facilitation measures category ( implemented ) category (requiring financial technical assistance). Section III Agreement important provisions, regard establishment national committees trade facilitation ensure effective implementation provisions enhanced cooperation stakeholders. Understanding linkages trade facilitation development discussed present study developing countries reap full benefits seize opportunities sections Agreement Trade Facilitation. UNCTAD | 2 3 5. Conclusions relationship trade facilitation development dynamic. Countries capacities, higher trade volumes greater financial resources position invest reforms trade faster, easier transparent. time, developing country invests programmes modernize customs administrations trade procedures, reap benefits greater trade, revenue collection institutional development. potential virtuous circles. Dynamic nature trade facilitation development Countries trade find easier attract financial resources invest trade facilitation, large trade volumes achieve high rate return trade-related investments. Countries invest trade facilitation trade grow (chapter 1). Countries financial resources disposal position invest trade facilitation. Countries invest trade facilitation find reforms increase revenue collection (chapter 2). Countries stronger human institutional capacities implement trade facilitation reforms advance faster implementation Agreement Trade Facilitation . Countries attach high priority trade facilitation reforms, context national development strategies donor relations, find reforms develop stronger human institutional capacities (chapter 3). challenge policymakers initiate virtuous circles, investments trade facilitation reforms generate greater trade, revenue capacity development. order advance trade facilitation agenda, keeping mind close linkages development, policies pursued: Ensure functioning national trade facilitation committee Build national implementation capacities Mainstream trade facilitation reforms national development strategies, building productive capacities donor relations discussed present study, trade facilitation measures closely correlated level development country measured, , Human Development Index score GDP capita. countries advance development, improve trade facilitation implementation capabilities. smaller vulnerable economies, including developed countries, capacity move trade facilitation implementation future clear benefits, strong technical assistance . UNCTAD development partners (UNCTAD, 2014b; UNCTAD, 2015a; UNCTAD, 2016a; UNCTAD, 2016b). United Nations Conference Trade Development 2 4 | / / / 2 0 1 6 / 1 UNCTAD technical assistance UNCTAD extensive expertise experience area trade facilitation, dating mandate UNCTAD .1 fifty years, work UNCTAD trade facilitation variety forms, constantly adjusting priorities diverse membership. UNCTAD support ranged helping countries assess trade facilitation reforms develop institutional technical tools implementing reforms, facilitating trade Automated System Customs Data, 90 countries. UNCTAD special programme trade facilitation Expert Working Group Trade Efficiency, work led adoption Ministerial Declaration Trade Efficiency 1994. declaration, turn, instrumental inclusion trade facilitation agenda WTO Ministerial Conference 1996. beginning trade facilitation negotiations, support developing countries negotiations major focus UNCTAD trade facilitation-related activities included analytical policy publications, training awareness-raising events developing countries UNCTAD headquarters, implementation technical assistance capacity-building activities tailored developing countries. Prior conclusion Agreement Trade Facilitation, 2012–2013, UNCTAD agreed lead efforts conducted collaboration Annex partners,2 aimed helping developing countries elaborate national implementation plans trade facilitation measures proposed WTO negotiations. Today, UNCTAD trade facilitation package includes support implementation Agreement Trade Facilitation, broader, ambitious transport, transit trade facilitation reforms. UNCTAD support close collaboration international organizations, including International Trade Centre United Nations Economic Commission Europe. Specific UNCTAD products regard trade facilitation related issues cover trade portals, customs automation, port training, shipping connectivity, -tariff measures transit. 1 Final Act UNCTAD recommended UNCTAD “promote, United Nations family, arrangements [] intergovernmental action research improved marketing techniques, organization trade fairs, dissemination market intelligence simplification formalities relating customs procedure, commercial travel, .” (UNCTAD, 1964). 2 Annex decision adopted WTO General Council Doha Development Agenda work programme 1 August 2004, defining relevant international organizations invited provide technical assistance capacity-building, including International Monetary Fund, OECD, UNCTAD, WCO World Bank. UNCTAD | 2 5 References Bernhofen , El-Sahli Kneller (2012). Estimating effects container revolution world trade. Lund University Publications. Cantens , Raballand Bilangna (2010). Reforming customs measuring performance: Cameroon case study. 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