WCO Europe Region Trade Facilitation Agreement Workshop
01 June 2016
When I look around, I realize this is a classic case of what you call preaching to the choir.
I presume that there is no one in this room that doubts the benefits of trade facilitation -- or at least that is my hope.
But it still deserves to be repeated: WHY is this so important?
First: As tariffs and quotas have been reduced worldwide, attention has rightfully been shifted to the remaining impediments to trade. Average world tariffs are around 5 percent ad valorem. But average trade costs are about 10 percent. And a lot of it has to do with unnecessary red tape to trade.
Second: Global production and trade patterns are changing. In a world of deepening global value chains, no one can afford to be the weakest link. Just in time delivery at competitive prices is more important than ever. Unnecessary costs to trade are basically roadblocks to countries' aspirations of integrating in global trade, but also to critically important investment that allows countries to access and climb value-chains. No country can afford this in the long run.
As UNCTAD has put it many time: Trade efficiency in general and trade facilitation in particular is the "new frontier of competitiveness".
Simply put, investing in improving trade facilitation makes utter sense. The empirics back this up. A study from 2009 found that for every $1 spent on trade facilitation in an Aid for Trade country, the country's trade volume grows by $6.37 per year.
But the gains from trade facilitation go beyond trade efficiency gains; Trade facilitation fosters good governance.
New technologies and institutional reforms can improve governance, reduce entry barriers and pull the informal sector into the formal sector. And with less paperwork to dodge, and fewer palms to grease, public revenues go up. This generates new resources for spending on essential services.
For all of these reasons, trade facilitation is a clear win for growth and for development. And it benefits everyone: consumers, companies, governments and the global trading system that we all ultimately depend on.
This is why so many countries are pursuing trade facilitation reforms. And it is also why so many international organizations are giving clear priority to it.
BUT if the benefits of trade facilitation reforms are so evident, WHY do countries need international organizations? Why are our services needed?
Bottom line, while trade facilitation is a no-brainer, it is not a simple reform process. At its heart, we are talking about institutional reforms - sometimes even a fundamental reboot of legal, regulatory and administrative procedures and practices. This requires technical knowhow, financial resources, coordination among government agencies and involvement of stakeholders, not to mention political will.
In the end, the new WTO Trade Facilitation Agreement (TFA) is setting out a minimum standard of what countries should put in pace. It does not say HOW to do it. Also, TFA is not an end in itself - it is a means to an end. And, as such, we need to ensure that countries understand how the implementation of this WTO Agreement, important as it is, should go hand in hand with broader reforms and improvements to trade, ranging from e-Governance, soft infrastructure, services (like distribution, logistics, transport services, insurance and trade finance), as well as port management, rail and road systems and other hard infrastructure investment.
Otherwise, the benefits of the WTO's Trade Facilitation Agreement will not be fully materialized. Otherwise, we will not seriously address the fact that costs to trade in developing countries are still - on average - 1.8 times higher than in developed countries. Otherwise, we will not ensure that trade facilitation reforms indeed become the spring-board for countries' integration in global trade, higher revenues and stronger institutional development.
The wide scope of the agenda of trade facilitation reforms justifies the wide range of international organizations. The field is crowded, yes, but each international organization also has its own niche and comparative advantage.
In the case of UNCTAD, Trade Facilitation has been part of UNCTAD's mandate since its inception, in 1964. We are proud that our work on trade efficiency directly contributed to making trade facilitation one of the so-called Singapore Issues.
Starting in 2004 - with the beginning of substantive negotiations on the WTO - UNCTAD also began to provide more targeted support to developing countries. In the run up to WTO's Ministerial Conference in Bali, we supplied policy papers, training events, and technical assistance tailored to local needs.
And today, we're engaged in efforts to implement the Bali package. For instance, we identify compliance gaps and design projects aimed at closing those gaps (or - in TFA-speak - we assist with identifying what requires to be out in Category B, as well as to develop projects for Category C measures). We offer advisory services for countries that face specific legal or technical challenges in ratifying the agreement. And we help to establish and maintain National Trade Facilitation Committees.
Of course, we are not alone in doing this, and more. In fact, our effectiveness depends on the extent to which we coordinate our efforts with other development partners. This is true for UNCTAD, just as it is for every other international organization in this field.
For this reason, we work closely with colleagues in ITC, as well as UNECE and WCO in a number of TFA-related activities. The World Bank - as well as regional partners like TradeMark EastAfrica - are also key donors to our customs automation program, ASYCUDA, which has been rolled out and benefitted 110 countries since its inception in 1981. And we are working with our private sector partners as part of the World Economic Forum's and ICC's Global Alliance for Trade Facilitation.
Rest assured, all international organizations in this field try hard to work together. We must deliver as one. And: We all do our best to help developing and transition countries to fully and timely implement the TFA.
But we must also be honest about the challenges that we face. Despite close collaboration and significant resources allocated and generous commitment by donors, there remain important challenges with respect to matching and funding. The money is there, but it is not always accessible in a timely and results-oriented manner. This is particularly the case for targeted assistance on TFA-ratification and implementation.
To illustrate the point: UNCTAD and ITC, working together, have helped over 50 countries to categorize their commitments for notification to WTO. And we have been not only effective, but also cost-efficient: the cost of our assistance is, on average, USD 20.000 per country for the services provided.
But despite this and despite the nearly USD $160 million that have been allocated for TFA-implementation to six key institutions (WTO, the World Bank, the WCO, the Global Alliance, ITC and UNCTAD), it is a fact that UNCTAD and ITC today receive numerous requests for assistance to which we cannot respond favourably for lack of funding. UNCTAD and ITC, combined, do not even account for 3% of the total funds allocated to support the TFA. This leaves a bad impression with developing and transition economies which are in the process of deciding if/when to prepare their ratifications and notifications, and whose requests for help we now run the risk of having to turn down.
Frankly, this is something that can and must change. Collectively, we must find ways to more efficiently release the funds necessary to the countries requesting it. And to allow the countries to draw on the expertise of international organizations based on their needs - not the priorities of donors. Money sitting still in massive trust funds will do no good.
Ladies and Gentlemen,
It is clear to all of us that trade facilitation can accelerate inclusive growth and development. But it's equally clear that many developing and transition countries need our support to make the necessary reforms. Working together, we are convinced that we can successfully implement the WTO Trade Facilitation Agreement.
Thank you for your attention.