Trade+Facilitation

In a time of financial crisis and increasing competition, governments and economists around the globe are looking at ways of increasing the performance of the economy and reducing transaction costs. The importance of trade for the worldwide economy and for reducing poverty is widely recognised and increased trade is sought as a means of boosting failing domestic economies. According to the World Trade Organization (WTO), international trade has increased annually by 5,5% during the last decade. Production is scattered around the globe and international trade has changed from complete goods towards intermediate and sub-assembled products. The increased globalization of production, along with just-in-time logistic techniques, has made companies more dependent on efficient movement of their goods, complemented by a parallel flow of business information. It is more important than ever to achieve trade facilitation.
 * Trade Facilitation – a Good Idea!**

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“Traditional” trade barriers, such as tariffs, are gradually disappearing – both through multilateral negotiations and the increase in bilateral and regional free trade agreements. This development has contributed to making the costs of inefficient administration and cumbersome trade procedures more visible. Due to the differences between bound and applied rates in Customs tariffs, many studies indicate that the gains from the present WTO DDA-round might be smaller than from previous rounds, if only looking at Customs tariffs. On the other hand, the gains from trade facilitation in the round are potentially bigger. A study from the Swedish National Board of Trade shows that trade facilitation contributes most to developing countries' potential gains in the DDA-round. Also the country that facilitates its procedures stands to gain the most. Trade facilitation is estimated to lead to national income gains for all regions and to play an important role in development.

Economists are able to show the gains in models and theory and a large number of case studies from around the world show that gains are available both for trade and governments. The draft agreement on trade facilitation from the DDA-round gives an interesting framework to start building from. However, the DDA-negotiations are limited to the three GATT articles on Freedome of Transit (Article V), Fees and Formalities connected with Importation and Exportation (Article VIII) and Publication and Administration of Trade Regulations (Article X). Trade facilitation is a concept that is wider than these. Trade facilitation is very often (even in most cases) related to information and its availability in the transaction and whole process. Problems arise: if the goods arrive before the information; if there is not a harmonized way to present information defined and agreed between parties; and if there is overloaded, complicated and redundant information requirements made by the parties relating to the transaction or by authorities. This implies that many more procedures and information flows are concerned. As different countries are in different phases of development and work in different environments, each country should individually determine what trade facilitation measures to implement and in which order. Also, there is no one-size-fits-all or a toolkit that every country should adopt. It is important to stress that trade facilitation is a process, where governments, governmental agencies, traders’ associations and other interested partners analyse needs, possibilities, threats and opportunities and go for the low-hanging fruit in order to have the best results. Trade facilitation does not have to be expensive or technical. It can start with two countries sharing the same facility for border crossings, be it Norway and Sweden where since 1960 Customs officials on both sides of the border exercise authority on behalf of the other, or Zambia and Zimbabwe who have cooperated at Chirundu since 2009. It can be a committee discussing a specific problem and how to best overcome it, with very low costs involved. Dialogue and partnership are important components. A number of technical and electronic solutions are available, but there is no hierarchy between measures and it is advisable to be wary of buzz-words. Technical solutions need to be adaptable, integrated with existing systems, and sometimes also with solutions in neighbouring countries. Most of all they need to be economically defendable and viable.

Trade facilitation is a continuous process. Once Governments and trade have launched mechanisms, they should jointly continue to monitor trade-related national and international developments and, as necessary, adapt existing measures or draw up new ones to fit the changing environment.