Trade Facilitation And Development Essay

1478 words - 6 pages

Trade facilitation and development
World trade has expanded rapidly over the past decades. This has been driven, in large part, by the changing nature of both production and increased competition in international commerce. Another important factor contributing to the growth in trade has been the periodic rounds of successful multilateral trade negotiations. These talks at the World Trade Organization (WTO) have led to a considerable reduction in tariffs on goods crossing national borders. Today, as the role of traditional trade barriers gradually vanishes, the focus of trade policy has shifted to the remaining non-tariff barriers to trade, including trade facilitation.

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A number of other studies have illustrated the specifics of why trade facilitation matters and specific sources of trade costs. One study, for example, found that barriers to export performance in Africa are closely related to firm characteristics and policies that raise trade costs. This includes non-transparent customs laws and administration. Much less evidence was found that transport infrastructure, in comparison, had a significant impact on export performance (Clarke, 2005).
[edit] World Bank research

The World Bank is conducting extensive research on the issue of trade facilitation and its effects on trade, economic growth, and development. The main part of the research is carried out under the project Trade Costs and Facilitation. This project is focused on contributing to stronger understanding of the concrete relationships between trade costs, trade facilitation, private sector growth, and export competitiveness in developing countries. A major focus of the work is on exploring the dynamic gains associated with lowering trade transactions costs and identifying the relative importance of related reform measures.
The World Bank's Doing Business 2007: How to reform report (2007) documents the wide range of reform needed in developing countries to lower trade costs.[1] The report outlines procedural requirements for importing and exporting a standardized cargo of goods in 155 countries. While the total cost to import (in US$ per container) was $842 on average in high-income countries, it was $1960 in low-income countries. Typical regulations in low-income countries required 13 documents from domestic regulatory agencies as compared to six signatures in high income countries, nine in upper-middle-income and ten in low-middle-income countries. On average it still costs almost two and a half times in expenses, more than twice as many documents and four times as many signatures to trade in a poor country as it does in rich countries.
The Doing Business report provides concrete examples of efficiency savings made possible through trade facilitation reforms. Much of these relate to addressing regulatory reform and other steps—that in contrast to hard infrastructure—constitute the major part of why engaging in trade takes longer in developing countries. Progress in reducing costs, however, has been made. For example, Guatemala with the support of the Inter-American Development Bank changed to an electronic system for export authorization in 2000. Within four years the time for authorization of export documents dropped from one day to around three minutes. Tunisia has also introduced an automated system that provides a one-stop trade documentation-processing platform. Due to this innovation the processing time for trade documentation became reduced from 18 to 7 days which probably had led to substantial productivity gains according to the United Nations Economic Commission for Africa.
[edit] What are the gains from cutting trade costs?

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