Wednesday, October 3, 2012

Trade Facilitation - Getting into details

How much does easy facilitation of trade impact economies? How relevant is it in the interconnected world? I have blogged about trade facilitation issues here. Does Trade Facilitation have a significant impact on the development and growth of economies? Do they play a dominant role in the ability of countries to participate in the global economy?

This piece in Vox EU argues that a slew of measures under the broad rubric of "Trade Facilitation" does matter. The authors argue that cutting transaction costs, better infrastructure, logistics has a positive impact on a country's exports and imports. Thus an environment that is conducive for trade would boost a country's participation in the world economy.
"Trade facilitation may have little of the glamour of headline-hitting trade talks, but recent research suggests that it packs a powerful economic punch. Moreover, it may be the best way and perhaps only way forward for the world trade system in today’s difficult political climate."
What stops country's from entering into a multilateral Trade Facilitation Agreement? It is obvious that the developed world is far ahead in providing infrastructure and logistics to enhance exports and imports. Procedures, infrastructure and processes in countries hitherto not part of the globalized network would require considerable churning. A country is disadvantaged if its customs procedures are archaic and time consuming. One would also have to deal with the systemic challenges of addressing inefficiencies.

The Global Trade Enabling Report 2012 of the World Economic Forum captures the essence of the issues that trade facilitation involves. It is a detailed report on what challenges a country faces in enhancing its trade competitiveness and what its benefits are. SIngapore ranks first in the Enabling Trade Index (ETI):
"Singapore remains at the head of the ETI rankings by maintaining its outstanding performance across the board. As a small country, Singapore has a very open trade policy and exporters face only a few barriers in target markets. Singapore also is rewarded for the extreme simplicity of its tariff structure, ranking 4th on this indicator, just a few places behind first-placed Hong Kong. Singapore’s border administration is second to none in terms of efficiency and is highly transparent (3rd). As in previous years, the assessment of the quality and availability of its transport infrastructure is equally excellent. Singapore leads the way for the quality of its air transport, seaport, and road infrastructure. Even more importantly, its regulatory environment is the best in the ETI sample, with well-defined property rights,little corruption and undue influence, and a high level of openness to FDI. Taken together, all these factors enable Singapore to be one of the most successful trading nations worldwide."
The Report gives a valuable insight into what is required to enable better trade facilitation int he context of global supply chains. Would trade facilitation take centre stage in the context of the failed Doha Round? Can it provide the impetus for global rule making or is too mundane and non-headline catching? Trade facilitation deals with the nuts and bolts of international trade - the way bureaucracies work at the borders, what requirements exporters and importers need to complete to trade in a country, the logistics and transportation requirements. Unless countries streamline these procedures, the tall claims of international trade benefitting countries will not be able to be realized. The devil, as always, is in the details.

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