Trade Facilitation Offers Path for Expanding Commerce

By Phillip Kurata

With global trade negotiations at a standstill, countries can increase trade flows by taking unilateral steps to speed up the movement of goods across international borders.

Stephen Creskoff, a former Treasury Department official and veteran trade lawyer, says trade facilitation, or administrative and logistical measures designed to cut the cost and time of handling and processing exports and imports, often generates more trade than tariff cuts.

A weak administrative support for trade has an opposite effect.

"Countries with inadequate trade infrastructure, burdensome administrative processes or limited competition in trade logistics services are less capable of benefiting from the opportunities of expanding global trade," according to Daniel Ikenson of the Cato Institute in Washington. In his view, "man-made" barriers to trade have the same effects as "natural" barriers, such as distance, marshes, rivers and bad roads.

"Too many frictions related to document processing or cargo inspection at customs, antiquated port facilities, logistics bottlenecks, or limited reliability of freight or trade-financing services" deter companies from investing, buying or selling in local markets, Ikenson said in an article, "While Doha Sleeps: Securing Economic Growth through Trade Facilitation."

Creskoff, who has helped scores of countries improve their trade procedures, said that in the United States and other developed countries the key to trade facilitation progress is an active partnership between customs inspection officials and business. The key is creating a "less intrusive but more effective regulatory environment," he said in another article, "Trade Facilitation: An Often Overlooked Engine of Trade Expansion."

Creskoff said the central components of this partnership are comprehensive automation and the use of other new technologies such as scanners and "smart" containers, sophisticated risk management systems, self-declarations and the use of simplified procedures for qualified traders.

"The adoption of a fully computerized customs administration and new technologies, such as web-based secure communications, cargo-tracking, mobile X-ray technology, gamma ray cavity detectors, video monitoring, electronic customs seals, specialized aircraft and vessels, digital identification cards and others has the potential to substantially speed the movement of goods and facilitate trade," Creskoff writes.

Creskoff said that trade facilitation holds greater benefits for developing countries than developed countries. If, for example, Rwanda could cut its transit times for exports (60 days) and imports (95 days) to those of South Africa (31 days for exports and 34 days for imports), then Rwanda's exports could rise by 29 percent and its imports by 61 percent, he said. He cites similarly dramatic figures for Bangladesh and Egypt.

It is critically important for policymakers in developing countries to understand the economic growth potential offered by trade facilitation as they decide how to allocate foreign assistance funds, he said. Likewise, he said, rich countries would be well-advised to earmark foreign assistance grants to developing countries for improving trade facilitation if the political will exists in the target nations to make improvements.

Trade facilitation brings both economic and political benefits, according to Creskoff. It can boost economic growth, lessen dependence on foreign aid and create new business opportunities. And a working partnership between the government and the trading community should result in a less intrusive, more effective border agency regulation, he said. "In developing countries with authoritarian regimes, this could be a powerful precedent for the development of democratic institutions," he said.

Nevertheless, the trade expert has no illusions that trade facilitation is easy to transplant to countries where unofficial payments to customs and border officials are a common practice. When undertaking to reform customs agencies, he cautioned, it is important to keep in mind the Japanese maxim, "never break a rice bowl."

Customs and border officials who are stripped of their authority to charge "unofficial" fees would have to have their official salaries raised to compensate for the loss of income in order for the customs reforms to succeed, he said.

"Vested interests are strong, and they fight vigilantly to maintain the existing income flow from unofficial payments. This is a fundamental problem that must be addressed by governments, businesses, international donors and others seeking to improve trade facilitation," Creskoff said.

See also "Increased Global Trade Depends on Individual Governments ( http://www.america.gov/st/econ-english/2008/July/20080718125930cpataruk0.7165491.html?CP.rss=true )."

Source: U.S. Department of State

judythpiazza@newsblaze.com

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