Economic Development and Trade Facilitation

Definition

Trade Facilitation, in its broadest sense, can be defined as any measure, or set of measures, that aims to increase the cost-effectiveness of international trade transactions.

Overview

The above definition encompasses both strands of trade facilitation; the first generation reforms involving both tariff reduction and the removal of other physical and licensing restrictions on trade, associated with the movement towards membership of the World Trade Organisation. These reforms, which can be characterised as top-down, also highlighted the need for second generation reforms, which focused on improving the actual processes associated with the movement of the consignment, and which involved, inter alia, the harmonization of procedures, greater integration and the strengthening, in terms of skills and knowledge, of the different agencies involved in trade.

The links between both types of trade facilitation and economic development are strong and the impacts are paricularly pronounced on the development of Small and Medium Sized Enterprises, reflecting the direct link between these measures, which result in lower logistical costs, and lower costs, and hence prices, for both imports and export. The former leads to a better range of products, available at lower cost, whilst the latter can lead to increases in exports such as agricultural products, with a direct impact on poverty reduction. The following sections summarise recent work on measuring the benefits of trade facilitation at the two levels.

The Macro Benefits of Trade Facilitation

The potential economic benefits of trade facilitation are high, with one recent study (Wilson et al, 2004) investigating the relationship between trade facilitation in four important categories; port efficiency, customs environment, regulatory environment, and service sector infrastructure, and the impact on flows of traded manufactured goods, predicting an increase of US$377 billion globally, with the benefits falling disproportionately on exports.

Other authors either consider more specific categories of trade facilitation initiatives, or a more limited country set. Hertel, Walmsley and Itakura (2001) find that greater standards harmonization for e-business and automating customs procedures between Japan and Singapore increase overall trade flows between these countries as well as their trade flows with the rest of the world. Hummels (2001) finds that each day saved in shipping time, in part due to a faster customs clearance, is worth 0.5 percentage point reduction of ad-valorem tariff. Freund and Weinhold (2000) find that a 10 percent increase in the relative number of web hosts in one country would have increased trade flows by one percent in 1998 and 1999. Fink, Mattoo, and Neagu (2002) find that a 10 percent decrease in the bilateral price of phone calls is associated with an 8 percent increase in bilateral trade.

UNCTAD (2001) uses advanced macro-economic models (Computerized General Equilibrium) to consider trade facilitation in the broader context of creating an environment conducive to developing e-commerce. The objective of the CGE analysis is to consider the relationship between an exogenous shock of a given size on productivity growth, applied equally to all members of the group, on the GDP of regional groups of countries. The results show that a 1 percent reduction in the cost of maritime and air transport could increase Asian GDP some $3.3 billion. If trade facilitation is considered in a broader sense to include an improvement in wholesale and retail trade services, a 1 percent improvement in the productivity of that sector could increase GDP an additional $3.6 billion.

Global Economic Prospects (2004) clearly outlines the links between trade reform and poverty reduction. Because most poor people live in rural areas, cutting trade barriers in agriculture are among the most important to poverty reduction. A relatively simple program to cut tariff peaks in rich countries to 10 percent in agriculture and 5 percent in manufacturing, reciprocated with cuts to 15 percent and 10 percent respectively in transition and developing countries, coupled with other complementary measures, would produce gains for transition and developing countries of nearly US$300 billion by 2015. The wealthier countries would gain too – up to US$170 billion. This is projected to cut the number of people in poverty by 8 percent or 144 million individuals.

The Micro Benefits of Trade Facilitation

At a micro-economic level, trade facilitation has a direct impact on total logistical costs, the sum of time and money involved in moving traded goods. Lower transport costs can lead to higher wages, thereby having a direct impact on poverty reduction. The associated increasing and broadening of the exports of a country can reduce the vulnerability of the respective economy to exogenous shocks, increase the potential for knowledge spillovers in specific sectors and have a positive impact on Foreign Direct Investment (FDI).

A broad, well-designed, trade facilitation program can also impact positively on SME development, which have been found to be the engines of economic development in many transitional countries (see World Bank, 2002), growing faster, engendering more employment opportunities and making a substantive contribution to the objective of broad based economic growth.

Where to Start

Join the effort!

The GFP welcomes feedback/additions/tools from practitioners, who either applied the GFP methodology or are using their own instruments. The GFP is particularly interested in collecting and assembling all the methodologies, survey instruments and results developed and used by its Partners.

Please e-mail those to support@gfptt.org and suggest the topic(s) under which they could be included. Or post relevant documents under your partner profile and assign them to this topic.

Group register: 
Show on registration page
Group visibility: 
Public - accessible to all site users

Irish Minister of State assesses Port Training Programme in United Republic of Tanzania

29 Apr - Joe Costello, Minister of State at Ireland’s Department of Foreign Affairs and Trade,  has completed a visit to the United Republic of Tanzania at which he reviewed the impact of the UNCTAD Port Training Programme.​ Read more ...

 

Geographic coverage: 
Global

UNCTAD Liner Shipping Connectivity Index (LSCI)

Countries’ access to world markets depends largely on their transport connectivity, especially as regards regular shipping services for the import and export of manufactured goods. UNCTAD’s Liner Shipping Connectivity Index (LSCI) aims at capturing a country’s level of integration into global liner shipping networks.

How to join: 

Free viewing and download from http://stats.unctad.org/lsci

Periodicity: 
annual
Geographic coverage: 
Global

UNCTAD Review of Maritime Transport

The Review of Maritime Transport is an UNCTAD flagship publication, published annually since 1968.

Around 80 per cent of the volume of international trade in goods is carried by sea, and the percentage is even higher for most developing countries. The Review of Maritime Transport provides an analysis of structural and cyclical changes affecting seaborne trade, ports and shipping, as well as an extensive collection of statistical information. Every issue provides data and insights on:

How to join: 

Free download from http://unctad.org/rmt

Periodicity: 
annual
Geographic coverage: 
Global

UNCTAD Regional Forums on Trade Facilitation Implementation Plans in Latin and Central America - (Dominican Rep., April 2012)

BACKGROUND

Participants: 

Representatives of capitals familiarized with the implementation process of trade facilitation measures are invited to attend both forums.

Event date: 
04/12/2012 - 00:00 to 04/13/2012 - 00:00
Geographic coverage: 
Not Global

UNCTAD Regional Forums on Trade Facilitation Implementation Plans in Latin and Central America - (Chile, March 2012)

BACKGROUND  

Participants: 

Representatives of capitals familiarized with the implementation process of trade facilitation measures are invited to attend both forums.

Event date: 
03/28/2012 - 00:00 to 03/29/2012 - 00:00
Geographic coverage: 
Not Global

Review of Maritime Transport 2012

More than 80 per cent of international trade in goods is carried by sea, and an even higher percentage of developing-country trade is carried in ships.

The Review of Maritime Transport, an annual publication prepared by the Division on Technology and Logistics of the UNCTAD secretariat, is an important source of information on this vital sector. It closely monitors developments affecting world seaborne trade, freight rates, ports, surface transport and logistics services, as well as trends in ship ownership and control and fleet age, tonnage supply and productivity.

Geographic coverage: 
Global

Trade and Transport Facilitation Assessment - A Practical Toolkit For Country Implementation

Release date: 
07/08/2010
Published date: 
07/08/2010

This new edition of the toolkit provides an opportunity not only to reflect the changes in the trade environment and the need for additional features in the toolkit, but also to benefit from the experiences of the assessments already undertaken based on the original edition. In 2001, the Bank issued a first Trade and Transport Facilitation Audit (TTFA) toolkit based on an original concept developed by John Raven. This initial concept was extensively revised to give the new toolkit an increased operational focus.

Type: 
Reports/Studies
Relevance Degree: 
Must Read
Geographic coverage: 
Global

Export performance and trade facilitation reform : hard and soft infrastructure

Release date: 
06/22/2010
Published date: 
05/04/2010

The authors estimate the impact of aggregate indicators of "soft" and "hard" infrastructure on the export performance of developing countries. They build four new indicators for 101 countries over the period 2004-07. Estimates show that trade facilitation reforms do improve the export performance of developing countries. This is particularly true with investment in physical infrastructure and regulatory reform to improve the business environment.

Type: 
Working Papers
Relevance Degree: 
Good Read
Geographic coverage: 
Global

Behind the Border Trade Facilitation in Asia-Pacific: Cost of Trade, Credit Information, Contract Enforcement and Regulatory Coherence

Release date: 
06/20/2010
Published date: 
05/20/2009

The performance of Asia-Pacific countries in terms of both trade and business facilitation varies greatly. However, with a few exceptions, developing countries in the region have much room for improvement. This paper evaluates the potential contribution of both trade and business facilitation measures to trade and export competitiveness, as well as the potential gains from adopting a more integrated and coherent approach to trade and business (investment) facilitation.

Type: 
Reports/Studies
Relevance Degree: 
Good Read
Geographic coverage: 
Not Global

Trade facilitation opportunities for landlocked and transit developing countries

Release date: 
06/20/2010
Published date: 
07/20/2008

1. UNCTAD organized in Geneva on 8 and 9 July 2008 the “Global preparatory meeting on the midterm review of the implementation of the Almaty Programme of Action: Trade facilitation opportunities for landlocked and transit developing countries”. The meeting was a contribution by UNCTAD to the high-level midterm review of the Almaty Programme of Action.

Type: 
Explanatory notes
Relevance Degree: 
Useful Background
Geographic coverage: 
Global

Distance and regionalization of trade for low-income countries

Release date: 
06/20/2010
Published date: 
02/18/2010

The "distance effect" measuring the elasticity of trade flows to distance has been rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the "distance puzzle". This paper reviews the evidence and explanations. Using an extensive data set of 124 countries over the period 1970-2005, the authors confirm the existence of this puzzle and identify that it only applies to poor countries (the bottom third in per capita income terms in the sample -- i.e., the low-income countries according to the World Bank classification, 2006).

Type: 
Working Papers
Relevance Degree: 
Good Read
Geographic coverage: 
Global

Formulas and flexibility in trade negotiations : sensitive agricultural products in the WTO's Doha agenda

Release date: 
06/20/2010
Published date: 
04/02/2010

Many trade negotiations involve large cuts in high tariffs, with flexibilities allowing much smaller cuts for an agreed number of politically-sensitive products. The effects of these flexibilities on market access opportunities are difficult to predict, creating particular problems for developing countries in assessing whether to support a proposed agreement.

Type: 
Working Papers
Relevance Degree: 
Good Read
Geographic coverage: 
Global

Conclude Doha : it matters !

Release date: 
06/19/2010
Published date: 
11/18/2009

The Doha Round must be concluded not because it will produce dramatic liberalization but because it will create greater security of market access. Its conclusion would strengthen, symbolically and substantively, the WTO's valuable role in restraining protectionism in the current downturn. What is on the table would constrain the scope for tariff protection in all goods, ban agricultural export subsidies in the industrial countries and sharply reduce the scope for distorting domestic support - by 70 per cent in the EU and 60 per cent in the US.

Type: 
Working Papers
Relevance Degree: 
Good Read
Geographic coverage: 
Global

Time as a determinant of comparative advantage

Release date: 
11/16/2009
Published date: 
06/19/2010

It is assumed that added time to export adds cost to and lowers the volume of trade. Time delays may also affect the composition of trade and can disproportionately reduce trade in time-sensitive goods. This paper investigates the validity of these propositions using the World Bank Doing Business database and Enterprise Surveys for 64 developing countries. The authors find that in countries where there is longer time needed to export firms in time-sensitive industries are less likely to become exporters. Moreover, firms that do export have lower export intensities.

Type: 
Working Papers
Relevance Degree: 
Useful Background
Geographic coverage: 
Global

Global economic crisis and trade: the role of trade facilitation

Release date: 
05/19/2010
Published date: 
06/19/2010

The onset of the global economic crisis has led to a slump in global demand. However, the extent to which major trading powers have reduced their imports has differed by trading partner. Like financial contagion, could it be the case that countries that are better integrated in the global trading system via efficient trade facilitation environment suffered the most because of their interconnectedness? Using recent data from the US census bureau, this study finds that the efficiency of the trade facilitation environment actually helped to mitigate the effects of the global slump in demand.

Relevance Degree: 
Good Read
Geographic coverage: 
Global

Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure

Release date: 
04/19/2010
Published date: 
06/19/2010

The authors estimate the impact of aggregate indicators of “soft” and “hard” infrastructure on the export performance of developing countries. They build four new indicators for 101 countries over the period 2004-07. Estimates show that trade facilitation reforms do improve the export performance of developing countries. This is particularly true with investment in physical infrastructure and regulatory reform to improve the business environment.

Type: 
Working Papers
Relevance Degree: 
Good Read
Geographic coverage: 
Global

Trade facilitation and the measurement of trade costs

Release date: 
06/19/2010
Published date: 
06/19/2010

As tariffs and non-tariff barriers (NTBs) fall attention has shifted to trade facilitation, both in the WTO and in regional arrangements such as ASEAN or APEC. Economists have, however, been slow to develop convincing measures of trade costs. Commonly cited estimates of the border effect or of trade costs are huge, but flawed. The gap between CIF and FOB values of trade is the best aggregate measure, but suffers from lack of consistent data.

Type: 
Reports/Studies
Relevance Degree: 
Good Read
Geographic coverage: 
Not Global

Trade costs and facilitation in APEC and ASEAN: Delivering the goods?

Release date: 
01/18/2010
Published date: 
06/18/2010

This paper uses a new methodology to provide some first evidence on the overall level of trade costs in APEC and ASEAN. On average, APEC member economies have met the Shanghai target of a 5% reduction in trade costs over five years, but only just. Performance of individual member economies varies substantially, and in some cases is far below the Shanghai target. ASEAN member countries have also experienced some declines in trade costs, but generally to a lesser extent than in APEC. In both groups, tariff reductions have played an important role in reducing overall trade costs.

Type: 
Working Papers
Relevance Degree: 
Useful Background
Geographic coverage: 
Not Global

Recommendation N°. 4 - National Trade Facilitation Bodies

Release date: 
01/01/2001
Published date: 
01/01/2001

List of Documents under Recommendation No. 4:

ECE/TRADE/242 (2001) Recommendation N°. 4 - Second Edition
ECE/TRADE/256 (2000) Guidelines to Recommendation N°. 4
TRADE/WP.4/INF.33 (1974) Recommendation N°. 4

Relevance Degree: 
International legal instrument
Geographic coverage: 
Not Global

Pages

Subscribe to Group content

Top Contributors

Bismark's picture
Bismark Sitorus
User Since: June 2011
Points: 380
Arantzazu Sanchez Belastegui's picture
Arantzazu Sanchez Belastegui
User Since: February 2013
Points: 231
Christina Busch's picture
Christina Busch
User Since: August 2013
Points: 110
Maame's picture
Maame Agyeben
User Since: October 2014
Points: 40

Recent Comments

Maria Ceccarelli's picture
Maria Ceccarelli
Posted in News - 3 years 9 months ago
29th UN/CEFACT Forum: 27 - 31 March 2017, Palais des Nations, Geneva, Switzerland. Further information about the programme, schedule and contact details can be... Full Post
smubarak's picture
smubarak
Posted in Document - 5 years 10 months ago
Can you supply a link to the article. the "Click here" link is circular. Full Post
gabwte's picture
gabwte
Posted in Recommendation - 6 years 1 month ago
Check out Import Transactions & Customs Compliance to enable the user to understand the U.S. importing process. http://icont.ac/2zO9x Full Post