Opinion

The Great Debate

Don’t miss the boat on trade facilitation

By Stephen Green and Harold McGraw III
December 3, 2013

Trade ministers open their meeting in Bali Tuesday with the aim of creating a new multilateral trade reform package worth more than $100 billion to the global economy. The deal — focusing on measures to cut red tape at borders — would be a welcome shot in the arm for both global trade and for the World Trade Organization itself.

This may come as a surprise to some. Indeed, you could be forgiven for thinking that the Doha Round of multilateral trade negotiations had quietly died after a 10-year struggle. But in fact, work has continued in the World Trade Organization — and in capitals around the world — to capture some of the gains from what was once billed as the most ambitious trade round ever. The first multilateral trade agreement in almost 20 years now stands tantalizingly within reach.

The package on the table in Bali includes important provisions on agriculture and development, which would give greater transparency and additional safeguards for international trade. Top billing should go to “trade facilitation” reforms that would streamline border and customs procedures the world over.

That might sound strange. After all, customs regulation is hardly a topic to get pulses racing. But the importance of this agenda is apparent when you realise that around 7 percent of the value of global trade is eaten up by unnecessary bureaucracy at borders.

Consider the time it takes to get goods through customs. Clearance times of two weeks are regrettably par for the course in many parts of the world. It’s not uncommon to hear from businesses struggling with the consequences of having goods stuck in customs for many months.

The flip side is that where customs procedures are improved, businesses and consumers see clear benefits. And in quick order too. In Japan, measures introduced through the 1990s cut average lead times for cargo in half, leading to huge savings for businesses and real increases in consumer welfare.

Looking across the economy, the largest beneficiaries of trade facilitation reforms tend to be small- and medium-sized enterprises, which are too often deterred from trading internationally due to complex customs requirements. Research now suggests that a robust WTO deal could trigger a 60 percent to 80 percent increase in cross-border small- and medium-sized enterprise sales in some countries.

Put in these terms, the business case for this trade deal is compelling. It’s a shame that this has been stuck waiting for the rest of the Doha Round to catch up. But the time is now right for a fresh approach: a trade facilitation agreement should act as a bridge towards a progressive completion of the rest of the Doha Round in future years.

In addition to providing a major stimulus to the global economy, a deal would also reinforce the WTO’s central role in shaping the rules that govern world trade. The challenges now facing global trade are formidable. Showing that the WTO can help by tackling them one by one — rather than in a mammoth undertaking — would be an important step forward and a model to build on.

That is why we both strongly support an ambitious outcome from this WTO ministerial meeting. In the past three weeks, officials and ministers from around the world have been locked in round-the-clock negotiations to hammer out a final deal. Given the string of missed deadlines and periodic crises that have characterised the Doha Round, a little scepticism would not be surprising. Yet, there are grounds to think that things will go better this time.

For one, few think that excessive customs regulation is a good thing. While there are disagreements on details, speeding up goods across borders is a shared goal among all WTO members. The bones of this deal have been clear for some time, awaiting only the finishing touches.

Under the WTO’s new director-general, Roberto Azevedo, huge progress has been made toward doing just that. The Bali deal is a crucial part of his vision for freer and fairer global trade that supports economic growth and employment. So, it is important to us all — businesses, governments, consumers — that this deal gets done.

That said, success is far from assured. One consequence of the failure to complete the Doha Round has been a progressive disengagement by those who stand to gain the most.

But the prize now on the table is significant. Support and engagement in the coming days from both governments and businesses will help avoid a repeat of past failures. This is vital not only for companies big and small — but also for the jobs and growth that rely on international trade.

It’s time to get this deal done.

 

PHOTO: A South Korean soldier stands guard in front of a gateway leading to the KIC (Kaesong industrial complex) at South Korea’s CIQ (Customs, Immigration and Quarantine), just south of the demilitarised zone separating the two Koreas, in Paju, April 10, 2013. REUTERS/Kim Hong-Ji

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