Trade Facilitation (TF) and itsEconomic Benefits

Serguei KouzmineUNECE GTS

8 December 2010

1

Ratio of world exports of goods and commercial

services to GDP, 1981-2009

(Index 2000=100)

Source: IMF for world GDP, WTO Secretariat for world trade in goodsand commercial services.

in 2009 the global economic crisis sparked a 12.2% contraction in the volume of global trade.

The largest such decline since World War II.

Recent trendsRecent trends

« International Trade is one of the most important

arenas in which we must combat the real effects of the

crisis. Trade itself is a stimulus. »Source: Simon Crean, Australian Minister of Trade

« Where the trade environment is more favorable,

businesses are better positioned to take advantage of

new opportunties, to grow and to great jobs when the

global economy picks up again. »Source: WB, World Business Report, 2010

Importance of trade facilitationImportance of trade facilitation

Where is trading easy—and where not?

Easiest RANK Most difficult RANK

Singapore 1 Niger 174

Hong Kong, China 2 Burkina Fasu 175

United Arab Emirates 3 Burundi 176

Estonia 4 Azerbaijan 177

Finland 5 Tajikistan . 178

Denmark 6 Iraq 179

Sweden 7 Congo Rep. 180

Korea, Rep. 8 Kazakhstan 181

Norway 9 Central African Rep. 182

Israel 10 Afghanistan 183

Source: Doing Business database. Doing Business Report 2011

….But in many economies cumbersome trade procedures, long delays and high trading costs continue to stifle trade potential.

Ranking indicators:

• Documents to export & import

• Time to export & import

• Cost to export & import

Arrival Notice

Letter of InstructionInvoice, PO

Importer’s Bank

Ocean Carrier

Customs House Broker

Line of CreditProforma Invoice

Shipping & funding detail

Cargo Status

Vessel Booking Request

CargoStatus

Shipping & Funding Detail

Exporter’s Bank

Importer Exporter

Vessel Booking Confirmation

Bill of Lading

Rated Bill of Lading

Dock Receipt

Freight Forwarder / NVOCC

Purchase Order

LCConfirmation

AES

Dock receipt

Pick-up & Delivery Order

Vessel Manifest

Dock receipt

Release/Approval

Demurrage guarantee & payment

Inland Carrier

Manifest

Pick-up & Delivery Order

Importer Notice

Converted VesselManifest

Customs (Export)Port

Customs ( Import )

Original B/L, Invoice, PO, Packing List

Inland Carrier

Marine Insurance Company

Fund Transfer

Confirmed Line of Credit

Release/HoldNotice

Purchase Exportation Importation

ImportTerminalOperator

Proforma Invoice

Export Declaration

Export Declaration

Bill of lading, Documentation

Import Docs

Export Terminal Operator

• 20 actors• > 200 data elements;

(60-70% re-keyed at

least once, 15% re-

typed up to 30 times)• Manual procedures;• Multiple data

systems;• > 30 documents or

messages.

Data exchange in International TradeData exchange in International Trade

Source: UNCTAD 2006

Too many documents…Too many documents…

Enquiry Order Despatch advice Collection order Payment order Documentary credit Forwarding instructions Forwarder's invoice Goods receipt Air waybill Road consignment note Rail consignment note Bill of lading

Freight invoice Cargo manifest Export licence Exchange control doc. Phytosanitary certificate Veterinary certificate Certificate of origin Consular invoice Dangerous goods declaration Import licence Customs delivery note TIR carnet

Source: UNCTAD 2006

Number of documents to export and importNumber of documents to export and import

Documents to Export (number) Documents to Import (number)

Region DB 2011 DB 2007 DB 2011 DB 2007

OECD high income 4.4 4.5 4.9 5.2

East Asia & Pacific 6.4 6.8 6.9 7.5

Latin America & Caribbean 6.6 6.6 7.1 7.3

Middle East & North Africa 6.4 7.5 7.5 8.6

Eastern Europe & Central Asia 6.4 7.1 7.6 8.5

Sub-Saharian Africa 7.7 8.3 8.7 9.3

South Asia 8.4 8.5 9.0 9.4

Global Average 2010 6.5 7.3

Source: World Bank Doing Business 2011Source: World Bank Doing Business 2011

Time to export and importTime to export and import

Time to Export (days) Time to Import (days)

Region DB 2011 DB 2007 DB 2011 DB 2007

OECD high income 11 11 11 12

East Asia & Pacific 23 24 24 26

Latin America & Caribbean 18 22 20 27

Middle East & North Africa 20 25 24 32

Eastern Europe & Central Asia 27 32 28 34

Sub-Saharian Africa 32 37 38 45

South Asia 32 35 33 38

Global Average 2010 23.1 25.8

Source: World Bank Doing Business 2011Source: World Bank Doing Business 2011

What do traders want ? What do traders want ?

Simple and smooth processing of formalities

Means to allow goods to proceed promptly to their final destination. No longer itineraries, no unpacking, no delays

A single control point for all public services

Standard forms, assembled into a ‘single bunch of documents’, compatible with trade documents and transport contracts

Predictable and transparent rules and procedures

Source: UNCTAD

CSDAT Aug 2010 10

TRADE FACILITATION

Process of eliminating all unnecessary elements and duplications in formalities, processes and procedures

Simplification Harmonisation

Alignment of national procedures, operations and documents with international conventions, standards and practices

Standardisation

Process of developing internationally agreed formats for practices and procedures, documents and information

Source: UNECE, UNCTAD

By reducing trade related transaction costs, delays at the

borders, number of documents required,improving custom

administration……., trade facilitation:

Fosters businesses’ competitiveness

Increases trade volumes and gains

Raises countries’ GDP

Boosts government tax revenues

The economic benefits of TF The economic benefits of TF

Trade related transaction costs are estimated to lie between 2 and 15% the value of imported goods (OECD 2001, 2003)

Each 1% reduction of such costs is worth up an economic prize of USD 43 billion worldwide (OECD 2003)

Some evidence…. Worldwide

Some evidence…. Worldwide

If APEC members, who perform below average, were able to improve their TF performance to half the APEC average, intra-APEC trade could increase by USD254billion and raise average APEC region GDP by 4,3 % (Wilson et al. 2004)

If APEC members would reduce border delays by 1 day, they would increase exports by 1% (Martinez-Zarzosa et Marquez-Ramos 2008)

Some evidence (con’t d)…In APEC

Over the past 5 years, economies that rank high

on the ease of trading across borders have:

1. Introduced or improved electronic data interchange systems

2. Introduced or improved risk-based inspections

3. Improved customs administration

4. Reduced number of trade documents

5. Improved procedures at ports

6. Introduced or improved single window

7. Implemented border cooperation agreements

Source: WB, World Business Report, 2010

Towards smart regulation

● In Singapore, the SW System (Trade Net) allows the business community to: submit 100 % of trade applications (9 mln per year) to all concerned government

authorities

with a processing time of 10 minutes

● In Korea, the SW System: Processes 80% of all import applications (3,000 per day)

It is s used by 17 participating organizations and about 16,068 businesses from the trade

community (as of December 2009).

● In both countries Firms’ savings in labor, printing, paper delivery, storage, inventory

costs, etc. amount to approx US$ 1 billion per year

.

Source: UN/CEFACT Single Window Repository 2010

Opening a single window (SW) in Singapore & Korea

Россия в рейтинге «doing business»Россия в рейтинге «doing business»

Беларусь Казахстан Россия

Простота ведения бизнеса 58 63 120

Открытие бизнеса 7 82 106

Разрешение на строительство 44 143 182

Наём работников 32 38 109

Регистрация собственности 10 31 45

Получение кредита 113 43 87

Защита инвесторов 109 57 93

Уплата налогов 183 52 103

Трансграничная торговля 129 182 162

Исполнение договоров 12 34 19

Закрытие бизнеса 74 54 92

Как видят Россию?Как видят Россию?

« Индекс развития ИКТ » - Россия - 48 место

(Швеция-1; Германия-13; Франция-18:

Беларусь-55; Казахстан-69; ..)«  Индекс логистики » -Россия- 94 место

(Германия-1; Швеция-3; Франция-17;

Казахстан-62; Украина-102; ..)« Делать бизнес» - Россия - 120 место

(Сингапур – 1; США – 4; Германия – 25; Франция – 31; Беларусь- 58; Казахстан –63,..)

In summaryIn summary

Trade facilitation: Gives businesses a competitive edge

Allows greater integration in the global economy

Enhances government revenues

Contacts:Sergei KouzmineUNECE Global Trade Solution Sectionserguei.kouzmine@unece.orgwww.unece.org/trade