Trade facilitation

What is trade facilitation?

 

Facilitating trade is about streamlining and simplifying international trade procedures in order to allow for easier flow of goods and trade at both national and international level.

OECD analyses the benefits and costs of trade facilitation efforts and also provides support to World Trade Organization (WTO) discussions in this area.

Did you know..?

  • Reducing global trade costs by 1% would increase world-wide income more than USD 40 billion, 65% of which would accrue to developing countries.
    (Source: Overcoming Border Bottlenecks: The Costs and Benefits of Trade Facilitation, OECD, 2009)

  • An average 5% reduction in the time spent at the border could help exporters in Sub-Saharan Africa achieve a 10% increase in formal intra-regional export volume.
    (Source: Overcoming Border Bottlenecks: The Costs and Benefits of Trade Facilitation, OECD, 2009)

  • 40% of manufacturing firms in developing countries consider the competition from informal trade and the disproportionate tax burden on them as one of the top three obstacles to doing business and a significant disincentive to invest in the formal economy.
    (Source: “Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa”, OECD Trade Policy Working Paper No. 86)

  • In some African countries revenue losses from inefficient border procedures are estimated to exceed 5% of GDP
    (Source: “Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa”, OECD Trade Policy Working Paper No. 86)

  • Lengthy or unreliable  export and import times not only reduce trade volumes but also reduce the probability that firms will enter export markets for time-sensitive products at all.
    (Source: “Logistics and Time as a Trade Barrier”, OECD Trade Policy Working Paper No. 35)

  • The emergence of global value chains and the significant import content in the export value of many products (in the electronics sector 65% in Thailand and 72% in the Philippines, in the clothing sector 43% in Sri Lanka and 80% in Botswana in 2001*) means that the efficiency of border procedures directly affects the productivity and export competitiveness of domestic firms. 
    (*Source: “Logistics and Time as a Trade Barrier”, OECD Trade Policy Working Paper No. 35)


Background - a new global trade environment

Steady increases in trade volumes and complexity have significantly changed the operating environment for the international trading community and for involved government agencies. This has laid bare the inefficiencies of outdated modes of operation and motivated an essential rethinking of border procedures both within national administrations and at the international level.

Prompted by concerns of economic operators over the impact of inefficient border procedures on global economic welfare, WTO Members undertook to review, clarify and improve existing GATT provisions and identify related needs and priorities of members and in July 2004 launched negotiations in the area of trade facilitation. OECD work is devised as a direct contribution to this undertaking.

OECD work on trade facilitation

OECD analysis underway includes reflections on core trade facilitation principles, such as transparency, predictability, non-discrimination and simplification, and on possible approaches for implementing facilitation measures at the national level, based on country best practices and experience. Particular approaches such as harmonisation, risk management or automation are systematically reviewed.

OECD research also seeks to evaluate the costs of inefficient trade procedures and the benefits of remedial trade facilitation action for businesses and for governments in developed and developing economies. Possible variations with respect to different types of products or companies, and appropriate methodologies for self-evaluation by concerned countries are also investigated.


Further reading

 

Overcoming Border Bottlenecks: The Costs and Benefits of Trade Facilitation

Inefficient, outdated and complex trade procedures and formalities prevent countries from drawing full benefits from the advantages of open global markets.

This book brings together six studies that examine how these border bottlenecks affect trade and investment flows, how they might be reduced, and whether the expense involved is worth it.


  • Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa (OECD Trade Policy Working Paper No. 86)
    This study examines the extent and nature of informal cross-border trade in selected Sub-Saharan African countries and identifies which trade facilitation measures have the potential to encourage traders to switch from informal to formal trade.


  • Logistics and Time as a Trade Barrier (OECD Trade Policy Working Paper No. 35)
    This paper analyses the relation between time for exports and imports, logistics services and international trade. Time is found not only to reduce trade volumes, but more importantly lengthy procedures for exports and imports reduce the probability that firms will enter export markets for time sensitive products at all.

 

 

 

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