Trade facilitation looks at how procedures and controls governing the movement of goods across national borders can be improved to reduce associated cost burdens and maximise efficiency while safeguarding legitimate regulatory objectives. Business costs may be a direct function of collecting information and submitting declarations or an indirect consequence of border checks in the form of delays and associated time penalties, forgone business opportunities and reduced

competitiveness Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, individ ...

. Understanding and use of the term “trade facilitation” varies in the literature and amongst practitioners. "Trade facilitation" is largely used by institutions which seek to improve the regulatory interface between government bodies and traders at national borders. The

WTO The World Trade Organization (WTO) is an intergovernmental organization headquartered in Geneva, Switzerland that regulates and facilitates international trade. Governments use the organization to establish, revise, and enforce the rules that g ...

, in an online training package, has defined trade facilitation as “the simplification and harmonisation of international trade procedures”, where trade procedures are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”. In defining the term, many trade facilitation proponents will also make reference to

trade finance Trade finance is a phrase used to describe different strategies that are employed to make international trade easier. It signifies financing for trade, and it concerns both domestic and international trade transactions. A trade transaction requir ...

and the procedures applicable for making payments (e.g. via a commercial banks). For example,

UN/CEFACT UN/CEFACT is the United Nations Centre for Trade Facilitation and Electronic Business. It was established as an intergovernmental body of the United Nations Economic Commission for Europe (UNECE) in 1996 and evolved from UNECE's long tradition of w ...

defines trade facilitation as "the simplification, standardization and harmonisation of procedures and associated information flows required to move goods from seller to buyer and to make payment". Occasionally, the term trade facilitation is extended to address a wider agenda in

economic development In economics, economic development (or economic and social development) is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and object ...

and trade to include: the improvement of

transport infrastructure Transport (in British English) or transportation (in American English) is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelines ...

, the removal of

government corruption Political corruption is the use of powers by government officials or their network contacts for illegitimate private gain. Forms of corruption vary but can include bribery, lobbying, extortion, cronyism, nepotism, parochialism, patronage, influen ...

, the modernization of customs administration, the removal of other non-tariff

trade barriers Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency. Most trade barriers work o ...

, as well as export

marketing Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce. Marketing is usually conducted by the seller, typically a retailer or ma ...

and promotion. The World Trade Report 2015 provides an overview of the various trade facilitation definitions from academia as well as various international organizations, contrasting them with the scope of the WTO Trade Facilitation Agreement (TFA) concluded in December 2013. The WTO TFA has become the new baseline for trade facilitation, with many countries striving to implement measures going beyond those included in this Agreement in order to maintain a competitive advantage in global markets. Notably, most countries have focused their trade facilitation efforts on establishing electronic single windows and other paperless trade systems to further reduce trade costs.

Driving factors of the trade facilitation agenda

The trade facilitation objectives were introduced in the international agenda basically because of four main factors. 1) The successful implementation of the

trade liberalization Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold economically liberal positions, while economic nationalist political parties generall ...

policy within the

frameworks caused the significant reduction of tariff and non-tariff barriers, that is common for developed countries (the average rate of customs duty from 4,5% to 6,5%, the share of duty free HS subheadings in customs tariffs from 29,2% to 53%). This reduced the revenue functions of customs and thus, the possibility of simplifying customs procedures with a moderate level of risk for national revenue opened up for a significant number of states. 2) The reduction of customs tariffs has caused the situation where the amount of import duties has become commensurate or even lower than trade transaction costs (TTC) with regards to compliance with customs and border formalities, since the latter are estimated on various data ranging from 1.5% to 15% of the transaction value. Respectively, trade transaction costs has started to be considered as the main trade barrier in the conditions of liberalized market access. 3) The industrial development in the modern global world based on the Global Value Chains (GVC) has transformed a cross-border movement of goods. Today, up to half of the total imports and exports of developed countries are “intermediate goods”, which are components of the corresponding GVCs. Accordingly, the cost of customs borders for business has increased significantly. 4) The expansion of production processes based on the principles of Just-In-Time (JIT) and of e-commerce shipments, which increased the requirements for the speed release of goods by customs.

Examples of regulatory activity in international trade

Fiscal: Collection of customs duties, excise duties and other indirect taxes; payment mechanisms Safety and security: Security and anti smuggling controls; dangerous goods; vehicle checks; immigration and visa formalities Environment and health: Phytosanitary, veterinary and hygiene controls; health and safety measures;

CITES CITES (shorter acronym for the Convention on International Trade in Endangered Species of Wild Fauna and Flora, also known as the Washington Convention) is a multilateral treaty to protect endangered plants and animals from the threats of inte ...

controls; ships’ waste Consumer protection: Product testing; labelling; conformity checks with marketing standards (e.g. fruit and vegetables) Trade policy: Administration of quota restrictions; export refunds

Topics and issues in trade facilitation

Trade facilitation has its intellectual roots in the fields of

logistics Logistics is the part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the Consumption (economics), point of consumption according to the ...

and

supply chain management In commerce, supply chain management (SCM) deals with a system of procurement (purchasing raw materials/components), operations management, logistics and marketing channels, through which raw materials can be developed into finished produc ...

. Trade facilitation looks at operational improvements at the interface between business and government and associated

transaction costs In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market. The idea that transactions form the basis of economic thinking was introduced by the institutional economist John R. Commons in 1 ...

. Trade facilitation has become a key feature in supply chain security and

customs Customs is an authority or Government agency, agency in a country responsible for collecting tariffs and for controlling International trade, the flow of goods, including animals, transports, personal effects, and hazardous items, into and out ...

modernisation programmes. Within the context of

it has also come to prominence in the

Doha Development Round The Doha Development Round or Doha Development Agenda (DDA) is the trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001 under then director-general Mike Moore. Its objective was to lower trade barriers ...

. However, it is an equally prominent feature in unilateral and bilateral initiatives that seek to improve the trade environment and enhance business competitiveness. Reference to trade facilitation is sometimes also made in the context of " better regulation". Some organisations promoting trade facilitation will emphasize the cutting of

red tape Red tape is a concept employed to denounce excessive or redundant regulation and adherence to formal rules for creating unnecessary constraints on action and decision-making. The occurrence of red tape is usually associated with governments but a ...

in international trade as their main objective. Propagated ideas and concepts to reforming trade and customs procedures generally resonate around the following themes: * Simple rules and procedures * Avoidance of duplication * Memoranda of Understanding (MoUs) * Alignment of procedures and adherence to international conventions * Trade consultation * Transparent and operable rules and procedures * Accommodation of business practices * Operational flexibility * Public-service standards and performance measures * Mechanisms for corrections and appeals * Fair and consistent enforcement * Proportionality of legislation and control to risk * Time-release measures * Paperless trade * Risk management and trader authorisations * Standardisation of documents and electronic data requirements * Automation * International electronic exchange of trade data * Single Window System

References

* Page, S (2010
What happens after Trade Agreements?
ODI Project Briefing 12,

Overseas Development Institute ODI Global (formerly Overseas Development Institute) is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the ...

* Grainger, A 2011
Trade Facilitation: A Conceptual Review
Journal of World Trade, 45 (1). pp. 39–62. ISSN * Grainger, A 2007
Customs and Trade Facilitation: from concepts to implementation
World Customs Journal, Volume 2, Number 1 * OECD. 2002.
Business Benefits of Trade Facilitation
* UN ESCAP / ADB (2013
Designing and Implementing Trade Facilitation in Asia and the Pacific
{{DEFAULTSORT:Trade Facilitation International trade Freight transport Borders