Trends in International Trade: Key Issues for the World Bank and Customs

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Trends in International Trade Key Issues for the
World Bank and Customs

• Paul Brenton
• International Trade Department
• World Bank

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OUTLINE

• What is the World Bank ?
• What do we do on trade? Research, advocacy,
  advice, lending.
• Why are we interested in Customs and trade
  facilitation ?
• Key trends in trade that will shape our work and
  the work of Customs

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What is the World Bank?

• Global co-operative owned by its 184 shareholders
  or member countries Run by a Board of Governors
• The Bank is a UN Specialized Agency
• Development agency that provides policy advice,
  TA, knowledge sharing and development finance
• 11254 staff in 111 countries
• In FY 04 - IDA - 9 b 158 projects - 62
  countries
• In FY 04 - IBRD - 11 b 87 projects 33
  countries

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Trade can be a powerful engine of growth and
poverty reduction

• Levers for Intervention
• Before the border (Improving overseas market
  access, reforming domestic trade policy)
• At the border (Trade Facilitation Regulatory
  and procedural harmonization, simplification and
  institutional reform)
• Behind the border (Improving the investment
  climate, improving trade and transport
  infrastructure, dealing with supply side
  constraints)

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WHAT IS THE BANK DOING ON TRADE?

• Research, analysis and advocacy
• Elevating Trade to a prominent role in Country
  Policy Dialogue
• Established Trade Department including Trade
  Logistics Group
• Bringing together Trade Policy, Infrastructure
  and Customs/Border Management teams
• Stepping up traderelated operations
• Aid for trade?

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Why is the World Bank interested in Customs?

• Customs plays a critical role in trade
  facilitation. The costs of crossing borders now
  seen as a more significant barrier than tariff
  rates.
• Customs performs other important functions such
  as revenue collection, community protection and,
  increasingly, national security
• Customs can act as an effective integrator to
  ensure all trade and border related agencies work
  together to simplify and harmonize systems and
  procedures
• The Bank believes productive investment in
  Customs modernization delivers sound development
  results

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More efficient customs are associated with more
trade
Ratio of total trade to GDP, 90 countries
Source WBES and Global Trends as cited in
Subramanian, et al 2003
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What is the Bank doing on Customs?

• Stressing importance of Customs in policy
  dialogue
• Established the Trade Logistics Group
• Building a broader constituency for reform
• Global Facilitation Partnership for T T,
  Diagnostic Trade Integration Studies, Trade and
  Transport Facilitation Audits, Trade Facilitation
  Seminars
• Coordination of donors international
  organizations
• Customs Modernization Handbook
• Stepping up operations

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Bank Operations - Some current examples

• Russian Customs Modernization Project ( 140 m)
• Vietnam Customs Modernization Project ( 75 m)
• Tanzania Tax Administration Project ( 70 m - WB,
  UNCTAD, DANIDA, DFID, EU, FINNIDA, SIDA IMF)
• Cambodia Trade Facilitation and Competitiveness
  project ( 10 m - WB, EU AUSAID)
• EAC Trade Facilitation Project (30 m)

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Despite improvements in trade policies, many
Countries Have Been Left Behind

• The experience of individual countries varies
  greatly
• 43 countries had no expansion of exports between
  1980 and 2000
• Increase in market share mainly associated with
  todays Middle Income Countries
• Much growth in South South trade

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Key issues in Bank research and analysis on trade

• Global trade agenda
• Regionalism
• Asia
• Standards
• Speed with security

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Global integration

• Technological change and splitting up of
  production chains will continue to drive greater
  trade and capital flows. Labour?
• Global companies seeking out lowest cost
  locations
• More countries are seeking to integrate into
  global markets
• The global market enacts a high price on those
  not using competitively supplied inputs

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Success in Doha Round will still leave much to
be done at global level
Possible gains in real income in 2015 as percent
of full multilateral liberalization for LMICs
(excluding services and trade facilitation)
Full
Tiered cuts w/ SDT
w/ 2 exclusions
Low Middle Income
Tiered SDT 70 in HICs and 40 in LMICs in ag,
plus NAMA cuts of 50 in HICs, 33 in LMICs and
0 in LDCs
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Regional Trade Agreements are proliferating
Annual number
Annual number
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Regional Trade Agreements are proliferating
Annual number
Total in force
Cumulative in force
New agreements annually
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South-South RTAs predominate in number, but not
in trade covered
Percent of World Trade Covered
Number of RTAs
South-South
South-South
US
US
European Union
European Union
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RTAs can help address trade facilitation issues

• RTAs can offer a mechanism to deal with
  cross-border issues
• Customs simplification, cooperation,
  harmonisation.
• Transport cooperation, harmonisation of
  regulations, insurance.
• But, many RTAs have yet to deliver better trade
  facilitation

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Proliferation of PTAs is leading to a complex
global trading system
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Overlapping African agreements
Nile River Basin
COMESA
IGAD
ECCAS
AMU
CEMAC
Somalia
Sao Tomé Principe
Algeria Libya Morocco Mauritania Tunisia
Egypt
Cameroon Central African Rep. Gabon Equat.
Guinea Rep.Congo
ECOWAS
Djibouti Ethiopia Eritrea Sudan
Burundi Rwanda
Ghana Nigeria
Conseil de LEntente
Cape Verde Gambia
Chad
DR Congo
Kenya Uganda
Benin Niger Togo
Burkina Faso Cote dIvoire
Angola
Guinea-Bissau Mali
Senegal
EAC
Liberia Sierra Leaone
Guinea
Tanzania
Mauritius Syechelles
Malawi Zambia Zimbabwe
SACU
Comoros Madagascar
WAEMU
Mano River Union
South Africa Botswana Lesotho
CLISS
Namibia Swaziland
Reunion
AMU Arab Maghreb Union CBI
Cross Border Initiative CEMAC Economic
Monetary Community of Central Africa CILSS
Permanent Interstate Committee on Drought
Control in the Sahel COMESA Common Market for
Eastern and Southern Africa EAC East
African Cooperation ECOWAS Economic Community
of Western African Studies IGAD
Inter-Governmental Authority for Government IOC
Indian Ocean Commission SACU
Southern African Customs Union SADC
Southern African Development Community WAEMU
West African Economic Monetary Union
CBI
Mozambique
SADC
IOC
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Different agreements with different rules of
origin add complexity

• Proliferating trade agreements with differing ROO
  further complicate customs procedures
• clearance of preferential imports requires more
  manpower
• overlapping rules of origin cause particular
  difficulties for customs

• Need Clear and consistent ROO with minimal costs
• to firms in adhering to them and
• to customs in implementing them
• How about satisfying either a 10 value added
  requirement OR change of tariff classification (6
  digit HS)

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Examples of Complex and Restrictive ROO
EU imports of Fish
To receive preferences under the GSP

• The vessel must be registered in the beneficiary
  country or in the EU

• The vessel must sail under the flag of the
  beneficiary or of a member state of the EU

• The vessel must be at least 50 per cent owned by
  nationals of the beneficiary country or the EU

• The master and the officers must be nationals of
  the beneficiary country or an EU member
• At least 75 per cent of the crew must be
  nationals of the beneficiary country or the EU.

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The Rise of Asia

• East Asias share of worlds (non-oil) imports has
  risen from 2.7 in 1980 to 10.6 in 2004
• East Asia was the key source of export growth for
  Africa in 1990s
• Opportunities and challenges
• Tremendous mass of fast growing demand (emerging
  tri-polar world) key to improved market access
  is global negotiation
• Increasing competition in export and domestic
  markets Need to distinguish unfair from
  effective competition. (Perceived) Lack of border
  control can undermine efforts towards trade
  liberalisation.

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The Rising Importance of Non-Traditional
Exports.
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brings greater demands in terms of standards.

• Competitiveness depends on capacity to satisfy
  both mandatory (SPS/TBT) and private standards in
  export markets
• Standards in developed countries are shaping
  expectations of consumers in developing countries

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and increased need for timeliness to be
competitive.

• Increasing importance of air transport (30 of US
  imports now come by air)
• For many products, globalisation means that to be
  competitive exporters require access to imported
  inputs at world prices
• Increasing impetus to hold lower inventories
• Security secure trade is now as important as
  free trade, and the two need not be mutually
  exclusive
• Particular problems for land-locked countries

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Still much to be done to improve trade
facilitation in developing countries
Average number of days to clear customs for sea
cargo
Source International Exhibition Logistics
Associates, based on a sample of countries in
each region as cited in World Bank Global
Economic Prospects 2004 country data from World
Bank country surveys
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Conclusions

• Increasing emphasis on customs as a border
  management institution to facilitate timely and
  secure trade
• Bank a key source of research and operational
  experience on trade issues
• Trade facilitation essential element of Banks
  agenda on trade and poverty reduction