Treasury Today Country Profiles in association with Citi

Who’s making trade easier and who’s not?

Two people playing tug of war ontop of a rocky platform

Reducing trade costs, with special emphasis on paperless trade, will aid growth and sustainable development for all countries. A United Nations global report reveals the leaders and the laggards in trade facilitation.

Make trade easier because it costs less and enables growth. This is the simple tenet explored by the most recent Global Survey on ‘Trade Facilitation and Paperless Trade Implementation’ published by United Nations.

This is the second such survey (the first was released in 2015) to be jointly conducted by the five United Nations Regional Commissions, for Africa, Asia and the Pacific, Europe, Latin America and Caribbean, and West Asia. Although each commission is set to publish its own detailed paper for download, the global view presents a clear view of progress, highlighting how different countries and regions tackle non-tariff based sources of trade costs, addressing unwieldly regulatory procedures and documentation requirements across 120 economies.

Making it easier

Trade facilitation is defined by the UN as “the simplification and harmonisation of import, export and transit procedures”. A key element is the concept of ‘paperless trade’ which it describes as “innovative, technology-driven measures aimed at enabling trade using electronic rather than paper-based data and documentation”.

With WTO Trade Facilitation Agreement (TFA) having come into force in February 2017, and a growing number of regional and sub-regional initiatives being established to encourage the electronic exchange of information along international supply chains, the world is waking up to a huge opportunity for growth and efficiency. Indeed, WTO estimates show that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to US$1trn per year, with the biggest gains in the poorest countries.

To date, the global average implementation rate of both the FTA and paperless trade measures is about 60%, according to the UN survey. There is clearly room for improvement.

The paper chase continues

The global average implementation rate of paperless trade measures is around 50%. Measures such as electronic customs systems, the full availability of internet connection to customs and other trade control agencies, and the electronic submission of customs declarations have been either fully or partially implemented in most countries surveyed. However, the report advises that implementation of more advanced paperless trade measures remains low.

Whilst nearly 60% of the economies studied have engaged to some extent in creating an electronic single window for processing trade documents, very few have fully operational systems in place.

The global average implementation level of cross-border paperless trade is just 33%. Although the average implementation level of legal and regulatory processes for electronic transactions exceeds 60%, steps to enable the cross-border electronic exchange and recognition of regulatory documents – such as certificates of origin and sanitary and phytosanitary certificates – have been adopted in less than 30% of the represented economies.

More work, more help

The report concludes that across all surveyed countries there is “strong momentum” towards the implementation of trade facilitation and paperless trade measures.

Countries, it notes, “should continue to apply modern information and communication technologies and develop paperless trade to simplify trade procedures and enable electronic exchange of data and documents, not only between stakeholders domestically, but with all the actors along the international supply chain”.

Help is at hand. Policy recommendations and technical standards have been developed by United Nations Economic Commission for Europe (UNECE) through the UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT). In Asia and the Pacific, for example, the 2016 Framework Agreement on Facilitation of Cross-Border Paperless Trade provides the ground rules for member states to cooperate and make progress in this area.

Key trade facilitation findings summarised

  • The global average implementation rate of common trade facilitation measures is 59.6%.

  • Developed economies have the highest implementation rate (78.5%), while Pacific Islands have the lowest (28.2%).

  • Among the developing regions, Latin America, the Caribbean, and South-East and East Asia achieve high implementation rates at 67.8% and 62.7% respectively.

  • Sub-Saharan Africa and South and East Europe, Caucasus and Central Asia achieve implementation rates of 51.8% and 50.7% respectively.

  • Benin (79.6%) is the top performer in Sub-Saharan Africa, while India (72.0%) leads the way in South Asia.

  • Macedonia (81.7%) leads the South and East Europe, Caucasus and Central Asia region.

  • The Netherlands (93.6%) is the best overall performer.

  • The UN-deemed developing regions of Singapore, the Republic of Korea, China, Malaysia and Thailand are the top performers in South-East and East Asia, all with implementation rates exceeding 80%.

  • Qatar and United Arab Emirates lead the Middle East and North Africa region, both with implementation rates exceeding 90%.

  • Mexico, Colombia, Brazil, Chile and the Dominican Republic are the top performers in Latin America and the Caribbean, all with implementation rates exceeding 80%.