Better trade facilitation reduces costs, boosts exports

MANILA, Philippines - The Philippines and other East Asian countries should implement trade facilitation improvements to reduce costs along the entire supply chain, boosting exports and contributing to the expansion of the world economy.

The World Bank’s latest East Asia and Pacific Economic Update report said the World Trade Organization’s new Agreement of Trade Facilitation (ATF) represents a major step toward reducing trade costs.

“The ATF offers an opportunity to implement much-needed cost-cutting measures across a wide range of areas. If successfully adopted, these measures will allow developing East Asia to more fully participate in regional and global value chains and substantially improve the economic well-being of its peoples,” it said.

Within ATF, the trade facilitation measures with most impact on developing East Asia have been identified, including increased information availability on trading rules and regulations; improved fee structures, appeal procedures and consultations; and improved governance and impartiality of border authorities, covering transparent structures and functions of border authorities, codes of conduct and internal audits and sanctions in the customs administration.

But while some of these measures involve stroke-of-pen reforms that would eliminate trade impediments within a short time, many non-tariff measures (NTM) require deeper reforms, it added.

Nontariff barriers accounted for as much as 90 percent of all direct and indirect trade costs other than transportation. These barriers include other NTMs, indirect costs of trade procedures, maritime connectivity services, business regulatory environment and availability and use of information communications technology (ICT) services.

The report recommended that policy be focused on the trade regulatory environment.

It also underscored the need for East Asia to address other issues to further lower trade costs, including topics such as rules of origin in regional trade agreements, intermodal transport and cross-border logistics services.

“In logistics, as well as in border and behind-the-border reforms, the wide variation in country performance suggests a number of country-specific areas for improvement. For instance, shipping performance could be substantially strengthened in Cambodia, Indonesia, the Philippines, and Thailand,” it noted.

The report estimated exports rising by 10 percent, real gross domestic product (GDP) by 2.7 percent and employment by 1.2 percent if East Asia were to implement fairly conservative trade facilitation measures.

“Greater trade facilitation, with each country improving its trading environment a quarter of the way toward the levels observed in the region’s top performer, could conservatively expand the world economy by 4.5 percent, or $1trillion,” the report said.