ADMINISTRATIVE TRADE BARRIERS AND TRADE FACILITATION

Predrag Bjelić, Ph.DIvana Popović Petrović, M.Sc.

ADMINISTRATIVE BARRIERS AS OBSTACLES TO INTERNATIONAL TRADE

Golden age – period after 1945

GATT –eight rounds of multilateral trade negotiations – trade regime liberalisation

Non-tariff barriers:

-traditional-technical

-administrative

Graph1: Evolution of Non-tariff Barriers by Broad Category, in %Graph1: Evolution of Non-tariff Barriers by Broad Category, in %

Source: UNCTAD ”Globalisation and Development: Fact and Figures” Geneva, 2009, p.53

-Administrative barriers to trade are a special category of non-tariff barriers

- Source: administrative regulations and procedures with a restrictive effect on international trade

-AB are obstacles to international trade derived from differences in national legal and administrative regulations

and administrative procedures that exporter had to carry out in order to put its products on a foreign market

All administrative barriers, by their origin, can be divided into two main groups:

Legal barriers to trade;

Procedural barriers to trade.

We have to distinguish “naturally” occurring non-tariff barriers, which are caused from differences in national standards and inefficient customs authorities clearance of goods,

from politically introduced measures that are intended to obstruct import in country which introduce these measures.

The group of administrative barriers to trade is consisted of many different measures and procedures, some of them being:

Customs valuation;

Application of Sanitary and Phytosanitary measures;

Rules of origin;

Special customs formalities;

Preshipment inspection;

Procedures of Export licences.

Main indicators – The World Bank

Trading across borders

Number of documents needed to obtain to execute export or import in the economy;

Number of days need for a procedure of export or import in the economy;

Costs of exporting and importing measured in USD per container.

Table 1: Indicators of Foreign Trade Administrative Procedures in Southeast Europe, 2008.

Economy Rank

EXPORT IMPORT

Documents (numb

er)

Time(days)

Cost (USD per

container)

Documents (numb

er)

Time (days)

Cost (USD per

container)

Albania 77 7 21 770 9 22 775

Bosnia and Herzegovina 55 6 16 1,070 7 16 1,035

Bulgaria 102 5 23 1,626 7 21 1,776

Croatia 97 7 20 1,281 8 16 1,141

Macedonia 64 6 17 1,315 6 15 1,325

Moldova 135 6 32 1,775 7 35 1,895

Montenegro 125 9 18 1,710 7 19 1,910

Romania 40 5 12 1,275 6 13 1,175

Serbia 62 6 12 1,398 6 14 1,559

Source: World Bank, Doing Business 2009 Report, Trading Across Borders Indicators, April 2009.

Table 2: Trading across borders indicators for Serbia Indicators 2005 * 2006 2007 2008

Trading across borders rank - 51 58 62

Export

Documents to export number 9 6 6 6

Time to export days 32 11 12 12

Cost to export USD per container ... 1,240 1,240 1,398

Import

Documents to import number 15 8 6 6

Time to import days 44 12 14 14

Cost to import USD per container ... 1,440 1,440 1,559

(*) Data for 2005 are for Serbia and MontenegroSource: World Bank data from Doing Business Report for 2006, 2007, 2008 and 2009.

Removing administrative barriers

Individual national economies vs. multilateral and regional initiatives

TRADE FACILITATION – INITIATIVES FOR THE REMOVAL OF ADMINISTRATIVE TRADE BARRIERS

The World Trade Organization

as a Pillar of Multilateral Regulation of Trade Facilitation

The Trade Facilitation process is based on the three articles

in GATT from 1994.

Article 5 which deals with freedom of transit for goods,

Article 8 concerned with fees and formalities connected to importation and exportation

Article 10 which requires all trade regulations to be clearly published and fairly administered.

The Trade Facilitation–to strengthen GATT articles

TF topic of discussion in 1996 at the Singapore Ministerial Conference.

Doha Ministerial Declaration adopted on 14th November 2001,

the Council for Trade in Goods should review, clarify and improve relevant aspects of

Articles 5, 8 and 10 of the GATT 1994

and identify the Trade Facilitation needs and priorities of all members

in July 2004 - ”July Package“

TF was put on the negotiation agenda of the Doha round

On 12th October 2004 the Trade Negotiations Committee established the Negotiating Group on Trade Facilitation

The Agenda of the Negotiating Group consists of:

-Clarification and improvement of relevant aspects of Articles 5, 8 and 10 of the GATT 1994;

-Special and differential treatment for developing and LDC;-Identification of Trade Facilitation needs and priorities;

-Concerns related to cost implications of proposed measures;-Technical assistance and support for capacity-building and

-Working with and the work of other relevant international organizations

The initiative of the WCO

- More than 50 years of work – important technical progress in customs clearance and in

developing the process of administering and co-operation of custom services of its member countries.

International Convention on the Simplification and Harmonization of Customs Procedures

also called Kyoto Convention, adopted in 1973, revised in 1999.

Trade Capacity Building

The trade capacity - human, institutional and infrastructure capacity necessary for all subjects who participate effectively in international trade.

- more efficient ports, road networks, automated equipment for customs officials and significant investments in infrastructure

The sixth WTO Ministerial Conference, Hong Kong (13 -18 12 2005) help for the project Aid for Trade

-USA grants of USD 2.7 billion a year by 2010-EU EUR 2 billion per year by 2010

For trade related development assistance

Trade Transaction Costs (TTCs)

costs arising from supplying documents and information required for border procedures or procedural delays

Direct incurred costs - expenses relating to supplying information and documents to

the concerned authority and

indirect incurred costs - mostly results of procedural delays.

Table 3. Welfare effects from Trade Facilitation measures

Key findings

Francois et al.(2005)

Based on a CGE model exercise, the authors estimate that world annual income will increase by USD 72 billion (USD 151 billion) following a 1.5% (3.0%) reduction in TTCs for goods trade. In proportion to national income, most of these gains would benefit developing countries. All regions or major trading nations would benefit except China in the 1.5% reduction scenario. All countries/regions would benefit in the 3.0%, or „full liberalisation“

OECD Based on a CGE (GTAP – Global Trade Analysis Project) model exercise, the authors estimate that a 1% reduction in TTCs for goods trade will bring annual gains of about USD 40 billion on a world basis. Most of these gains will benefit developing countries in relative terms. There are no losers. Estimates as share of GDP reveals that Middle East and North Africa (0.27%), non-OECD Asia Pacific (0.25%), OECD Europe (0.19%) and Sub-Saharan Africa (0.18%) would be particularly well off.

Wilson et al.(2002)

Based on a CGE model execise for APEC economies, the authors estimate that a 5% reduction in TTCs for goods trade will raise APEC GDP by USD 154 billion, or 0.9%.

Commonwealth of Australia

(2002)

In terms of annual increases in real incomes measured in 1997 prices, gains from reforms of customs procedures are estimated to be USD 0.4 billion in the Philippines, USD 2.3 billion in Singapore and USD 1.2 billion in Thailand.

UNCTAD(2001)

A 1% reduction in the costs of maritime and air transport services in developing countries could increase global GDP by USD 7 billion (1997 value).

Source: Michael Engman, (2009), „The Economic Impact of Trade Facilitation“, in Overcoming Border Bottlenecks — The Costs and Benefits of Trade Facilitation , OECD, p.85.

TTCs -15% of the value of the traded goods

The arch is from 2% to 15%.

UNCTAD TF results – savings of 2-3% of the value of traded goods

Table 4: Estimated benefits of Trade Facilitation in different

studies Additional GDP growth

(billions UDS)Share of Trade Facilitation

benefits in overall liberalization

Dutch study 72 34%

OECD study 76 65%

APEC study 154 56%

Source: Anthony Kleitz (2003), “Costs and Benefits of Trade Facilitation”, in Sharing the Gains of Globalization in the New Security Environment—

The Challenges to Trade Facilitation, United Nations Economic Commission for Europe, New York and Geneva, p. 65.