“Trade facilitation” offers intelligent reforms to increase trade

Catalyst for economic growth in the absence of a Doha Round agreements

June 17, 2008

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WASHINGTON — As the Doha Round lies in a cryogenic state, there are plenty of measures governments can take to increase trade, investment and economic growth, affirms a trade policy analysis by the Cato Institute. 

“Fortunately, comprehensive multilateral agreement is not the only way to improve the trading system. Like tariff cuts, improvements in trade facilitation procedures can help reduce the cost of trade and increase its flow,” writes author Daniel Ikenson, associate director of the Cato Institute’s Center for Trade Policy Studies, in “While Doha Sleeps: Securing Economic Growth through Trade Facilitation.”

Though definitions vary, “trade facilitation includes reforms aimed at improving the chain of administrative and physical procedures involved in the transport of goods and services across international borders.” According to recent studies from the World Bank and elsewhere, improvements to a country’s trade infrastructure — logistics services, port capacity, administrative procedures, customs requirements, etc. — could do more to increase global trade flows than further reductions in tariff rates.

Trade facilitation reforms are typically considered to be most needed by developing countries, yet rich countries have much to gain through their own reforms.  This is especially the case as successful participation in the global economy will be increasingly determined by whether a country maintains high-quality, reliable trade infrastructure; whether competition is permitted to flourish in the logistics services industries; and whether the regulatory environment is conducive to the relatively frictionless movement of goods and services through the supply chain.

On a variety of trade facilitation indices, U.S. performance lags behind countries whose companies compete with ours for investment and markets. Small improvements can make a big difference.

“One recent study suggests that a one-day improvement in the average time it takes to move U.S. cargo from a warehouse to the port of export and inbound cargo from the port to a domestic warehouse could increase U.S. trade by almost $29 billion per year,” writes Ikenson.

Concludes the author: “With world trade continuing to grow faster than global output, it is imperative that governments embrace practices that position their citizens to compete effectively for markets and investment. … Closing the trade facilitation performance gap will be crucial to U.S. competitiveness going forward.”

This report can be found at: http://www.freetrade.org/pubs/pas/tpa-037es.html