Ratnakar AdhikariInternational Consultant

UNDP

} Trade and development issues in Northeast Asia (NEA)

} Regional trade integration and trade facilitation (TF)

} Trade facilitation status

} Preliminary results of the study

} Possible ideas/initiatives

Source: World Development Indicators

Figure 1: Trade to GDP ratios of NEA countries , 1989-2011

} Most countries in the NEA region are highly dependent on international trade

} Their trade to GDP ratios have grown remarkably between 1989 and 2011

} Mongolia, followed by Republic of Korea (ROK) are the two most trade dependent economies, although China achieved remarkable growth in the last 2 decades

} Barring periods of global economic crises and debt crisis, they have been able achieve significant export growth

} In 2012, together they generated 21.8 % of world exports and 19.1% imports } Today, China is the world’s largest exporter, followed by Japan at fourth, ROK

at seventh and Russian Federation at eighth

Figure 2: Export growth rates in NEA countries, 2003 – 2012

Source: Based on data from ITC Trademap

Table 1: Intra-regional trade share in world trade

NEANEA excluding Mongolia

and the Democratic Republic of Korea

Country 2003 2006 2003-2006 2003 2012 2003-

2012China 25.9 22.4 24.0 25.7 18.1 20.5Japan 22.4 24.7 24.0 22.4 27.8 26.2

Republic of Korea 30.2 32.5 32.3 30.8 31.9 32.5

Russian Federation 9.9 11.7 10.9 9.7 14.9 13.9

Korea, Dem. Rep. 53.1 42.5 48.8

Mongolia 64.2 74.4 67.5Total 24.1 23.6 24.1 23.9 21.8 23.2

Source: Author’s Calculation Based on data from WITS and ITC Trademap

} Without any formal trade agreement regional trade is growing despite relatively high most-favoured nation (MFN) tariffs e.g.: ◦ Republic of Korea – 12.1% ◦ China - 9.6 % ◦ Russian Federation - 9.1%

} If a regional trade agreement is signed, it would significantly reduce these barriers for intra-regional trade, which would significantly contribute to enhance trade for which more trade facilitation is required

} Rate of intra-regional trade growth has been particularly rapid in the periods of economic crisis or debt crisis, so regional trade is a cushion against excessive dependence on developed countries’ market

} Due to robust growth in Gross National Income per capita (all the NEA countries, expect for Japan), increased purchasing power of consumers in these countries ◦ Between 2003 and 2011, average growth: – China : 10.27% – ROK : 3.32 % – Mongolia : 6.52 % – Russian Federation : 4.81%

} Due to discernible shift towards “slicing up the value chain” and emergence of global value chain production processes are being integrated regionally whether to serve regional or international market. TF important for both export and imports

Table 2: Table Bilateral trade costs (US$) in 2009 Country Sectors China Japan Korea,

Rep. Russia Singapore USA

China

Agriculture 178.9 161.7 132.6 150.4 108.5Manufactured N/A 65.8 52 96.5 111.6 74.7

Total 68.5 55 99.5 114.4 74.5

Japan

Agriculture 178.9 118.8 280 188.6 118.8Manufactured 65.8 N/A 63.6 128.2 123.1 81.5

Total 68.5 65 131.7 123.8 80.3

Republic of Korea

Agriculture 161.7 118.8 223.4 187.9 111.8Manufactured 52 63.6 N/A 100.5 97.2 73.7

Total 55 65 104.5 98.6 74

Russian Federation

Agriculture 132.6 280 223.4 370.7 222.2Manufactured 96.5 128.2 100.5 N/A 208.3 124.7

Total 99.5 131.7 104.5 212.6 127.8

Source: World Bank International Trade Costs.

Table 3: Export trade costs for trading across borders (%GDP per capita, 2012)

Export procedures China Japan Korea, Rep.

Mongolia Russia Singapor

eMalaysi

a Thailand

Documents preparation 4.35% 0.21% 0.22% 3.95% 0.89% 0.22% 0.82% 3.20%

Customs clearance and technical control 1.31% 0.18% 0.07% 4.36% 6.13% 0.10% 0.58% 0.91%

Ports and terminal handling 2.30% 0.54% 0.44% 4.08% 3.21% 0.29% 1.16% 2.92%

Inland transportation and handling 1.56% 0.95% 2.21% 57.17% 9.87% 0.27% 1.64% 3.65%

Total 9.52% 1.88% 2.94% 69.56% 20.09% 0.88% 4.19% 10.69%

Source: Trade Cost data from www.doingbusiness.org; GDP per capita from World Bank

Preliminary results of the study in the GTR

China ROK

} Export ◦ Supply capacity ◦ Buyer identification ◦ Technical requirements and

standards ◦ Regional transportation

} Import ◦ Import procedure ◦ Supplier identification ◦ Tariff barriers ◦ Regional transportation ◦ Domestic transportation

} Export ◦ Buyer identification ◦ Para-tariff barriers ◦ Regional transportation◦ Transit issues

} Import ◦ Regional transportation ◦ Supplier identification ◦ Import procedure ◦ Transit issues

Mongolia Russian Federation

} Export ◦ Supply capacity ◦ Regional transportation ◦ Transit issues ◦ Domestic transportation ◦ Tariff barriers

} Import ◦ Supplier identification ◦ Regional transportation ◦ Domestic transportation ◦ Para-tariff barriers ◦ Transit issues

} Export ◦ Tariff barriers◦ Para-tariff barriers ◦ Non-tariff barriers ◦ Access to imported inputs ◦ Quality requirements

} Import ◦ Tariff barriers◦ Para-tariff◦ Non-tariff barriers ◦ Import procedures

} As an example, in China, among border agencies Revenue and Customs, Immigration Services and Security seem to have high level of understanding of TF issues compared to others

Figure 3: Relative understanding of TF issues by border agencies(China)

} As an example, in Korea, infrastructure of customs and revenue,security agencies and immigration are considered relatively better

Figure 5: Relative infrastructure quality of border agencies (Korea)

} For example, in Mongolia, use of ICT, mutual recognition agreement and post clearance audit was relatively better compared to other measures

Figure 6: Current status of TF measures (Mongolia)

} Competition within some trade support facilities/infrastructure providing agencies is limited, which results in higher service charges

} Visa regime – in particular for business travelers – is found to be burdensome: ◦ Average cost : US$ 279/visit ◦ Time for obtaining visa: 32 days

} There is a lack of dedicated, institutionalized mechanism for consultation with private sector on trade facilitation; almost non-existent at the provincial level

◦ Free trade agreement within the sub-region ◦ Operation of a regional single window by linking all

the national single windows ◦ Implementation of authorized economic operators

system at the country level followed by signing of a mutual recognition agreement within the region ◦ Enactment and implementation of competition law

at the country level ◦ Institutionalizing the process of organizing regular

trade forums/fairs in major cities of the GTR region on a rotational basis ◦ Easing visa process and reducing costs ◦ Creation of institutionalized mechanism for

Thank you