Trends in International Trade: Trends in International Trade: Key Issues for the World Bank Key Issues for the World Bank

and Customsand Customs

Paul BrentonInternational Trade Department

World Bank

OUTLINEOUTLINEWhat is the World Bank ?What do we do on trade? Research, advocacy, advice,

lending.Why are we interested in Customs and trade

facilitation ?Key trends in trade that will shape our work and the

work of Customs

What is the World Bank?What is the World Bank?

Global co-operative owned by its 184 shareholders or member countries – Run by a Board of Governors

The Bank is a UN Specialized Agency Development agency that provides policy advice, TA,

knowledge sharing and development finance 11254 staff in 111 countries In FY 04 - IDA - $9 b – 158 projects - 62 countries In FY 04 - IBRD - $11 b – 87 projects – 33 countries

Trade can be a powerful engine of Trade can be a powerful engine of growth and poverty reductiongrowth and poverty reduction

Levers for Intervention Before the border (Improving overseas market

access, reforming domestic trade policy) At the border (Trade Facilitation – Regulatory and

procedural harmonization, simplification and institutional reform)

Behind the border (Improving the investment climate, improving trade and transport infrastructure, dealing with supply side constraints)

WHAT IS THE BANK WHAT IS THE BANK DOING ON TRADE?DOING ON TRADE?

Research, analysis and advocacy Elevating Trade to a prominent role in Country Policy

Dialogue Established Trade Department including Trade Logistics

Group– Bringing together Trade Policy, Infrastructure and

Customs/Border Management teams Stepping up trade–related operations Aid for trade?

Why is the World Bank Why is the World Bank interested in Customs?interested in Customs?

Customs plays a critical role in trade facilitation. The costs of crossing borders now seen as a more significant barrier than tariff rates.

Customs performs other important functions such as revenue collection, community protection and, increasingly, national security

Customs can act as an effective integrator to ensure all trade and border related agencies work together to simplify and harmonize systems and procedures

The Bank believes productive investment in Customs modernization delivers sound development results

More efficient customs are More efficient customs are associated with more tradeassociated with more trade

R2 = 0.1354

0

50

100

150

200

0 5 10 15 20 25 30 35Days through customs, imports

Ratio of total trade to GDP, 90 countries

%

Source: WBES and Global Trends as cited in Subramanian, et al 2003

What is the Bank doing on What is the Bank doing on Customs?Customs?

Stressing importance of Customs in policy dialogue Established the Trade Logistics Group Building a broader constituency for reform

• Global Facilitation Partnership for T & T, Diagnostic Trade Integration Studies, Trade and Transport Facilitation Audits, Trade Facilitation Seminars

Coordination of donors & international organizations Customs Modernization Handbook Stepping up operations

Bank Operations - Some current Bank Operations - Some current examples:examples:

Russian Customs Modernization Project ($ 140 m) Vietnam Customs Modernization Project ($ 75 m) Tanzania Tax Administration Project ($ 70 m - WB, UNCTAD,

DANIDA, DFID, EU, FINNIDA, SIDA & IMF) Cambodia Trade Facilitation and Competitiveness project ($ 10 m -

WB, EU & AUSAID) EAC Trade Facilitation Project ($30 m)

Despite improvements in trade policies, Despite improvements in trade policies, many Countries Have Been Left Behindmany Countries Have Been Left Behind

The experience of individual countries varies greatly

43 countries had no expansion of exports between 1980 and 2000

Increase in market share mainly associated with today’s Middle Income Countries

Much growth in South – South trade

Key issues in Bank research Key issues in Bank research and analysis on tradeand analysis on trade

Global trade agendaRegionalismAsiaStandards Speed with security

Global integrationGlobal integrationTechnological change and splitting up of

production chains will continue to drive greater trade and capital flows. Labour?

Global companies seeking out lowest cost locations

More countries are seeking to integrate into global markets

The global market enacts a high price on those not using competitively supplied inputs

0102030

405060708090

100

Possible gains in real income in 2015 as percent of full multilateral liberalization for LMICs (excluding services and trade facilitation)

Full

Tiered cuts w/ Tiered cuts w/ SDTSDT

w/ 2% w/ 2% exclusionsexclusions

Tiered SDT ~ 70% in HICs and 40 in LMICs in ag, plus NAMA cuts of 50% in HICs, 33 in LMICs; and 0 in LDCs

““Success” in Doha Round will still leave Success” in Doha Round will still leave much to be done at global levelmuch to be done at global level

Low & Middle Income

Regional Trade Agreements are Regional Trade Agreements are proliferatingproliferating… …

0

5

10

15

20

25

30

1958 1969 1976 1984 1989 1994 1999 2004

Annual numberAnnual number

Annual numberAnnual number

Regional Trade Agreements are Regional Trade Agreements are proliferating…proliferating…

0

5

10

15

20

25

30

1958 1969 1976 1984 1989 1994 1999 20040

50

100

150

200

250

300

New agreements annuallyNew agreements annually

Annual numberAnnual number Total in force Total in force

Cumulative in forceCumulative in force

0

5

10

15

20

25

30

35

1990 1996 2002

0

50

100

150

200

250

1990 1996 2002

South-South RTAs predominate in South-South RTAs predominate in number, but not in trade coverednumber, but not in trade covered

South-South-SouthSouth

European European UnionUnion

USUS

South-South

European European UnionUnion

Percent of World Trade CoveredPercent of World Trade CoveredNumber of RTAsNumber of RTAs

USUS

RTAs can help address trade RTAs can help address trade facilitation issuesfacilitation issues

RTAs can offer a mechanism to deal with cross-border issues: – Customs simplification, cooperation,

harmonisation…….– Transport cooperation, harmonisation of

regulations, insurance….But, many RTAs have yet to deliver better

trade facilitation

Canada

USA Mexico

Chile

Uruguay

Paraguay Brazil Argentina

Mercosur

Bolivia

Colombia Venezuela

Peru Ecuador

Costa Rica

Nicaragua

El Salvador

Honduras Guatemala

CACM

Trinidad & Tobago

Antigua & Barbuda Barbados

Belize

Dominica Grenada

Guyana Jamaica

Suriname

St. Lucia

St. Vincent & Grenadines St. Kitts & Nevis

CARICOM

Panama

Dominican Republic

“ American and Asian Spaghetti Bowl

-

Andean Community

Bahamas

Haiti

Brunei Cambodia Thailand

Laos

Malaysia Philippines

Myanmar

Singapore

Indonesia Vietnam

Japan

New Zealand

Australia

ASEAN

Korea

PR China Hong Kong

Taiwan

Russia

Papua New Guinea APEC

Intra - Asia - Pacific in force Intra - Asia - Pacific signed

FTAA

Intra - Americas in force

Trans - Pacific signed

APEC

FTAA

Source: Devlin and Estevadeordal (2004)

Proliferation of PTAs is leading to a Proliferation of PTAs is leading to a complex global trading system complex global trading system

AlgeriaLibyaMorocco MauritaniaTunisia

AMU

GhanaNigeria Cape Verde

Gambia

ECOWAS

Benin NigerTogo Burkina FasoCote d’Ivoire

Conseil de L’Entente

Guinea-Bissau Mali Senegal

WAEMU

Liberia Sierra Leaone Guinea

Mano River Union CLISS

CameroonCentral African Rep.GabonEquat. GuineaRep.Congo

Chad

Sao Tomé & Principe

ECCAS

CEMAC

Angola

Burundi*Rwanda*

Egypt

DR Congo

DjiboutiEthiopiaEritreaSudan

Kenya*Uganda*

Somalia

Tanzania*

EAC

South AfricaBotswanaLesotho

Namibia*Swaziland*

Mozambique

SACU

Malawi*Zambia*Zimbabwe*

Mauritius*Syechelles*

Comoros*Madagascar*

Reunion

IOC

*CBI

SADC

COMESA Nile River Basin IGAD

AMU: Arab Maghreb UnionCBI: Cross Border InitiativeCEMAC: Economic & Monetary Community of Central AfricaCILSS: Permanent Interstate Committee on Drought Control in the SahelCOMESA: Common Market for Eastern and Southern AfricaEAC: East African CooperationECOWAS: Economic Community of Western African StudiesIGAD: Inter-Governmental Authority for GovernmentIOC: Indian Ocean CommissionSACU: Southern African Customs UnionSADC: Southern African Development CommunityWAEMU: West African Economic & Monetary Union

Overlapping African agreements…Overlapping African agreements…

Different agreements with different rules of Different agreements with different rules of origin add complexityorigin add complexity

Proliferating trade agreements with differing ROO further complicate customs procedures

•clearance of preferential imports requires more manpower•overlapping rules of origin cause particular difficulties for customs

Need Clear and consistent ROO with minimal costs

a) to firms in adhering to them and b) to customs in implementing them

How about satisfying either a 10% value added requirement OR change of tariff classification (6 digit HS)

Examples of Complex and Restrictive ROOExamples of Complex and Restrictive ROO EU imports of Fish To receive preferences under the GSP

•The vessel must be registered in the beneficiary country or in the EU•The vessel must sail under the flag of the beneficiary or of a member state of the EU•The vessel must be at least 50 per cent owned by nationals of the beneficiary country or the EU•The master and the officers must be nationals of the beneficiary country or an EU member •At least 75 per cent of the crew must be nationals of the beneficiary country or the EU.

The Rise of AsiaThe Rise of AsiaEast Asia’s share of worlds (non-oil) imports has

risen from 2.7% in 1980 to 10.6% in 2004East Asia was the key source of export growth for

Africa in 1990sOpportunities and challenges

– Tremendous mass of fast growing demand (emerging tri-polar world): key to improved market access is global negotiation

– Increasing competition in export and domestic markets: Need to distinguish unfair from effective competition. (Perceived) Lack of border control can undermine efforts towards trade liberalisation.

The Rising Importance of Non-The Rising Importance of Non-Traditional Exports…….Traditional Exports…….

Figure 3 : Changing Structure of Developing Country Agro-food Exports

Major traditional commodities Major traditional

commodities Major traditional commodities

High value commodities High value

commodities High value commodities

Cereal,oil seeds, feed

Cereal,oil seeds, feed

Other Other Other

Cereal,oil seeds, feed

0%

20%

40%

60%

80%

100%

80/81 90/91 03/04

Shar

e in

Tot

al A

gro-

food

Ex

port

s

……brings greater demands in brings greater demands in terms of standards….terms of standards….

Competitiveness depends on capacity to satisfy both mandatory (SPS/TBT) and private standards in export markets

Standards in developed countries are shaping expectations of consumers in developing countries

……and increased need for and increased need for timeliness to be competitive.timeliness to be competitive.

Increasing importance of air transport (30% of US imports now come by air)

For many products, globalisation means that to be competitive exporters require access to imported inputs at world prices

Increasing impetus to hold lower inventories Security – secure trade is now as important as free

trade, and the two need not be mutually exclusive Particular problems for land-locked countries

Still much to be done to improve trade Still much to be done to improve trade facilitation in developing countriesfacilitation in developing countries

0 2 4 6 8 10 12 14

Bangladesh

India

South Asia

Africa

Latin America and Caribbean

East Asia and Pacific

Developed

Average number of days to clear customs for sea cargoAverage number of days to clear customs for sea cargo

Source: International Exhibition Logistics Associates, based on a sample of countries in each region as cited in World Bank Global Economic Prospects 2004; country data from World Bank country surveys

ConclusionsConclusionsIncreasing emphasis on customs as a border

management institution to facilitate timely and secure trade

Bank a key source of research and operational experience on trade issues

Trade facilitation essential element of Bank’s agenda on trade and poverty reduction