Features

Trade facilitation

10 December 2013
ITC News
ITC’s Executive Director Arancha González sets out the benefits of the new agreement on trade facilitation, which helps small and medium-sized enterprises in developing and least developed countries in their export efforts.

As this issue of the International Trade Forum goes to press, negotiations are under way in the run up to the World Trade Organization's Ninth Ministerial Conference in Bali, Indonesia in early December. On the top of the list is a trade facilitation package that aims to streamline customs procedures and cut red tape.

A Trade Facilitation Agreement will be particularly beneficial for small and medium-sized enterprises (SMEs) in developing and least developed countries (LDCs). Developing country SMEs often have to bear the inordinately high costs of complying with customs and border procedures and other non-tariff measures (NTMs), rendering them uncompetitive as suppliers and preventing them from integrating into regional and global value chains. The impact of NTMs is especially significant for companies exporting from landlocked developing countries. Since dealing with NTMs represents fixed costs for businesses, they have a larger relative impact on SMEs. Removing only half of the supply chain barriers currently in place would increase worldwide global domestic product by close to 3%, with much of the gain materializing at the SME level, according to an article by two research directors at the World Economic Forum.

Effective trade facilitation works. A trade facilitation project in West Africa, for instance, has led to US$ 2.25 million in additional income to onion farmers, while also lowering the region’s dependence on imported onions, contributing to food security. An International Trade Centre (ITC)-led trade facilitation project in Burundi has given 8,000 women traders the opportunity to move from the informal into the formal sector, increasing their income and personal safety.

A Trade Facilitation Agreement will create opportunities, but will not in itself bring about change. It is the implementation at the local level that can unleash the potential of trade and lead to tighter integration of SMEs into value chains and the capturing of additional value for their products and services. LDCs will need technical assistance and capacity building to turn these opportunities into increased exports. Improved trade facilitation measures are part of the enabling environment the private sector has been calling for in the run-up to Bali and in consultations for the post-2015 Development Agenda. ITC stands ready to assist developing countries and their SMEs in harvesting the opportunities an agreement on trade facilitation will provide. We must work collectively to seize the Bali moment to strengthen the role of SMEs in entrepreneurship, innovation, growth and poverty reduction.