Common-sense reforms that make trading easier and faster can have a greater impact than removing every tariff in the world. Global business representatives at an ICC summit in Buenos Aires ahead of the G20 meeting agreed on the importance of furthering trade facilitation.
The G20 meeting in Argentina approaches this year at a time of historic uncertainty around global trade and the future of the multilateral trading system. Fears surrounding this uncertainty are particularly acute for the global business community, as many companies depend on global value chains vulnerable to new trade barriers.
What was clear at ICC’s Regional Forum on Customs and Trade Facilitation—held in Buenos Aires on 4 May—though, was that, for business, the current economic and political context means that there has rarely been a better time to double down on trade facilitation.
20 million jobs
Trade facilitation is the general term used to describe a package of measures that help cut red tape at borders. Burdensome customs requirements present real challenges to companies of all sizes that trade internationally, particularly small- and medium-sized enterprises (SMEs). Economists calculate that inefficient border procedures can cost companies up to 15% of the value of their traded goods.
In 2017, the World Trade Organisation’s (WTO) landmark Trade Facilitation Agreement (TFA)—a global deal aiming to make trade easier, faster and more transparent—entered into force after it was ratified by more than two-thirds of WTO members. If fully implemented, it is estimated that the TFA would have a bigger impact on international trade than if all remaining tariffs in the world were removed—reducing trade costs by an average of 14.3% and creating around 20 million jobs in the process, the vast majority in developing countries.
The e-commerce potential
Nothing better illustrates the importance of customs reform for the future of trade than the challenges and opportunities that e-commerce brings about. Recent cross-border e-commerce growth in many markets has been breathtaking. In China, for instance, e-commerce exports rose 41.6% in 2017, with imports surging 116.4%.
This growth has also increased the volume of small packages being shipped across borders, pushing customs authorities to adapt procedures in a way that facilitates legitimate trade without losing undue revenue or allowing in illicit goods.
ICC’s Commission on Customs and Trade Facilitation has laid out a series of policy recommendations designed to capture the gains from faster, easier and more inclusive trade.