Is International Trade Facilitation Working?

The quick answer to this question is ‘probably not’. If it were working we would stop talking about it and would not need protocols such as the World Trade Organisation Trade Facilitation Agreement. One of the few things the author remembers of Latin from distant school days is that the word ‘facilitation’ is derived from ‘to make something easy’. Readers are likely to agree that importing and exporting are, by no stretch of the imagination, easy! It is interesting to note that, in the annual World Bank Ease of Doing Business Index, four of the ten top overall improvers—Afghanistan, Djibouti, Côte d’Ivoire and Togo—are countries suffering from fragility, conflict and violence. Also, a third of all business regulatory reforms were in the economies of Sub-Saharan Africa—a total of 107 reforms and a record for the region. Certainly, in relation to Trading Across Borders, a great example is Rwanda, a country that has taken trade facilitation extremely seriously as a catalyst to economic growth. Rwanda ranks 88 in the 2019 Trading Across Borders ranking with a positive increase of 2.54 points.

It is interesting to note that given the importance of education and communication for trade professionals, for the first time in the 2019 report the trading across borders questionnaire included research questions on education requirements, training opportunities and reform communication for customs officials and customs brokers. Although the captured data, in this respect, was not used to compute the trading across borders score or ranking there is a clear connection between the criteria. It does seem that countries which have a qualification requirement for freight forwarders / customs brokers, such as the East Africa Community Freight Forwarders Professional Certificate, do better in relation to overall trade facilitation. However, there are still wide divergences – on average ‘time (hours) taken to export’ is 12.5 for OECD high income nations but 62.9 for South Asia and 97.3 for Sub-Saharan Africa.

In general, it seems that, in relation to trade facilitation, emerging markets are making significant efforts to improve their performance. This is understandable and predictable as they have much further to go than OECD / high income countries in most respects. How are we doing in the UK? Well, since Brexit discussions started to become more granular and expressions such as ‘frictionless borders’ and ‘max fac’ entered common usage, trade facilitation started to become more of a focus. Well, the United Kingdom, comparatively, is not doing too badly in relation to other economies – ranking 30, with USA at 36, Germany at 40 and Ireland at 52.  UK receives an overall score for Trading Across Borders of 93.76 which is entirely respectable albeit static. This is exactly the same score as in the 2018 report. The important indicator will, of course, be our ranking after Brexit. This could be impacted by, potentially, the requirement for import and export declarations by traders who have never had to do them before, possible formalities at the Northern Ireland / Republic of Ireland border and a new HMRC customs management system – CDS, the Customs Declaration Service. The latter is interesting – the WTO TFA requires the establishment of a Single Window platform, the relevant UNCEFACT article defines this is a medium where all trade related information is provided once and once only by importers and exporters. HMRC indicate that the ‘gov.uk’ site provides this facility but, when questioned, individuals from HMRC recognise that it is a matter of dispute as to whether CDS / gov.uk, between them, provide a Single Window facility – to the author the current plan seems to be more of a ‘Double Window’!  HMRC and the Department for International Trade really need to take a bit of an ‘inward perspective’ on the UK’s compliance level with the WTO TFA, after all it should have been fully implemented by February 2017 when the protocol came into force. There are some gaps and the effect of these could be compounded by the forthcoming Brexit trade environment – whatever that may bring. 

Ultimately, good global trade facilitation would mean that it would be just as easy to conduct cross border trade as domestic trade. It is unlikely that this is achievable – so long as sovereign nations have the need to protect their borders, protect their societies, collect duties and taxes and have a divergence of standards it is hard to see completely frictionless borders on a global basis. Conversely, there are several initiatives that could improve trade facilitation on a global basis – these include regional Single Window platforms together with Blockchain technology, Globally Networked Customs connectivity and increased mutual recognition of national and regional ‘trusted trader’ schemes. In the next few years the World Bank Ease of Doing Business / Trading Across Borders report and index could become increasingly interesting reading.

Article written by Jon Walden, an Associate of Strong & Herd LLP 

A selection of related Strong & Herd LLP training courses:

What’s New: International Trade Updates – Brexit & UCC Special

EU Trade & Intrastat: the Brexit Impact

Vat in International Trade 

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