Trends in International Trade:

Key Issues for the World Bank

and Customs

Paul Brenton

International Trade Department

World Bank

OUTLINE

What 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?

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

growth 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

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

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

associated with more trade

R2 = 0.1354

0

50

100

150

200

0 5 10 15 20 25 30 35

Days 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

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

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,

many 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

and analysis on trade

Global trade agenda

Regionalism

Asia

Standards

Speed with security

Global integration

Technological 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

0

10

20

30

40

50

60

70

80

90

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/ SDT

w/ 2% exclusions

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 much to be done at global level

Low & Middle Income

Regional Trade Agreements are

proliferating…

0

5

10

15

20

25

30

1958 1969 1976 1984 1989 1994 1999 2004

Annual number

Annual number

Regional Trade Agreements are

proliferating…

0

5

10

15

20

25

30

1958 1969 1976 1984 1989 1994 1999 2004

0

50

100

150

200

250

300

New agreements annually

Annual number Total in force

Cumulative 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

number, but not in trade covered

South-South

European Union

US

South-South

European Union

Percent of World Trade CoveredNumber of RTAs

US

RTAs can help address trade

facilitation 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

complex global trading system

Algeria

Libya

Morocco Mauritania

Tunisia

AMU

Ghana

Nigeria Cape Verde

Gambia

ECOWAS

Benin Niger

Togo Burkina Faso

Cote d’Ivoire

Conseil de

L’Entente

Guinea-Bissau Mali

Senegal

WAEMU

Liberia

Sierra Leaone Guinea

Mano River

UnionCLISS

Cameroon

Central African Rep.

Gabon

Equat. Guinea

Rep.Congo

Chad

Sao Tomé & Principe

ECCAS

CEMAC

Angola

Burundi*

Rwanda*

Egypt

DR Congo

Djibouti

Ethiopia

Eritrea

Sudan

Kenya*

Uganda*

Somalia

Tanzania*

EAC

South Africa

Botswana

Lesotho

Namibia*

Swaziland*

Mozambique

SACU

Malawi*

Zambia*

Zimbabwe*

Mauritius*

Syechelles*

Comoros*

Madagascar*

Reunion

IOC

*CBI

SADC

COMESANile River Basin

IGAD

AMU: Arab Maghreb Union

CBI: Cross Border Initiative

CEMAC: Economic & Monetary Community of Central Africa

CILSS: Permanent Interstate Committee on Drought Control in the Sahel

COMESA: Common Market for Eastern and Southern Africa

EAC: East African Cooperation

ECOWAS: Economic Community of Western African Studies

IGAD: Inter-Governmental Authority for Government

IOC: Indian Ocean Commission

SACU: Southern African Customs Union

SADC: Southern African Development Community

WAEMU: West African Economic & Monetary Union

Overlapping African agreements…

Different agreements with different rules of

origin 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

costsa) 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 ROOEU 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 Asia East Asia’s share of worlds (non-oil) imports has

risen from 2.7% in 1980 to 10.6% in 2004

East Asia was the key source of export growth for

Africa in 1990s

Opportunities 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-

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

Exports

M ajo r tradit io nal

co mmo dit ies M ajo r tradit io nal

co mmo dit iesM ajo r tradit io nal

co mmo dit ies

High value

commodities High value

commodities High value

commodities

C ereal,o il seeds,

feedC ereal,o il seeds,

feed

Other OtherOther

C ereal,o il seeds,

feed

0%

20%

40%

60%

80%

100%

80/81 90/91 03/04

Sh

are

in

To

tal A

gro

-fo

od

Exp

ort

s

…brings greater demands in

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

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

facilitation 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 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

Conclusions Increasing 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