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

1. Trends in International Trade: Key Issues for the World Bank and Customs Paul Brenton International Trade Department World Bank

2. 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

3. 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

4. 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)

5. 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?

6. 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

7. More efficient customs are associated with more trade Ratio of total trade to GDP, 90 countries % Source: WBES and Global Trends as cited in Subramanian, et al 2003

8. 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

9. 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)

11. 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

12. Key issues in Bank research and analysis on trade • Global trade agenda • Regionalism • Asia • Standards • Speed with security

13. 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

14. “Success” in Doha Round will still leave much to be done at global level 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 Low & Middle Income 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

15. Regional Trade Agreements are proliferating… Annual number Annual number

16. Regional Trade Agreements are proliferating… Annual number Total in force Cumulative in force New agreements annually

17. South-South RTAs predominate in number, but not in trade covered Number of RTAs Percent of World Trade Covered South-South South-South US US European Union European Union

18. 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

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

20. Overlapping African agreements… Nile River Basin COMESA IGAD ECCAS AMU CEMAC Somalia Sao Tomé & Principe Algeria Libya Morocco Mauritania Tunisia Egypt Cameroon Central African Rep. Gabon Equat. Guinea Rep.Congo ECOWAS Djibouti Ethiopia Eritrea Sudan Burundi* Rwanda* Ghana Nigeria Conseil de L’Entente Chad Cape Verde Gambia DR Congo Kenya* Uganda* Benin Niger Togo Burkina Faso Cote d’Ivoire Angola Guinea-Bissau Mali Senegal EAC Liberia Sierra Leaone Guinea Tanzania* Mauritius* Syechelles* Malawi* Zambia* Zimbabwe* SACU Comoros* Madagascar* WAEMU Mano River Union South Africa Botswana Lesotho CLISS Namibia* Swaziland* Reunion 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 *CBI Mozambique SADC IOC

21. 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 costs • to firms in adhering to them and • to customs in implementing them • How about satisfying either a 10% value added requirement OR change of tariff classification (6 digit HS)

22. EU imports of Fish Examples of Complex and Restrictive ROO 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.

23. 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.

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

25. …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

26. …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

27. Still much to be done to improve trade facilitation in developing countries 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

28. 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