Chapter 3 Trade Facilitation
3.1
The evidence given to this inquiry indicated that trade facilitation
activities are of growing importance to APEC member economies. The
international financial crisis has, unfortunately, already prompted some
sectors to lobby their governments to attack their difficulties by raising
protective barriers against imports:
3.2
It was disappointing that, despite the G20 stressing the need for
continuing progress towards free trade, a number of G20 member governments,
including the US and EU, introduced protectionist measures in 2009. There was
also an unsuccessful push in Australia to introduce a
20 per cent price advantage for Australian companies in awarding State
government contracts.[1]
3.3
In this climate, it is more difficult for member governments to maintain
the pace of trade liberalisation. Consequently, measures to improve efficiency
and remove unnecessary barriers to trade offer an attractive alternative.
3.4
The Council of Australian Government’s Ministerial Council on
International Trade acknowledged the threat of protectionism in its 2009
Meeting Communiqué. The Ministers, taking stock of the impact of the Global
Economic Crisis, said:
Prospects for trade in the Asia-Pacific region remain
positive despite the economic crisis. Ministers agreed Australia must expand
its integration with the global economy if it is to continue to generate wealth
and safeguard jobs into the future.
They noted the pressure on governments to protect jobs,
however they agreed on the need to refrain from introducing protectionist
measures and to avoid exposing Australia to retaliation or legal challenge by
our trading partners.
They agreed to abide by the pledge taken by the G20 in London
in April 2009 to rectify promptly any measures that have raised new barriers to
investment or to trade in goods and services.[2]
3.5
Trade facilitation has been an important plank in the APEC agenda from
the group’s inception. As globalisation of the world economy has progressed,
the importance of trade facilitation has increased also:
Trade facilitation has taken on added importance since the
early 1990s due to the increasing globalisation of the world economy, which has
accompanied the reduction of trade barriers.
The dramatic increase of both the volume and complexity in
world trade means that it is necessary to keep trading procedures simple,
predictable and transparent to allow commerce to flow as freely as possible.
In practical terms, greater certainty over the time taken to
move goods in particular through increased transparency and the reduction of
procedural steps involved in import/export tends to mean lower costs for
traders.[3]
3.6
APEC defines trade facilitation as:
…the simplification and rationalisation of customs and other
administrative procedures that hinder, delay, or increase the cost of moving
goods across international borders.
3.7
Alternatively, it describes the process as:
… cutting red tape at the border for importers and exporters so
that goods are delivered in the most efficient and cost effective manner.[4]
3.8
Trade transaction costs can be conveniently divided into direct and
indirect costs:
Direct costs include the cost of preparing documentation, and
complying with various customs and other regulations. These may also include
the cost of moving goods from factory to port, handling costs at the port,
finance and insurance, and international transport costs. Indirect costs
include the opportunity costs associated with time and delays in moving the
goods from the buyer to the seller. These have been estimated to account for
about 80% of total trade transaction costs.[5]
3.9
Estimates have put total transaction costs at between one per cent and 15
per cent of the value of the goods. For developed countries, the estimates are
at the lower end of the scale; for developing nations, costs make up a higher
proportion of total value.[6]
3.10
The Chairman of the Australian APEC Study Centre, Alan Oxley, stressed
the importance of trade liberalisation in building a platform for sustained
growth and development:
APEC was founded on the idea that trade liberalization was
key to promoting economic growth and integration of APEC economies. There is an
inclination for the measure of success in reaching this goal [to be] the extent
to which trade barriers are reduced.
It takes more than that. The key is domestic economic policy
which fosters the competitiveness which enables industries in open economies to
trade on their comparative advantage. The commitment to reduce the trade
barriers is testimony to recognition of that principle. But the implementation
depends on sound domestic economic policy.
APEC has recognized this indirectly and implicitly – such as
through the trade facilitation programs to reduce the transaction costs of
trade and to tackle the ‘beyond the border’ impediments to increased growth.
APEC has established an economic structural change program and created a forum
for Economic Affairs Ministers to advance it.
What is missing is a statement of the primary goal these
activities are to achieve. It is not economic integration itself; it is the
condition which achieves it. And that, simply put, is to achieve global competitiveness in each
APEC economy.[7]
3.11
The Asian Development Bank (ADB) supported these views on the importance
of trade facilitation:
Trade facilitation is increasingly recognized as the key to
unlocking further gains from international trade. Tariffs are no longer the
main obstacle to trade following their substantial reductions over the last 60
years. Since the 1970s, major non-tariff barriers to trade, such as import quotas
or voluntary export restraint agreements, have also diminished in significance.
Yet, there remain significant costs to international trade.
Trade facilitation covers these remaining trade costs associated with
unnecessarily complex customs and at-the-border procedures, or with inefficient
transit arrangements.[8]
3.12
In its submission to the inquiry, the South Australian Government
commented on the need to extend reform beyond the border to provide a sound
basis for trade growth:
More generally, South Australia considers that the Federal
Government's approach to trade policy - the 'twin-pillars' approach - whereby
trade liberalisation at the border is accompanied by supply-side reforms behind
the border is fundamentally sound.
That is, better coordination between trade policies and
domestic economic policy makes good sense, and enhances the probability of
delivering good export outcomes for the nation and the states.[9]
3.13
The ADB also emphasised the role of trade facilitation in the
development of export competitiveness:
A national policy on trade facilitation is a key factor in
the development of export competitiveness. Inefficient trade-related procedures
and processes can delay the delivery of products to overseas markets. Such
inefficiencies can affect the ability of manufacturers and exporters to meet
the “just-in-time” needs of their overseas customers, and prevent them from
taking part in the growing number of regional and global production networks.[10]
3.14
In addition to focussing on the movement of goods, APEC has given
attention to facilitating “the international movement of business people”.[11]
The Chapter on APEC (Chapter 2) discusses the introduction and successful
operation of the APEC Business Travel Card.
3.15
The APEC group has also given special attention in its operations to the
needs of small to medium enterprises, particularly those in developing
economies. It acknowledges that their small scale makes them vulnerable to
additional costs caused by unnecessary delays or by costly and inefficient
government regulation.[12]
3.16
Tradegate Australia Limited (Tradegate), in its submission, indicated
that the business world sees the issue a little differently:
These definitions primarily relate to a government view of
the world rather than a business view… From a business perspective, trade
facilitation involves all of the activities, practices and formalities involved
in collecting, presenting, communicating and processing data required for the
movement of goods and services across international borders.[13]
3.17
Dr Andrew Elek stressed the importance of trade facilitation in APEC when
he noted:
Most traditional border barriers to trade are low, or gone.
Residual border protection is costly, but affects a rapidly shrinking share of
international commerce. These days, much more relevant impediments are
logistics, security concerns and economic regulations which are not efficient
and needlessly different from those of others. These policy weaknesses are
compounded by uncertainty about how policies and regulations will work in practice.[14]
3.18
Dr Elek referred also to a speech by Singapore’s Minister for Trade and
Industry, Lim Hng Kiang, in which the Minister spoke of the :
…need to complement a world of already low border barriers to
trade in most products, with an environment of transparent, consistent and
efficient economic policies and regulations, along with best practice
information networks and logistics.[15]
3.19
APEC has led the way in some aspects of the development of trade
facilitation:
Goods, services, people and capital are moving a lot more
freely around the region compared to 1989. Obstacles to trade and investment,
including border barriers, have been reduced more rapidly than in any other
region. …intra-APEC merchandise trade has grown five-fold. More efficient customs
procedures and other practical arrangements to facilitate trade and investment
are saving billions of dollars a year.[16]
APEC Trade Facilitation Action Plans
3.20
The APEC Leaders, at their Shanghai meeting in 2001, called for a five
per cent reduction in trade transaction costs between 2002 and 2006. The result
was the Trade Facilitation Action Plan, which was based on four priority areas:
Customs Procedures; Standards and Conformance; Business Mobility; and
Electronic Commerce.[17]
3.21
The Plan was coordinated by the Committee on Trade and Investment and,
at its expiry in 2006, had produced over 1,400 proposed actions, of which about
62 per cent had been completed. The APEC Leaders, at the Hanoi meeting in 2006,
acknowledged achievement of the five per cent reduction in costs.[18]
3.22
Earlier, however, at the Busan meeting in 2005, the Leaders had called
for a further cut of five per cent in trade transaction costs between 2007 and
2010. The result was the development of the Second Trade Facilitation Action
Plan (TFAP II).[19]
3.23
TFAP II was based on the same priority areas as the first plan but was
updated and revised, to reflect the conditions at the time and to remove
actions already completed or no longer appropriate.[20]
3.24
The APEC economies recognised the value of cooperative actions by
providing for greater use of Collective Actions and Pathfinders:
Pathfinders allow member economies that are ready to initiate
and implement cooperative activities or measures to do so, while those not
ready to participate may join at a later date.[21]
3.25
The scope of TFAP II was also extended by including other business
facilitation activities, such as: domestic regulatory reform; work on business
ethics; and secure trade. This extension recognised the concerns of the
business sector, which, following the 2005 meeting, were reflected in the Busan
Business Agenda. The Agenda included new initiatives in intellectual property
rights, anti-corruption, investment and secure trade.[22]
3.26
Importantly, TFAP II also included provisions for capacity building and
technical cooperation, to assist lesser developed countries to implement the
Plan. Where new Collective Actions and Pathfinders are introduced, for each one
at least one capacity building need must be identified — and a mechanism to
address it must be included:
Such mechanisms may include assistance from individual APEC
economies, cooperative activities in APEC and, on occasion, assistance from
international and regional institutions.
3.27
There was a stock-take of progress in 2009 and a final review of TFAP II
to be carried out in 2010.[23]
3.28
In its 2009 Report to Ministers, the Committee on Trade and Investment
reported that the stock-take of progress had revealed that, across APEC, trade
transaction costs were estimated to have fallen by 3.2 per cent between 2006
and 2008 — this exceeded the pro-rata rate required to achieve the five per
cent reduction by 2010.[24]
3.29
A very important conclusion drawn by the report is that:
Reducing the time that
regulation imposes on transactions reduces the transaction costs more than
cutting fees.[25]
3.30
The assessment added:
This indicates the aggregate cost of the time taken is
substantially greater than the aggregate costs of fees and charges.
Accordingly, measures to facilitate trade should give priority to reducing the
time required to comply.[26]
3.31
One recommendation arising from the Interim assessment process was that
the definition of transaction costs for TFAPII should include costs incurred in
ports, terminal handling and inland transport. Later research indicated that 60
per cent of estimated costs occur in these sectors.[27]
3.32
Arising from the work outlined above, APEC has established a
comprehensive set of Trade Facilitation Principles —set out in Table 1.
Table 1 APEC’s Trade Facilitation Principles
Source APEC’s
Second Trade Facilitation Action Plan, APEC Secretariat, Singapore, 2007, page
3.
3.33
A key point of concentration in efforts to reduce transaction costs has
been the development of paperless trading. In a report released in June 2010,
the APEC Committee on Trade and Investment concluded that:
1. Most APEC economies place
high premium on development of paperless trading and are equipped with
effective telecommunications infrastructure and legal systems, which
accordingly do not constitute obstacles to development of paperless trading.
2. Most APEC economies have
adopted electronic declaration systems for Customs, and some economies have
achieved substantial results in integration of customs and logistics.
3. Regional cooperation has
become stronger in simplifying trading procedures and paperless trading, and
significant progress has been made in regional cooperation in paperless
trading, thanks to cultural similarity, trading convenience and geographical
intimacy.
4. Some economies have started
to try to exchange electronic data for cross-border paperless trading.
Inter-governmental data exchange and certification has just newly started.
5. Realization of paperless
trading is increasingly based on integration of the global supply chain. All
the economies have started to revolve around the global supply chain to plan
single-window data integration.
6. Dominance in paperless
trading has increasingly shifted from government to market and from public
sector to private sector; as a result, private and public partnerships have
been formed.
7. Some economies have started
to build platforms for paperless trading that highlight their regional
advantages to promote single-window development of paperless trading. Regional
integration is the future development trend.[28]
3.34
The conclusions set out above and the general recommendation put forward
by the Committee, indicate that the benefits of paperless trading could be
extended beyond the APEC region and be of benefit in all the economies being
examined in this inquiry:
The report suggests that APEC economies deepen their research
into benefits that have been brought by paperless trading to international
trade, sum up their experience and lessons, reach consensus, and build capacity
in the region for the development of paperless trading.
It is advisable that various economies communicate and share
with each other, and learn from each other to bridge the digital divide of
paperless trading between developed and developing countries.[29]
3.35
The APEC Committee concluded that the benefits from the introduction of
paperless trading would be felt by many businesses. It would, the Committee
concluded:
- Minimize the
constraints of time and space in import and export procedures
- Reduce the cost of
carrying out formalities and improve the efficiency
- Achieve online
shipping space booking, online insurance, online payment, etc; a variety of
declaration procedures can be conducted online
- Improve the level of
supply chain integration for enterprises to gain opportunities for competition
- Obtain transparent
and relatively stable services. If paperless, all formalities associated with
customs declaration and clearance can be carried out on the internet with a
more transparent process... With [an electronic] customs clearance process,
many of the rules will become more stabilised and be fixed during a relatively
longer period
- Get easier to acquire
trade-related financing services. The emergence of electronic bills of lading
makes it more convenient for companies’ financing. On one hand, electronic bills
of lading facilitate supervision; on the other hand, the efficiency of
processing documents will also be further enhanced
- Collect real-time
information on the location of goods in transit, tariff rates and so on
- Reduce the errors in
data entry and re-keying times.[30]
3.36
Although the reduction of tariffs between the member economies of APEC
has gained most publicity, many of the group’s greatest successes have been in
trade facilitation:
…member economies have the freedom to implement agreed
measures and actions … most suitable to their own circumstances, with capacity
building assistance being a key ingredient to help bridge the gap in a forum
made up of members at different stages of economic development.
… Once the menu was agreed, member economies could choose to
implement actions and measures either individually or as a group, on a
voluntary basis.[31]
3.37
In fact, APEC has proved to be a very effective forum for this type of
cooperative exercise:
As a non-rules-based forum founded on the principle of
cooperation, APEC is well suited to this work. It provides a non-threatening
environment for member economies to consider new and innovative ways to address
similar problems. It also recognises the reality that on issues such as trade
facilitation, one size does not necessarily fit all. …[32]
APEC Business Advisory Council
3.38
The APEC Business Advisory Council (ABAC) consists of 63 members, three
from each member economy. It is a regular source of advice to APEC Leaders and
ministers on the best ways to achieve the APEC goals. It provides a
cross-section of opinion from the APEC business sectors.[33]
3.39
Trade Facilitation is one of the most important issues being considered
by ABAC. The group’s aim is to eliminate impediments to business growth and
development. It has a double-pronged approach and seeks to overcome:
- barriers at the
border – for example: onerous conditions on foreign investors and limitations
on the capacity of foreign investors to compete effectively, and
- barriers behind the
border – for example: trade restricting practices or the promotion of
monopolies in an economy.[34]
3.40
ABAC also recognises the need for special attention to the needs of
small and medium-sized enterprises (SMEs). It has identified a range of
practices that act as impediments to business growth –particularly for SMEs.
3.41
The Director of the Australian APEC Study Centre noted that the list of
these practices is quite long. He indicated, however, that the most important issues
are: excessive regulatory burdens; discriminatory treatment against foreign
investors; complexities in establishing a business or in exiting where a
business failure occurs; access to finance and information; and access to
efficient and inexpensive communications.[35]
3.42
In support of ABAC’s comments, he concluded that trade facilitation is of
vital importance and that:
The APEC agenda … is about opening markets in the region to
access to trade in commodities, manufactures and services and to opening
opportunities for the flow of investments in all regional economies.[36]
Further Support for ABAC’s Views
3.43
Evidence given by the Chief Executive of Tradegate supported the importance
of trade facilitation. Tradegate is an industry-based, not-for-profit
organisation working for the international trade and transport community. It
represents a variety of organisations, including: shipping lines, stevedores,
consolidators, airlines, customs brokers, freight forwarders, depots, container
parks, transport companies, importers and exporters. Several leading
associations representing these groups are also in its membership.[37]
3.44
Tradegate was established in 1989 and, since then, one of its main
projects has been “…the use of electronic commerce technologies to streamline
supply chain processes in the international trade and transport logistics
industry”. The result of this activity has been to give Tradegate a clear idea
of what is needed in the area of trade facilitation:
As a trading nation, it is in Australia’s interests that the
export of goods and services be achieved in the most cost effective and timely
manner as possible. To achieve this, it is imperative that Australia develop a
focused national approach to trade facilitation.
Trade facilitation requires a long term perspective to be
successful as changes to trading environments and government decision making
can take several years to implement. While Australia has done much to improve
its access regime for trade—reduced tariff barriers, improved processing at the
barrier—there is still much to be done.[38]
3.45
In support of these comments, Tradegate noted that, in ratings
established by the World Bank, Australia ranks only 34th among
economies considered to have the easiest trade access. It commented that:
“This provides significant opportunities for a whole of government trade
facilitation approach to improve importers’ access to international markets”.[39]
3.46
Tradegate’s submission to the inquiry included an example of an area
where there is considerable scope for simplification—and where that
simplification could make a useful reduction in the costs of international
trade. Referring to a study carried out by the Australian Customs Service in
2008, Tradegate noted:
…there are 41 Commonwealth and State government agencies
involved in international trade, collecting over 7,640 different pieces of
data. A lot of this data is required on paper forms – some 275 of them. Forms
do not allow fast and efficient processing as data from a form has to be
re-keyed into a computer.
Of these 7,640 data items, when harmonised across all
agencies only 637 core data items were needed. That is, less than 10 per cent
of the data was unique, a massive 90 per cent of duplication.[40]
3.47
Quoting from an OECD study made in 2003, Quantitative Assessment of
the Benefits of Trade Facilitation, Tradegate also reported that the study estimated
that transaction costs ranged from 1 to 15 per cent of the value of traded
goods. The OECD found that each transaction passed, on average, through 27 to
30 parties, such as: brokers, vendors, banks, carriers and freight forwarders.
Each transaction required at least 40 documents and over 200 data elements were
typically requested. At least 60 to 70 per cent of these were re-keyed at least
once and about 15 per cent of them re-typed up to 30 times.[41]
3.48
Tradegate supported ABAC’s concerns about small to medium enterprises
(SMEs). It reported:
…a late 1980s study concluded that SMEs, that is firms with
fewer than 250 employees in the European Union, incur trade transaction costs
30-45 per cent higher per consignment than those falling on larger firms.
The Department of Foreign Affairs and Trade (DFAT) calculated
that savings are “highest for smaller shipments rather than bulk shipments.
This is due to the high fixed cost of completing paperwork requirements
manually. …costs …estimated by traders at between US$75-US$125 per transaction,
irrespective of the size of the transaction”.[42]
3.49
To put these comments in an Australian context, Tradegate added:
Assuming DFAT’s numbers to be reasonably accurate then
Australian exporters face paper trade transaction costs of well over $100
million per annum.
Just two agencies of the Federal Government cost importers
and exporters in excess of $300 million per annum. Importers or their agents
pay $50 per import declaration to Australian Customs, a cost of $165 million
per annum, while AQIS currently charges $33 per import declaration.[43]
Improving the Logistics Chain
3.50
An area that shows significant promise for trade facilitation is the
improvement and greater integration of the transport and logistics networks in
the region.
3.51
Australia has made great efforts in the last few years to overcome
deficiencies in its transport and logistics network. Billions of dollars have
been allocated to the improvement of existing infrastructure, building new
infrastructure, and reducing impediments to the rapid and efficient movement of
goods.
3.52
APEC has also made the improvement of the supply chain network a
priority. In April 2010, APEC commented on a program that had been established
to develop an APEC Supply Chain Framework.[44]
3.53
In its submission to this inquiry, DFAT noted that the APEC program is
seeking to:
- identify
chokepoints impeding trade logistics in the Asia-Pacific region;
- assess
measures currently in place to ameliorate those chokepoints ;
- recommend
further action to remove impediments to trade logistics.[45]
3.54
The APEC announcement said that “efficiency gains in an interconnected
network for transport (and trade) would lead to more than just easier movement
of goods; overall it would result in higher growth and greater prosperity “.[46]
3.55
APEC reported that an increase of one percentage point in the ratio of
trade to GDP would produce a two or three per cent increase in income per head.
A 10 per cent efficiency gain in the supply chain it estimated would “lift
APEC’s real GDP by US$21 billion per year and generate thousands of jobs”.[47]
3.56
The Australian Federation of International Forwarders said, in evidence
to the Sub-Committee, that the major problems facing Australia’s importers and
exporters are the interfaces at port and airport and the compliance functions
for Customs and quarantine clearance.[48]
3.57
The Federation claimed that there are serious shortcomings in the
transport infrastructure around the ports; this mainly affects Sydney and
Melbourne at present, but Brisbane will also have problems as its growth
proceeds.[49]
3.58
The efficiency of cargo movement through the ports and the distribution
of imports to final destinations are under close scrutiny. The Federation gave
as an example the present situation in Sydney:
...the New South Wales ports minister has become very
involved, as did his predecessor, in trying to improve the efficiency. One of
the solutions ... brought forward was to impose penalties and fees, because if
the ports would not work efficiently by evolution or by organic methods then
perhaps they needed to be forced to do so.
Some solutions that were brought forward were penalty rates
for picking up containers from the wharf during peak hours. Of course, we are
talking about peak hours as daylight business hours that impact upon other
users of the roads—consumers, but also business. Therefore, by imposing
penalties on the transport operators, could we shift their hours of working to
night time and evening and how would we do that?
The penalty proposal was brought forward, which is called peak
period pricing, PPP. I would not say that has been shelved, but it is still
there in the background as a threat.
In the meantime, the ports minister for New South Wales is
trying to encourage Sydney Ports, who operate the ports on his behalf, to bring
forward these productivity and efficiency initiatives, some of which relate to
internal target setting by the CTOs themselves; in other words, setting their
own targets for which if they do not achieve them then maybe they impose on
themselves some internal penalties on staff and operations.
I envisage all of that will come to a head within the next
six months, because if this does not work and we still have inefficiencies at
the ports with long truck queues and congested roads around the port, then
something has to be done.[50]
3.59
The Federation commented that among the problems adding to the cost of
freight transport is the application of storage charges, or demurrage, for
cargo that cannot be immediately moved to the port, or from the port to its
final destination, and must be staged through a storage depot. There are also
similar charges, detention charges, applied to empty containers that are not
returned within a specified time (usually ten days) after they have been
emptied. A third factor is the cost of repositioning empty containers and the
cost of their storage in empty container depots while awaiting cargoes or
repositioning.[51]
3.60
One of the problems that increases the incidence of these charges is the
mismatch between the hours worked by ports and freight forwarders – which can
be 24 hours a day and seven days a week – and importers and exporters who have
shorter hours and limited to five or six days a week.[52]
3.61
One of the suggestion put forward to help reduce road congestion around
the ports, is to apply either an incentive or a penalty to encourage transport
companies to have their trucks bring an empty container back to the port when
collecting cargo – so that single movements are discouraged.[53]
3.62
An additional cost that has emerged in recent years is the cost of
antiterrorist programs. The security issues that have emerged in recent years
has steeply increased the cost of safeguarding cargoes:
If we go back probably 15 years there were no structured air
cargo or sea cargo antiterrorist programs. That is quite a recent introduction.
Things have moved very quickly and are still moving. I think it is a very large
factor in relation to our activities, so I might speak about those briefly.
The security issues relate to compliance costs, compliance
for our members in terms of regulation for the development of efficient and
effective programs to ensure the integrity of the cargo from the supplier
through to the carrier that takes the goods out of the country. To do that
there must be training in place, a system in place to monitor the cargo through
its movement and there is audit and compliance. With those two items come costs
as well.[54]
3.63
The Federation explained some of the additional programs and technology,
with accompanying costs, that are being introduced to deal with security
problems:
Just recently you would be aware that the government
announced $54 million to assist industry to implement and enhance the air cargo
security program. ... Part of that money will be developing a regulated shipper
program. You talked about our role as freight forwarders. We are getting closer
to the shipper because at the moment the shipper is unregulated in air cargo
security in that all they have to do is identify themselves and show that they
have a driver’s licence or whatever and they can give the cargo to the party in
the chain that takes it to the airport. That is not satisfactory.
We need to know more about the individuals working at
shippers’ premises, as much as we have to regulate our own industry. Part of
this money will go towards a new regulated shipper program.
Part of the money will also go to improving the technical
examination of cargo. By this I mean cargo x-ray and explosive trace detection
technology, which is available in some form already. These technological improvements
we will see continuing on forever and at the moment I cannot guarantee that
they are foolproof. I can guarantee that they are putting hurdles in the way of
would-be terrorists and therefore making the supply chain a lot more secure
than it would be without them.
We are looking to work together with the government to
develop these new systems to improve cargo security. At the same time it should
be noted that the freight forwarder is going to have to pay more to work with
this technology, not just in the purchase of equipment but also in the training
required to operate the equipment effectively.[55]
Wider Recognition of the Importance of Trade Facilitation
3.64
The Asian Development Bank (ADB), quoting the Economic Commission for
Europe, noted that:
The main objective of trade facilitation is to simplify the
process and minimise transaction costs in international trade, while
maintaining effective levels of government control.[56]
3.65
The World Trade Organization (WTO) has also recognised the importance of
trade facilitation. It was added to the WTO agenda at the 1st
Ministerial Conference in Singapore in 1996. The Ministerial Declaration that
launched the DOHA Round included specific provision for consideration of the needs
and priorities of members in this area.[57]
3.66
In part, the Ministerial Declaration said:
Recognizing the case for further expediting the movement,
release and clearance of goods, including goods in transit, and the need for
enhanced technical assistance and capacity building in this area we agree that
negotiations will take place after the Fifth Session of the Ministerial
Conference…
In the period until the Fifth Session, the Council for Trade
in Goods shall review and, as appropriate, clarify and improve relevant aspects…and
identify the trade facilitation needs and priorities of members, in particular
developing and least-developed countries. We commit ourselves to ensuring
adequate technical assistance and support for capacity building in this area.[58]
3.67
In August 2004, “…Members took note of the trade facilitation work done
so far and agreed to start negotiations…” by adopting the so-called ‘July
Package’. Under this agreement the Members:
Besides committing themselves to clarifying and improving the
relevant GATT Articles, …recognised that the principle of special and
differential treatment for developing and least-developed countries should
extend beyond granting traditional transition periods for the implementation of
commitments and that the extent and timing of entering into commitments should
be related to the implementation capacities of such countries.[59]
3.68
Later in 2004 a Negotiating Group on Trade Facilitation was established
and commenced negotiations. Discussions were suspended in 2006 because they
seemed to be heading for agreement well in advance of the main negotiations.[60]
3.69
The Group now has a wide range of proposals from Members to consider and
will have to decide which of them will be included in any agreement. This will
involve the delicate task of balancing the different interests of all WTO
Members so that a consensus can be reached. However, as the paper quoted above
notes:
It is certain that technical assistance and capacity building
for less developed countries are the keys to reform of WTO law. Looking at the
potential that trade facilitation presents, especially for the developing
world, it is more than desirable that Members manage to agree on an ambitious
set of disciplines.[61]
3.70
The ADB, commenting on this aspect of the Doha negotiations, said:
The global trade talks on the Doha Development Agenda include
negotiations of a trade facilitation agreement, focusing on freedom of transit,
fees and formalities for import and export, as well as publication and
administration of trade regulations (transparency). Trade facilitation
provisions are also included in a growing number of free trade agreements in
Asia and the Pacific.[62]
3.71
Another international organisation with a crucial role to play in the
process of improving trade facilitation is the World Customs Organization
(WCO). The WCO represents 176 Customs administrations that, collectively,
process about 98 per cent of the world’s trade. Through this organisation, based
in Brussels, Customs authorities from around the world co-operate on issues
such as: development of global standards; simplification and harmonisation of
Customs procedures; trade supply chain security; facilitation of international
trade; enhancement of Customs enforcement and compliance activities;
anti-counterfeiting and anti-piracy; public private partnerships; integrity
promotion; and sustainable Customs capacity building programs.[63]
3.72
The WCO also maintains the international Harmonized System of goods
nomenclature and administers the technical areas of the WTO Agreements on
Customs Valuation and Rules of Origin.[64]
3.73
Australia has a very active organisation that is co-operating closely
with the WCO in training international Customs officers – the Centre for
Customs and Excise Studies at the University of Canberra. This program is regarded
as an international centre of excellence; it offers comprehensive courses in
customs, excise, revenue management, border management and related areas. It is
also very active in research and has an extensive program of consultancy
projects.[65]
3.74
One of the main aims, for both the WCO and the Australian Centre for
Customs and Excise studies, is to lower international transaction costs through
the streamlining and harmonisation of customs procedures throughout the world.
3.75
The Asian Development Bank commented that although there is wide recognition
of the benefits of trade facilitation, some countries are reluctant to commit
to the implementation costs:
Some developing countries may view costs associated with
implementing trade facilitation measures as prohibitive, but evidence suggests
otherwise.
The introduction and implementation of trade facilitation
measures do entail start-up costs for government agencies; however, these
reforms eventually reduce government expenditures by enhancing transaction
efficiency and transparency, eliminating duplicative functions, and allowing a
more economical and efficient use of administrative resources. In practice,
some of the initial costs are also transferred to traders through charges for
services provided.
Overall, savings from implementing trade facilitation
measures, such as those being negotiated under the WTO, are expected to far
outweigh any setup and operating costs involved in implementing them. ..[T]his
is particularly true for some of the more advanced and far-reaching trade
facilitation measures such as electronic single window, risk management, and
post-clearance audit mechanisms.[66]
3.76
The ADB added that there were several different types of cost involved
in trade facilitation measures:
- Institutional costs,
such as the restructuring of existing institutions or establishing new ones
- Regulatory and
legislative costs, such as amendment of existing regulatory and legal systems
- Equipment and
training costs, such as setting up electronic data systems and training the
staff members
- Other costs, such as
the potential loss of customs revenue — however, a loss of revenue can be
offset, to some extent, by increased trade volumes and by a reduction in the
revenue lost through corruption, as procedures become more transparent.[67]
3.77
The Bank commented that it was not necessary for every country to
implement radical changes and employ very expensive technology:
...cost concerns should not deter countries from pursuing
trade facilitation. Trade facilitation can often be significantly achieved
without investing in a fully automated and computerised system.
Merely simplifying rules, procedures, and regulatory
processes, and investing in port and border crossing infrastructure and
equipment, such as container scanners, can considerably expedite control and
clearance of goods at borders. As such, optimising the use of the existing
infrastructure, equipment, and human resources can yield early and significant
efficiency gains.[68]
Export Market Development Grants
3.78
The Export Market Development Grants (EMDG) scheme was described in the
report of the Mortimer Review of Export Policies and Programs as “the
Australian Government’s principal financial assistance program for aspiring and
developing exporters”. The report set out the aims of the scheme as:
To encourage businesses to promote their products and
services overseas and to become established exporters whose exporting persists
as a sustained activity after assistance under the scheme ceases.[69]
3.79
The EMDG scheme has operated since 1974 and the Mortimer Review found
that the:
Scheme has been helpful in introducing smaller Australian
businesses and new exporters to the global market and can be considered both
effective and efficient in supporting the development of Australia’s exports. The
scheme should be continued.[70]
3.80
The Australian Institute of Export told the Sub-Committee that the
scheme is “vital infrastructure for exporters”. The Institute pointed out that
reviews have shown that EMD Grants increase productivity and they do not
increase inflation because most of the funds are spent offshore.[71]
3.81
There was considerable distress among exporters when Austrade had
insufficient funds in 2007-08 to meet the EMDG claims lodged. Austrade estimated
the shortfall at A$28 million and about 900 firms had their claims
substantially reduced for that year. Austrade reduced the initial payout from
$70,000 to $40,000 and could pay only 24.4 per cent of the second stage
entitlements. In effect, this reduced the statutory maximum grant from $150,000
to $89,533.[72]
3.82
The Government responded by increasing funding for the scheme in
2008-09 by $50 million and adding another $50 million in 2009-10, providing a
total budget of $200,400,000 in each year. It also proposed amendments to the
scheme in the Export Market Development Grants Amendment Bill 2010, which was
introduced in the House of Representatives on 26 May 2010.[73]
3.83
The Minister for Foreign Affairs said the amendments were designed to
focus the grants “on those SME exporters who can benefit most”. The changes proposed:
reduction of the maximum number of grants for an individual exporter from eight
to seven; retention of the maximum grant of $150,000; an increase in the
minimum level of expenditure required from $10,000 to $20,000; and a cap on the
maximum amount claimable for intellectual property expenses at $50,000. It also
proposed an extension of the life of the scheme by five years – to 2015-16.[74]
3.84
The total budget allocation for each year from 2010-11 to 2013-14 is
$150,400,000. The legislation provides for a further review to be provided to
the Minister by 30 June 2015, to determine whether there will be a further
extension of the scheme beyond 2015-16.[75]
3.85
The Australian Institute of Export strongly advocated the provision of
full funding for the scheme on a regular basis. The Institute noted that what
exporters need is the ability to be able to calculate the ultimate cost to them
of activities such as: trade fairs; provision of free samples; advertising;
engagement of marketing assistance; trips to prospective markets and setting up
promotional office overseas. The Institute added:
If exporters don’t know how much these activities will cost
them, they won’t undertake these additional activities that would otherwise
lead to extra export revenue for Australia.[76]
Recommendation 4 |
|
That the Australian Government commit itself to a concerted
effort to lift Australia into the top 20 countries in the World Bank’s list
of economies having the easiest trade access. |
Recommendation 5 |
|
That Australia work towards the complete introduction of
paperless trading as soon as possible and that it encourage and, where
necessary, assist its trading partners to achieve the same outcome. |
Recommendation 6 |
|
That Australia should strongly encourage the complete
acceptance of the APEC Business Travel Card by the remaining members of APEC;
and also explore the possibility of establishing a similar arrangement with
other trading partners, e.g. non-APEC economies in Latin America, the EU and
India. |
Recommendation 7 |
|
That Australia should take a leading role in working towards
the improvement of supply-chain processes in APEC and in encouraging other trading
partners to undertake a similar program. |
Recommendation 8 |
|
That, in view of the benefits arising from the Export Market
Development Grants Scheme, it should continue indefinitely and be fully
funded to provide certainty for exporters seeking to widen their overseas
market focus. |