1 UNECE – SECOND INTERNATIONAL FORUM ON TRADE FACILITATION GENEVA, MAY 2003 COSTS AND BENEFITS OF TRADE FACILITATION Anthony Kleitz Trade Directorate, OECD

2 I. OBJECTIVE OF THIS PRESENTATION Understand better the nature and importance of trade facilitation. Focus on a quantitative rather qualitative assessment.

3 II. DEFINITIONS Trade facilitation (TF) – an imprecise term WTO: simplification and harmonisation of trade procedures; Often considered to include other procedural NTBs. Costs and benefits – not the flip side of each other Trade transaction costs (TTC): what TF aims to reduce; Implementation costs of TF; Benefits of TF: come from the reduction of TTC; Public and private sectors see different costs and benefits.

4 III. QUANTITATIVE ANALYSIS OF COSTS AND BENEFITS OF TF a)Challenges:  Inconsistent data on TTC and implementation costs;  No standard methodology for analysis;  Results vary according to parameters and assumptions.  Public and private sectors face different costs and benefits. b)Implementation costs for governments - an example of data for automated customs systems:  Chile – $ 5 m.;  Chinese Taipei – $ 5 m. (air-cargo system), $ 6.5 m. (sea-cargo system);  US – overall $ 1 b. (ACE estimate).

5 c)Modelling trade and welfare effects: 1.Overall TTC and benefits of TF: some results –TTC valued by UNCTAD at 7-10% of world trade; –Typically TF estimated to reduce TTC by 1-3% of world trade value, increasing GDP: Estimated Benefits of TF* Additional GDP Growth (Billion US$) Share of TF benefits in overall liberalisation benefits (%) Dutch study (2003)7234% OECD study (2003)7665% APEC study (2002)15456% * Liberalisation assumptions of these studies differ

6 2.Quantitative cost indications for particular sectors: Some goods more susceptible to border controls -- e.g. border delays for agricultural products: Korea – typically days for new products (cf. less than 3-4 days for most other agricultural products); Japan – 1 day more for sea-cargoes subject to other government procedures (e.g. animal and plant quarantine, food sanitary).

7 3. Quantitative assessments for particular countries: Customs Service Quality in Relation to GDP Per Capita

8 CUSTOMS QUALITY BY REGION

9 OBSERVATIONS ON PERCEIVED QUALITY OF THE CUSTOMS ENVIRONMENT “Customs service quality” is an average of three survey indicators; SMEs and developing country firms frequently seen as disadvantaged in meeting TTC and implementation costs; Positive correlation between income and customs quality; Yet many examples of low-income countries with good customs services; Examples of countries with good customs found in all major regions; Suggests that benefits can be within grasp.

10 4.Calculations for particular kinds of costs and benefits: Administrative costs: Japan MITI estimates feasible reductions of import prices: – % for transport machinery; – % for other machinery and equipment. Savings from paperless trading: –estimated % of landed value by Australian DFAT; – 3% average  $60b. savings across APEC. Time required for customs release.

11 Average Customs Clearance Time for Imports through trade facilitation (Hours) EconomyBeforeAfter New Zealand Singapore Greece Korea Costa Rica Peru Source: WTO, OECD, and others

12 IV. CONCLUDING REMARKS No single answer; work continues. Important to identify key areas where TF may produce greatest benefits. One size does not fit all; Importance of a coherent approach to streamlining procedures and improving infrastructure.