Department of Public Administration

University of Dhaka

Group #1

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 PA: 522: International Trade, Protection and Negotiation

Presented to

Presented by

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Table of contents
Introduction 04
Objective of the study 04
Limitation of the study 05
Methodology of the study 05
Findings of the study 05
International Trade Barrier 05
Why Trade Barriers Used? 06
Types of Trade Barriers 06
Non-tariff barriers to trade 07
Tariff barriers 09
Trade Facilitation 12
Definition of trade facilitation 12
Trade facilitation Issues and objectives 13
Why is trade facilitation important? 13
General aspects of trade facilitation 14
Trade Facilitation Bodies 15
International Level 16
Regional and Bilateral Level 18
National Initiatives 19
Conclusion 20
Bibliography 21

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Introduction
Trade is an integral part of the total developmental effort and national growth of all economies.
It particularly plays a central role in the development plan where foreign exchange scarcity
constitutes a critical bottleneck. International trade is a factor and a product of the economic
development of nations and also well known as “engine of growth”. International trade
increases the number of goods that domestic consumers can choose from, decreases the cost
of those goods through increased competition, and allows domestic industries to ship their
products abroad.

In this paper, I will particularly discuss about international trade barriers and facilitation. Both
concepts play a vital role in today’s international trade activity. International trade increases
the number of goods that domestic consumers can choose from, decreases the cost of those
goods through increased competition, and allows domestic industries to ship their products
abroad. Trade facilitation is a concept that considers the simplification, harmonization,
standardization and modernization of trade procedures. Its principle aim is to reduce
transaction costs in international trade, especially those between business and government
actors at the national border.

Objective of the study:

This paper has been prepared from the corner of two objectives are as follows:

Primary objective

• To give a concrete idea about International Trade Barriers and how it impacts on the
trade
• To know organizations that facilities international trade activities

Secondary Objective

• To know the various terms of barriers and protectionism

• To know the impact of barriers in the countries
• To know the role of World Bank, World Trade Organizations, European Union and
others in international trade activity

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 • To know how organizations facilitate trade activity

Limitation of the study:

Although the study has reached its aims, there were some unavoidable limitations and
shortcomings.

First of all, I am an amateur researcher who is not even expert on the field of study; therefore,
it was a tough task to assess the objectives perfectly within short time-limit.

Secondly, all the data I used in this study is mostly self-reported that is limited by the fact that it
rarely can be independently verified.

Methodology of the study

This study is generally a non-empirical analysis. The main sources of this study include
secondary sources like textbooks, reports, relevant national and international legislations, case
studies, some important daily newspapers, online documents and some publications. The study
has also relied on decided cases of Apex Court of Bangladesh and the Subcontinent.

Findings of the study

International Trade Barrier

Trade barriers are often tariffs and taxes imposed to protect - or favor - local producers.
International efforts to remove these discriminatory tariffs have been ongoing for over 50
years, coordinated initially by the General Agreement on Tariffs and Trade, followed by the
WTO and nine rounds of the international trade negotiations which govern the current WTO
system. Non-tariff barriers are increasingly significant and varied and can be more difficult to
overcome. Some non-tariff barriers have sensitive cultural and social issues, or appeal to
legitimate concerns, which must be considered. Other non-tariff barriers can create unjustified
obstacles to fair trade and can come in many forms, such as:

 technical regulations, standards and conformity assessment procedures

 labeling rules
 poor protection of intellectual property rights and geographical indicators
 misuse of sanitary and phytosanitary measures
 unfair subsidies
 unjustified trade defense measures - such as anti-dumping actions
 discriminatory taxation and other additional fees

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  ad hoc bans and prohibitions on imports - e.g. those implemented on the basis of
 spurious claims to protect the health and safety of citizens
 non-automatic licensing procedures
 customs procedures
 quantitative restrictions
 government procurement
 restrictions on access to raw materials
 barriers to trade in services and investment

They can also be any combination of these and overcoming each requires a different approach.
Trade barriers can also be created if countries breach the rules and commitments they have
legally entered into - mainly WTO or bilateral trade agreements. This may be as a result of poor
interpretation, misunderstanding of agreements, or may be intentional.

Why Trade Barriers Used?

Tariffs are often created to protect infant industries and developing economies, but are also
used by more advanced economies with developed industries. Here are five of the top reasons
tariffs are used:

1) Protecting Domestic Employment

The levying of tariffs is often highly politicized. The possibility of increased competition from
imported goods can threaten domestic industries. These domestic companies may fire workers
or shift production abroad to cut costs, which means higher unemployment and a less happy
electorate. The unemployment argument often shifts to domestic industries complaining about
cheap foreign labor, and how poor working conditions and lack of regulation allow foreign
companies to produce goods more cheaply. In economics, however, countries will continue to
produce goods until they no longer have a comparative advantage (not to be confused with an
absolute advantage).

2) Protecting Consumers

A government may levy a tariff on products that it feels could endanger its population. For
example, South Korea may place a tariff on imported beef from the United States if it thinks
that the goods could be tainted with disease.

3) Infant Industries

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The use of tariffs to protect infant industries can be seen by the Import Substitution
Industrialization (ISI) strategy employed by many developing nations. The government of a
developing economy will levy tariffs on imported goods in industries in which it wants to foster
growth. This increases the prices of imported goods and creates a domestic market for
domestically produced goods, while protecting those industries from being forced out by more
competitive pricing. It decreases unemployment and allows developing countries to shift from
agricultural products to finished goods.

4) National Security

Barriers are also employed by developed countries to protect certain industries that are
deemed strategically important, such as those supporting national security. Defense industries
are often viewed as vital to state interests, and often enjoy significant levels of protection. For
example, while both Western Europe and the United States are industrialized, both are very
protective of defense-oriented companies.

5) Retaliation

Countries may also set tariffs as a retaliation technique if they think that a trading partner has
not played by the rules. For example, if France believes that the United States has allowed its
wine producers to call its domestically produced sparkling wines "Champagne" (a name specific
to the Champagne region of France) for too long, it may levy a tariff on imported meat from the
United States. If the U.S. agrees to crack down on the improper labeling, France is likely to stop
its retaliation. Retaliation can also be employed if a trading partner goes against the
government's foreign policy objectives.

Types of Trade Barriers

A) Tariffs and Tariff Rate Quotas

Tariffs, which are taxes on imports of commodities into a country or region, are among the
oldest forms of government intervention in economic activity. They are implemented for two
clear economic purposes. First, they provide revenue for the government. Second, they
improve economic returns to firms and suppliers of resources to domestic industry that face
competition from foreign imports. Tariffs are widely used to protect domestic producers’
incomes from foreign competition. This protection comes at an economic cost to domestic
consumers who pay higher prices for import competing goods and to the economy as a whole
through the inefficient allocation of resources to the import competing domestic industry.
Therefore, since 1948, when average tariffs on manufactured goods exceeded 30 percent in
most developed economies, those economies have sought to reduce tariffs on manufactured
goods through several rounds of negotiations under the General Agreement on Tariffs Trade

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(GATT). Only in the most recent Uruguay Round of negotiations were trade and tariff
restrictions in agriculture addressed. In the past, and even under GATT, tariffs levied on some
agricultural commodities by some countries have been very large. When coupled with other
barriers to trade they have often constituted formidable barriers to market access from foreign
producers. In fact, tariffs that are set high enough can block all trade and act just like import
bans. A tariff-rate quota (TRQ) combines the idea of a tariff with that of a quota. The typical
TRQ will set a low tariff for imports of a fixed quantity and a highertariff for any imports that
exceed that initial quantity. In a legal sense and at the WTO, countries are allowed to combine
the use of two tariffs in the form of a TRQ, even when they have agreed not to use strict import
quotas. In the United States, important TRQ schedules are set for beef, sugar, peanuts, and
many dairy products. In each case, the initial tariff rate is quite low, but the over-quota tariff is
prohibitive or close to prohibitive for most normal trade. Explicit import quotas used to be
quite common in agricultural trade. They allowed governments to strictly limit the amount of
imports of a commodity and thus to plan on a particular import quantity in setting domestic
commodity programs. Another common non-tariff barrier (NTB) was the so-called “voluntary
export restraint” (VER) under which exporting countries would agree to limit shipments of a
commodity to the importing country, although often only under threat of some even more
restrictive or onerous activity. In some cases, exporters were willing to comply with a VER
because they were able to capture economic benefits through higher prices for their exports in
the importing country’s market.

There are several types of tariffs and barriers that a government can employ:

• Specific tariffs
• Licenses
• Import quotas
• Voluntary export restraints
• Local content requirements

Specific Tariffs

A fixed fee levied on one unit of an imported good is referred to as a specific tariff. This tariff
can vary according to the type of good imported. For example, a country could levy a $15 tariff
on each pair of shoes imported, but levy a $300 tariff on each computer imported.

Ad Valorem Tariffs

The phrase ad valorem is Latin for "according to value", and this type of tariff is levied on a
good based on a percentage of that good's value. An example of an ad valorem tariff would be
a 15% tariff levied by Japan on U.S. automobiles. The 15% is a price increase on the value of the
automobile, so a $10,000 vehicle now costs $11,500 to Japanese consumers. This price increase
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protects domestic producers from being undercut, but also keeps prices artificially high for
Japanese car shoppers.

B) Non-tariff barriers to trade include:

Technical Barriers to Trade

All countries impose technical rules about packaging, product definitions, labeling, etc. In the
context of international trade, such rules may also be used as non-tariff trade barriers. For
example, imagine if Korea were to require that oranges sold in the country be less than two
inches in diameter. Oranges grown in Korea happen to be much smaller than Navel oranges
grown in California, so this type of “technical” rule would effectively ban the sales of California
oranges and protect the market for Korean oranges. Such rules violate WTO provisions that
require countries to treat imports a nd domestic products equivalently and not to advantage
products from one source over another, even in indirect ways. Again, however, these issues will
likely be dealt with through bilateral and multilateral trade negotiations rather than through
domestic Farm Bill policy initiatives.

Exchange Rate Management Policies

Some countries may restrict agricultural imports through managing their exchange rates. To
some degree, countries can and have used exchange rate policies to discourage imports and
encourage exports of all commodities. The exchange rate between two countries’ currencies is
simply the price at which one currency trades for the other. For example, if one U.S. dollar can
be used to purchase 100 Japanese yen (and vice versa), the exchange rate between the U.S.
dollar and the Japanese yen is 100 yen per dollar. If the yen depreciates in value relative to the
U.S. dollar, then a dollar is able to purchase more yen. A 10 percent depreciation or devaluation
of the yen, for example, would mean that the price of one U.S. dollar increased to 110 yen. One
effect of currency depreciation is to make all imports more expensive in the country itself. If,
for example, the yen depreciates by 10 percent from an initial value of 100 yen per dollar, and
the price of a ton of U.S. beef on world markets is $2,000, then the price of that ton of beef in
Japan would increase from 200,000 yen to 220,000 yen. A policy that deliberately lowers the
exchange rate of a country’s currency will, therefore, inhibit imports of agricultural
commodities, as well as imports of all other commodities. Thus, countries that pursue
deliberate policies of undervaluing their currency in international financial markets are not
usually targeting agricultural imports. Some countries have targeted specific types of imports
through implementing multiple exchange rate policy under which importers were required to
pay different exchange rates for foreign currency depending on the commodities they were
importing. The objectives of such programs have been to reduce balance of payments problems
and to raise revenues for the government. Multiple exchange rate programs were rare in the

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1990s, and generally have not been utilized by developed economies. Finally, exchange rate
policies are usually not sector-specific. In the United States, they are clearly under the purview
of the Federal Reserve Board and, as such, will not likely be a major issue for the 2002 Farm Bill.
There have been many calls in recent congressional testimony, however, to offset the negative
impacts caused by a strengthening US dollar with counter-cyclical payments to export
dependent agricultural products.

Licenses

A license is granted to a business by the government, and allows the business to import a
certain type of good into the country. For example, there could be a restriction on imported
cheese, and licenses would be granted to certain companies allowing them to act as importers.
This creates a restriction on competition, and increases prices faced by consumers.

Import Quotas

An import quota is a restriction placed on the amount of a particular good that can be
imported. This sort of barrier is often associated with the issuance of licenses. For example, a
country may place a quota on the volume of imported citrus fruit that is allowed.

Voluntary Export Restraints (VER)

This type of trade barrier is "voluntary" in that it is created by the exporting country rather than
the importing one. A voluntary export restraint is usually levied at the behest of the importing
country, and could be accompanied by a reciprocal VER. For example, Brazil could place a VER
on the exportation of sugar to Canada, based on a request by Canada. Canada could then place
a VER on the exportation of coal to Brazil. This increases the price of both coal and sugar, but
protects the domestic industries.

Local Content Requirement

Instead of placing a quota on the number of goods that can be imported, the government can
require that a certain percentage of a good be made domestically. The restriction can be a
percentage of the good itself, or a percentage of the value of the good. For example, a
restriction on the import of computers might say that 25% of the pieces used to make the
computer are made domestically, or can say that 15% of the value of the good must come from
domestically produced components.

How Tariffs Affect Prices in International Trade

Tariffs increase the prices of imported goods. Because of this, domestic producers are not
forced to reduce their prices from increased competition, and domestic consumers are left

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paying higher prices as a result. Tariffs also reduce efficiencies by allowing companies that
would not exist in a more competitive market to remain open.

Figure 1 illustrates the effects of world trade without the presence of a tariff. In the graph, DS
means domestic supply and DD means domestic demand. The price of goods at home is found
at price P, while the world price is found at P*. At a lower price, domestic consumers will
consume Qw worth of goods, but because the home country can only produce up to Qd, it must
import Qw-Qd worth of goods.

When a tariff or other price-increasing policy is put in place, the effect is to increase prices and
limit the volume of imports. In Figure 2, price increases from the non-tariff P* to P'. Because
price has increased, more domestic companies are willing to produce the good, so Qd moves
right. This also shifts Qw left. The overall effect is a reduction in imports, increased domestic
production and higher consumer prices. (To learn more about the movement of equilibrium
due to changes in supply and demand, read Understanding Supply-Side Economics.)

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Trade Facilitation
Definition of trade facilitation

Trade facilitation covers all steps that can be taken in view of smoothing the flow of trade. The
term is widely used to cover all sorts of non-tariff barriers. In WTO concept, trade facilitation is
limited to „the simplification and harmonization of international trade procedures”, covering
the „activities, practices and formalities involved in collecting, presenting communicating and
processing data required for the movement of goods in international trade”.

Trade facilitation aims at developing a consistent, transparent, coherent, non-discriminatory

and predictable environment for international trade transactions based on internationally
accepted norms and practices resulting from:

• ð simplification of formalities and procedures

• ð standardization and improvement of physical infrastructure and facilities
• ð harmonization of applicable laws and regulations

The main goal of trade facilitation is to reduce the transaction costs and complexity of
international trade for businesses and improve the trading environment in a country, while
maintaining efficient and effective levels of government control.

The main area of focus includes:

• Infrastructure investment
• Customs modernization and border crossing – environment
• Streamlining of documentary requirements and information flows
• Automation and EDI
• Ports efficiency
• Logistics and transport services: regulation and competitiveness
• Transit and multimode transport
• Transport security

Trade facilitation Issues and objectives

Trade facilitation is a diverse and challenging subject with potential benefits for both business
and government at national, regional and international levels. It involves political, economic,
business, administrative, technical and technological, as well as financial issues, all of which
must be taken into consideration when a country or region develops its trade facilitation
strategy. The contents of trade facilitation measures can be highly technical and require the
input of expert practitioners and administrators. Any measure that eases a trade transaction
and leads to time and cost reductions in the transaction cycle fits into the category of trade

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facilitation. The latter can be effected through more efficient procedures and operations —
increasing value without a proportionate increase in cost — or through removing any
deadweight economic loss and redundancies.

Why is trade facilitation important?

The importance of the procedures that should be undertaken during an export or import
procedure have increased in recent years, adding to the cost of trading for both governments
and business.

The reasons for which trade facilitation has become an important element of economic
development are, among others:

 à increased trade volumes due to progressive trade liberalization

 à increased trade velocity due to modern technologies
 à increased complexity of trade

In the meantime, the dual role of Governments – providing trade facilitation while undertaking
statutory obligations – has become increasingly important in the current security-conscious
international environment.

For a given product, to remain competitive on foreign markets, the cost of its commercial
transaction must be as low as possible. The tools of the Supply Chain Management, which
attempt to manage the whole series of activities involved in trading goods are essential in this
respect. However, they should be complemented by effective procedures at national frontiers
in order to avoid unforeseen or undue delays or unexpected additional costs.

Therefore, trade facilitation should cover measures regarding formalities, procedures and
documents and the use of standard messages for trade transactions. In addition, measures
must be included to improve the physical movement of goods through the:

 supply of better (transparent, predictable, uniform) services, such as: adequate legal
environment, appropriate transport and communication infrastructure, organized
services providers companies, etc.;
 use of modern information and communication technology tools by both services
providers and users;
 increased awareness for all concerned actors regarding the potential benefits that they
may achieve through trade facilitation.

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Trade facilitation results in direct benefits to both Governments and business community:
Governments benefit in terms of revenue collection, increased economic efficiency, better
security and protection of society. Traders gain through faster delivery of goods and reduced
transaction costs. These gains are considerable, especially for small companies, for whom the
costs of compliance with procedures are considerable higher: in this case, trade facilitation
enhances the capacity of SMEs to participate in international trade.

General aspects of trade facilitation

Trade facilitation is a concept directed towards reducing the complexity and cost of the trade
transaction process and ensuring that all these activities take place in an efficient, transparent
and predictable manner. Trade facilitation comprises the whole trade chain from exporter to
importer, including transportation and payment, with emphasis on the border-crossing and the
agencies involved there.
According to the United Nations Centre for Trade Facilitation and Electronic Business
(UN/CEFACT), “trade facilitation” is defined as the simplification, standardization and
harmonization of procedures and associated information flows required to move goods from
seller to buyer and to make payment.
The figure below shows an overview of possible parties involved in the trade chain:

It is difficult to put a price on the benefits of trade facilitation – both for business and for
governments. A study by the United Nations Conference on Trade and Development (UNCTAD),
shows that a typical trade transaction passes through 27 to 30 parties – including brokers,

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banks, carriers, sureties and freight forwarders. At least 40 documents are needed, not only for
government authorities but also for related businesses. Over 200 data elements are typically
requested, of which 60 to 70 percent are re-keyed at least once, while 15 percent are re-typed
30 times.

An OECD study concludes that estimates of trade transaction costs range from 2 to 15 percent
of the total transaction value and that an approximate estimate for world trade is 550 billion
dollars each year. This result in an enormous amount of time and money wasted and is
hampering business, stifling growth and holding back economic development, particularly in
developing countries.

Trade Facilitation Bodies

As established earlier, trade facilitation looks at the operational aspects of international trade
and seeks to improve the interface between business and government. As such, any history of
trade facilitation is inevitably linked to the history of trade liberalisation. Some of the key
bodies involved in promoting trade facilitation, like the WTO and UN/ECE with its various
working groups, have already been introduced. However, there are many more international,
regional and national organisations that take an interest in developing this area. For example,
much of the more formalised research in trade facilitation has been initiated by the OECD and
the staff working for the World Bank (e.g. Henson, Loader et al. 1999; OECD 2001; 2003;
Wilson, Mann et al. 2003b; Wilson, Mann et al. 2004), while funding for trade facilitation
programmes comes from various public and private coffers, some of which are not insubstantial
(European Commission 2005; OECD 2006b). All these bodies have legacies dating back to wider
Allied Forces’ reconstruction efforts in the post World War II period and the Bretton Woods
agenda to secure security though international cooperation.

International Level

The World Trade Organization (WTO)

One of the key international institutions governing the liberalisation of trade is the WTO and its
predecessor the GATT. The GATT came to life in 1947 as a temporary substitute for the
International Trade Organisation, which was proposed under the Bretton Woods Agreement in
1944 but failed to come to life following US Congress’ failure to ratify it. The GATT’s overall
objective was to prevent a repetition of the protectionist and discriminatory trade policies of
the 1930s that are frequently seen as a significant contributory factor to the outbreak of World
War II (Stubbs and Underhill 1994, pp.153- 157; Appling and Archer 1998; Braithwaite and
Drahos 2000, p.175). The GATT’s purpose, as defined in the preamble to its Charter, is to
promote economic well being by enabling its members to enter into “reciprocal and mutually

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advantageous arrangements” aimed at the “substantial reduction of tariffs and other barriers
to trade and to the elimination of discriminatory treatment” in international trade (GATT 1947).

Originally founded with 23 member states, the GATT managed to attract a membership of 117
states by the end of the Uruguay Round in 1994. Following on from the Uruguay Round,
members agreed to set up the more permanent WTO with its own secretariat. The WTO came
to life on the 1st January 1995 and now has 1496 members. As outlined earlier, average tariff
levels for industrial products have fallen to 3.8% since its establishment (WTO 2006b). Not
surprisingly, as tariff rates fall, trade negotiators are increasingly taking an interest in the non-
tariff areas. Consequently, at the 1996 WTO ministerial meeting in Singapore, trade facilitation
with transparency in government procurement as well as investment and competition policy
was introduced as a new agenda item. In November 2001 these “Singapore Issues” were
adopted formally as part of the Doha development agenda. However, at the later ministerial
meeting in Cancun in 2003, the Singapore Issues, discussed as one package with four elements,
faced considerable criticism, especially by developing countries. In the follow-up discussions it
was agreed to drop competition policy and investment and transparency in government
procurement, but to keep trade facilitation, which received broad support. So, on 1st August
2004 the WTO’s General Council decided, by explicit consensus, to commence negotiations on
trade facilitation and the first meeting of the negotiations group took place on 15th November
2004 (European Commission 2006b; WTO 2006c). The trade facilitation negotiations are
focusing, initially, on Articles V, VIII and X of the GATT 1994, covering Freedom of Transit, Fees
and Formalities, and Publication and Administration of Trade Regulations (GATT 1994).

The World Customs Organisation (WCO)

While trade tariffs fall under the remit of trade negotiators (e.g. within the framework of WTO
instruments), the collection of duties and administration of tariff measures is governed by
customs procedures. These, too, are bound in the majority of cases by international
arrangements. While the WTO serves as an international organisation for multilateral trade
agreements, the World Customs Organisation “… maintains, supports and promotes
international instruments for the harmonization and uniform application of simplified and
effective customs systems and procedures” (WCO 2002). Given the lead role that Customs have
in controlling national borders, their representing international body, the World Customs
Organization, plays a prominent role in trade facilitation.

The origin of the WCO dates back to 1947 – the same year in which the GATT was created –
when the 13 European governments represented in the Committee for European Economic Co-
operation (CEEC)7 agreed to set up a study group examining the possibility of establishing one
or more inter- European Customs Unions based on the principles of the GATT. In 1948, the
study group set up two committees: an Economic Committee and a Customs Committee. The

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Economic Committee eventually evolved into the Organization for Economic Co-operation and
Development (OECD), while in 1952 the Customs Committee became the Customs Co-operation
Council (CCC), with 17 founding members, all of them European. With increasing membership
from outside Europe, the CCC was renamed the World Customs 7 The CEEC was a body
established with US and Canadian aid to help with the implementation of the Marshall Plan and
the reconstruction of Europe.

The United Nations Economic Committee for Europe (UNECE)

Unlike the WTO or the WCO, the activities of UNECE do not relate to any international legal
instruments. However, much of UNECE’s work may be unilaterally adopted by nation states or
through regional agreements and trading blocs. Thus, UNECE is widely recognised as the global
focal point for trade facilitation recommendations, standards and specifications. It, too, was
formed in 1947 and one of its primary goals is to encourage greater economic cooperation
among its 55 European member states. However, in the area of trade facilitation, UNECE has
taken on a global remit on behalf of the entire UN through its Centre for Trade Facilitation and
Electronic Business (UN/CEFACT). UN/CEFACT was brought to life in 1996, replacing the UNECE
Working party No 4 which was formed in 1960 for the facilitation of international trade
procedures. UN/CEFACT now serves as a forum to develop, initiate and consolidate work by
other international organisations (e.g. WTO, WCO, OECD, UNCTAD and ISO). In this capacity it
looks after 33 trade facilitation recommendation and range of electronic business standards
and technical specifications (UN/CEFACT 2005; UNECE 2005). As such it owns and manages
various document and electronic messaging standards used in international trade transactions,
including the UNeDocs and EDIFACT standards (UNECE 2006c

Other International Bodies

There are a number of other international bodies that concern themselves with trade
facilitation issues. Most recently this includes the International Standards Organisation (ISO),
which has developed its ISO/PAS 28000 family of best practice guidelines for implementing
supply chain security (Piersall and Williams 2006). But there are many others, including the
International Maritime Organisation (IMO), the International Chamber of Shipping (ICS), the
International Road Transport Union (IRU), the International Civil Aviation Organisation (ICAO)
and the International Chamber of Commerce (ICC). To give a few examples of their powers, the
IMO maintains the Convention to Facilitate Maritime Transport (IMO 1998), the Safety of Life at
Sea Convention (IMO 2002) and the International Ship and Port Facility Security Code (IMO
2003). The ICAO sets international standards and practices through its Convention on
International Civil Aviation, which in its Annex 9 includes trade facilitation (ICAO 2002). The ICC
has standardised recommended trading terms between buyers and sellers with its Incoterms
(ICC 1999) and it also governs the rules for letters of credit (ICC 1993). There are many other

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examples, helpfully summarised in the UNECE’s and UNCTAD’s “Compendium of Trade
Facilitation Recommendations” (2002).

Regional and Bilateral Level

In addition to negotiation through multilateral trade instruments like the GATT, trade
liberalisation and facilitation is sought through the establishment of free trade areas. There are
different qualities to the degree of regional integration. Undoubtedly the European Union (EU)
is one of the most advanced with a fully functioning Customs Union that now has 27 member
states. The EU has its roots in the European Coal and Steel Community (ECSC), which was
established in 1951. Following the signing of the Treaty of Rome in 1957, the ECSC became the
European Economic Community (EEC) – which was then reconstituted through the Treaty of
Maastricht in 1992 into the European Union (EU). As such the EU shares common customs
legislation as well as a common external tariff. This means that most goods within the Union
can move freely, effectively removing much of the regulatory transaction costs associated with
crossing its internal borders. Its key instruments are the common Customs Community Code
(2913/92/EEC) and its implementing provisions (2454/93/EEC) as well as the Tariff Regulation
(2658/87/EEC). Although legislation is identical across the European Union, the enforcement
and management of customs procedures may still vary between member state customs
administrations. To encourage greater interoperability between administrations, the European
Commission and Council are initiating an extensive reform programme that includes new
security measures (648/2005/EC) and extensive provisions for the electronic integration
between member state administrations by 2012-14 (COM(2003) 452 final; Grainger 2004).
Outside the area of customs many legislative differences remain between member states.
While member states frequently agree on common guiding directives, their application can vary
significantly – especially in areas like VAT and excise, veterinary controls and on matters of
national security. Of course there are many other regional groupings, although they have not
quite managed to reduce the operational impact of internal borders to quite the same extent as
the EU. Nevertheless, they do frequently include provisions to facilitate trade by harmonising
and standardising trade procedures and the administration of border controls. Examples of
such formations include the European Free Trade Associations (EFTA), the North American Free
Trade Agreement (NAFTA), the Association of Southeast Asian Nations (ASEAN), Mercosur in
Latin America, and the Common Market for Eastern and Southern Africa (COMSEA). There are
many more regional trade agreements. In September 2005 a total of 183 WTO-registered
regional agreements were in force (WTO 2005).

Regional trade agreements can bring consistency to regulations and procedures between
trading countries – something that proponents of trade facilitation tend to support. Annexes to
trade agreements can include specification on such practical issues as shared procedures for

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checking vehicle weights, use of common IT systems, documentation and messaging standards,
mutual recognition of official controls, licences and certificates.

However, many agreements are also annexed by very specific origin rules and other tariff
measures. The resulting variance between regional agreements is often described as being too
complex for the casual or occasional trader. Jagdish Bhagawati (e.g. 1998; 2005) prominently
describes the resulting mess of preferential arrangements as a “spaghetti bowl”, based on an
illustration showing the many overlaps of regional arrangements.

National Initiatives

At a national level trade facilitation can be seen as a vehicle to fully exploite the benefits of
lower tariff levels and to take advantage of international market pportunities, as well as to
attract foreign direct investment with as little red ape as possible. Many of the
recommendations and principles propagated by international institutions have been developed
initially by individual nation states, feeding their experiences and ideas into the negotiations of
regional and international bodies. Probably not surprisingly, one of UNECE’s key trade
facilitation recommendations, dating back to the early 1970s, is for nations to set up national
trade facilitation committees to interface between government and business interests to
improve trade procedures in the cross-border environment – so called “PRO” committees
(UN/CEFACT 1974). UNECE lists contact details for 48 such national PRO organisations (UNECE
2006b). Despite international efforts, the implementation of recommendations is likely to be
varied. Again, the Global Facilitation Network for Transport and Trade details several hundred
records of national experiences (GFP/UNTF 2006). Noteworthy is that trading nations such as
Singapore, Korea, Australia, New Zealand are often perceived by practitioners to be especially
innovative in making the trade facilitation agenda their own. A particularly inspiring national
initiative includes Singapore’s “single window” TradeNet system, which electronically links up
all trade procedures and government departments into one system (Applegate, Neo et al. 1993;
Applegate, Neo et al. 1995; Teo, Tan et al. 1997). Similar systems are now proposed for the
whole of the EU (COM(2003)452 final) and are being developed or put into place in countries as
varied as the USA, Ghana, Korea, Malaysia, Senegal, Mauritius and Tunisia (UNECE 2003b;
2003a; UN/CEFACT 2004; Wulf 2004). Similarly, where hegemonic powers are present,
unilateral measures can be quite influential in shaping international debate. For instance, since
the terrorist attacks on the USA on 11 September 2001, American security measures – such as
the Container Security Initiatives (CSI) and the Customs and Trade Partnership Against
Terrorism (CTPAT) (Browning 2003) – have contributed significantly to shaping and accelerating
debate on security and trade facilitation in international institutions like the WCO (e.g. IMO
2003; WCO 2005; Piersall and Williams 2006) as well as in other regional groups and nation

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states (e.g. New Zealand Customs Service 2003; Australian Customs Service 2004; 648/2005/EC
2005).

Conclusion
International trade increases the number of goods that domestic consumers can choose from,
decreases the cost of those goods through increased competition, and allows domestic
industries to ship their products abroad. While all of these seem beneficial, free trade isn't
widely accepted as completely beneficial to all parties. And, Trade facilitation relates to a wide
range of activities at the border (import and export procedures, transport formalities,
payments, insurance and other financial requirements).

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Butterly, T. (2003). Trade Facilitation in a Global Trade Environment. Trade facilitation:
the challenges for growth and development. UNECE. Geneva, United Nations.

Staples, B. R. (1998). Trade Facilitation,

http://www.cid.harvard.edu/cidtrade/issues/tradefacpaper.html.

UN/CEFACT. (2005). "About Us." Retrieved 8 August, 2005, from

http://www.unece.org/cefact/about.htm

World Bank. (2006). "Trade and Transport Facilitation and Logistics." Retrieved 6
October, 2006, from http://www.worldbank.org/transport/ports/tr_facil.htm#theory.

WTO. (2006c). "Trade Facilitation." Retrieved 5 October, 2006,

http://www.wto.org/English/tratop_e/tradfa_e/tradfa_e.htm.

Grainger, Andrew. (2007), Trade Facilitation: A Review, Trade Facilitation

Consulting Ltd

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