Speeches

Speech by ITC Executive Director at the High-Level UNCTAD Meeting on Trade Facilitation

15 December 2015
ITC News
Speech delivered by Arancha González, Executive Director International Trade Centre (ITC) at the High-Level UNCTAD Meeting on Trade Facilitation
Nairobi 15 December 2015

When we talk about the private sector, it is imperative that we speak about the role of SMEs in inclusive and sustainable growth as they make up over 95% of all firms globally, accounting for approximately 50% of GDP and 60%–70% of total employment, when both formal and informal SMEs are taken into account.

It is true that the changing landscape of international trade and the advent of value chains have provided more opportunities to SMEs to be competitive and access new markets. However, seizing these opportunities can be a costly undertaking for SMEs.

It is well known that one of the most important external factors which determine their participation in value chains is the ‘transaction cost’ of bringing goods to market. This includes the export-related costs such as clearing customs, transporting the goods to the border, and other logistics services. These costs are magnified when goods cross borders multiple times in their lifecycle and are disproportionally higher for SMEs due to their smaller volumes, higher per-unit costs and scarce resources.

The WTO Trade Facilitation Agreement (TFA) provides a unique opportunity to Members to reduce time and cost of international trade transactions by imposing binding obligations to improve the transparency and efficiency of border procedures. Trade Facilitation has become central to the economic agenda of countries around the world. It is a global response to a fundamental reality about trade: logistical efficiency is just as important as production capacity, and thus, finding effective low-cost producers is meaningless if exporting costs of those producers are prohibitive.

Benefits of TF reforms for SMEs


In a world where each extra day of transit costs about 1% of the shipment value, quick and easy processing of trade transactions is critical to international competitiveness of businesses. Thus, any effort to reduce the red-tape in international trade procedures will greatly benefit the businesses.

The implementation of the Trade Facilitation Agreement translates into a reduced number of documents required for imports and exports, minimized fees and charges imposed on import, export and transit, strengthened coordination between border regulatory agencies to improve traders’ experience.

In turn, these reforms will reduce the time and cost of compliance of businesses by an estimated 13% to 15%. (OECD), increase their competitiveness and will enable them to diversify into products that require just-in-time inventory or have a lower shelf life (e.g. perishable goods, pharmaceutical and fashion products etc.).

Let me, very briefly give examples of how SMEs are victims of inefficient cross border operations and what business benefits can accrue from trade facilitation reforms.

• World Bank study shows that a 10% improvement in trade facilitation is associated with product diversity gains of the order of 3-4%. Translate this into business world- - cross border delays are important factors that restrict development of time-sensitive industries or restrict innovation in business models which rely on supply chain speed, like ‘fast fashion garment industry’ – a value added segment of the clothing industry.

• Bangladesh air lifts 20% of its garment cargo to meet commitments made to buyers because of logistics related delays. Extra costs incurred on air freight over sea freight eats into the profits of small suppliers in developing countries.

The Trade Facilitation Agreement contains numerous provisions designed to simplify, coordinate and automate customs and other border procedures across WTO members, such as, pre-arrival processing, authorized economic operator scheme, post clearance audit, risk management and the obligation to use a ‘single window’ for the submission of documents and data to be used by all agencies involved in the import process.

For SMEs, it reduces time in transit, limits the information needed to export, reduces the chance for delay due to lost paperwork or clerical error, speeds up the clearance process and helps curb corruption by limiting person-to-person contact between traders and border authorities.

The role of public-private dialogue

While governments are to implement all provisions of the TFA, private sector can play a decisive role in all phases of the project (from needs assessment to monitoring of implementation and evaluation through a feedback loop). The Agreement itself acknowledges the importance of involvement of all international trade stakeholders (including private sector) by making it mandatory to hold regular consultations, provide opportunity to comment on proposed or new regulations and establish a national committee to oversee domestic implementation and coordination.

These initiatives provide the private sector with a platform to engage constantly with government agencies and play their part in policy formulation, prioritization of reforms, problem resolution etc. It is of particular importance that governments ensure that SMEs are included in the policy formulation as this cluster of businesses are large in number but their needs and constraints are seldom factored in trade facilitation reforms.

ITC’s work in Trade Facilitation

ITC has ramped up its assistance in the area of trade facilitation over the last two years. We do this through a process of collaboration with other international organizations, such as UNCTAD, WTO, WB, WCO, and with the private sector. Three UN agencies, namely ITC, UNCTAD and UNECE, have signed a partnership for collaboration in this area to demonstrate that the ‘UN delivers as ONE’.

The initial support from ITC has focused on helping countries categorise and ratify the agreement. With support from ITC, eight developing countries have ratified the Trade Facilitation Agreement, and 19 countries have notified the WTO of their category A commitments under the agreement (provisions that countries must apply from the moment the agreement comes into force), which will be when two thirds of the WTO membership have ratified it. These countries are among the 40 WTO members supported by ITC that we helped to prepare for the agreement.

After interacting with private sector representatives from over 30 countries in TF-related workshops, we realized that the private sector and particularly SMEs may not be able to fully utilize the TF reforms in the near future due to two main reasons:

(i) Their lack of understanding of the technical measures and the opportunities they present; and
(ii) Their lack of inclusion in all stages of developing TF reforms.

As a result, ITC collaborated with UNCTAD and UNECE to develop two demand-driven publications which we are launching at MC10.

SMEs and the WTO Trade Facilitation Agreement: A Training Manual

At the inception of the TF program at ITC, we realized the value of assisting the private sector on their compliance with the regulations and developed a TF Business Guide to enable businesses to understand the provisions of the Agreement in more detail. Building on that, we have now developed a training manual for SMEs to prepare them to comply in such a way that it maximizes benefits for them.

The easy-to-use manual explains each measure of the WTO Trade Facilitation Agreement including its key elements, resulting obligations on the governments, intended benefits from a business perspective and an outline of the practical steps that businesses might complete to take full advantage of the reforms.

We are confident that it will go a long way in enabling SMEs to - make border clearance faster, simpler and cheaper; resolve customs disputes fairly; obtain information on regulations and customs procedures easily; and become trusted partners of the government in implementing and monitoring of trade facilitation reforms.

National Trade Facilitation Committee: An Implementation Guide

National Trade Facilitation Committees have a key role in ensuring that developing countries are able to implement the TFA and get full benefit of trade facilitation reforms. The ITC, in collaboration with UNCTAD and UNECE, has developed a step-by-step guide on how to set up National Trade Facilitation Committees, including answering questions around mandate, membership, structure and funding.

Most importantly, it looks at the best practices for effective participation of the private sector in all stages of policy formulation, from diagnostics and solution-design to monitoring and evaluation by creating sustainable mechanisms. Such mechanism will ensure that there is effective public-private dialogue underpinning business environment reforms so they can be structured in a way which delivers real benefits to businesses on-the-ground.

ITC is now turning its attention to support implementation of the agreement. We will do so in partnership with others – in particular UNCTAD and UNECE -, through stakeholder engagement at all levels - policymakers, SMEs and trade support institutions and closely associating the private sector to our efforts. The sooner we get to work, the faster SMEs will see the benefits of trade facilitation.

Thank you.