Trade helps drive inclusive growth and poverty reduction. For developing Asia, strong value added from trade-related activities contributes to economic growth and development. Global trade helps reallocate capital and labor toward sectors holding comparative advantage.

And international trade is one important way to help meet the United Nations Sustainable Development Goals (SDGs). The beneficial links between trade and investment catalyzes economic transformation, job creation, and skill development-which all support SDG 8 (promoting decent work and economic growth), SDG 9 (building resilient infrastructure, promoting inclusive and sustainable industrialization and fostering innovation), SDG 10 (reducing inequality within and among countries), and SDG 17 (revitalized and enhanced global partnership). Trade facilitation eases the cross-border movement of goods by cutting costs and simplifying trade procedures (OECD, 2005). It rests on four core pillars:

1. transparency;
2. simplification;
3. harmonization;
4. standardization

Transparency promotes openness and accountability; it involves publicizing easily understood regulations so stakeholders can provide feedback prior to enforcement. Simplification eliminates unnecessary elements and duplications, focusing on essential aspects of trade and critical processes.

Harmonization aligns national procedures, operations and documents among trading partners. And Standardization aims to develop international best practices (UNECE, 2012). Based on these principles, trade facilitation focuses on five key areas:

1. publicizing and administering policies related to trade issues;
2. establishing rules and procedures for import and export;
3. creating product standards that conform to WTO guidelines on standards;
4. building trade-related infrastructure and supplying quality services that effectively reduce trade costs; and
5. balancing fast customs clearance with adequate security and protection from fraud.
    

Trade facilitation particularly benefits landlocked and island countries, where it boosts participation in international supply chains. They can diversify production of intermediate and final goods to cater to the global market, thereby benefiting other regions as well.

Impact Of Trade Facilitation

Everyone gains from easier trading processes (OECD, 2005b)—trade facilitation brings governments higher revenues from reduced fraud; businesses become more competitive and efficient, raising profits; and consumers save from lower prices. Inefficient trade procedures add significant costs, usually shouldered by the taxpayer or buyer, and it makes investment less attractive.

Trade facilitation increases trade flows and ultimately sustainable and inclusive growth. It lowers direct costs by raising efficiency among interacting businesses and administering agencies. Prices fall as they indirectly benefit from simpler, transparent border procedures. Even modest cost reductions show a positive link between trade facilitation and increased trade. All countries especially those developing— stand to gain. Countries that improve border procedures would benefit most.

Trade facilitation can have a greater impact on specific product groups, firms, and economies. For example, agro-food products have higher cross-border costs than manufactured goods, as they are subjected to special border procedures (costing 1%-15% of product value). Long border delays raise final costs by increasing spoilage.

Small and medium-sized enterprises (SMEs) are more vulnerable to financial and efficiency costs than large enterprises. The larger the international trade within a firm, the more economies of scale and comparative advantage exist for logistics and administrative coordination.

In a highly competitive environment, SMEs have to address the constraints of limited human resources, information, and capital. They are also often classified as high-risk and are required to comply with additional documentary and cargo checks. An Organisation for Economic Co-operation and Development (OECD) report (OECD, 2003) estimates that using simplified trade facilitation procedures would cut SME trade costs by 50%.

This is especially true for non-OECD countries with high trade-to-gross domestic product (GDP) ratios— and thus highly sensitive to changes in import and export costs. Developing countries would experience the largest relative gains from trade facilitation. Those best able to ease border flows with minimal financial resources show how small investments in trade facilitation can bring high relative returns. Additional investments would amplify the benefits.

Estimates Of Gains From Trade Facilitation

The benefits from trade facilitation vary by degree, particularly in efficiency gains. Certain product groups and countries—small and medium enterprises and developing countries, for example—benefit more from trade facilitation than others.

• For agriculture and food products, sanitary and phytosanitary measures, additional documentation and physical inspections are required for border clearance. For example, agricultural product exporters from India currently face a 37% cost disadvantage to those firms.
   
• In Bangladesh, export earnings could increase 30% with higher port efficiency.
   
• In Japan, use of electronic data led to a 7% reduction in costs and a 4% shorter waiting time for goods subject to similar procedures.
   
• In Australia, paperless trade resulted in a 1.5% savings for bulk sea shipments and 15% for air cargo.
   
• In Thailand, the 2008 implementation of a National Single Window brought savings of about $1.5 billion annually and cut time-to-export from 17 days to 14 days.
   
• Singapore's single-window system reduced documentation costs by more than half.
   
• In New Zealand, processing time fell from 10 days to 12 minutes over a 4 year period after the automation of customs procedures.

Particular Implications For Sustainable Development

If addressing TF issues were to attract the investment that its proponents suggest, this could help increase investment in developing countries, increased investment in those countries being a necessary (but not sufficient) pre-condition for sustainable development. However, there are at least two potentially negative outcomes that should be avoided.

First, the TF related focus on harmonization of standards should not intrude upon the guarantees for the setting of national standards already set out in the TBT and SPS Agreements. In particular, a TF agreement, if developed, should not be allowed to have any impact on environmental, human health and other public welfare legislation and regulation, matters much better left for the TBT and SPS Agreements and the GATT 1994.

Second, it must be recognized that many multilateral environmental agreements, as well as agreements relating to illicit drugs, organized crime activities and so on rely upon measures at the border to detect and prevent illegal activities. In the environmental context, this includes such critical agreements as the Basel Convention on hazardous wastes, the Montreal Protocol on ozone depleting substances, the Convention on International Trade in Endangered Species and others. TF should not become a barrier to the effective implementation and further development of such agreements.