Alan Beattie makes an important but overlooked point in the weekend Financial Times: Forget tariff cuts, the poor need trade facilitation (susbscriber only):
Campaigners savage rich governments for failing to treat HIV-positive Africans. Few get excited about computerising the application process for Rwandan export licences. Yet the unglamorous area of "trade facilitation" - streamlining customs and business regulation to give poor countries better access to the markets of Europe, the US, and Japan - is attracting some attention.
Not least because negotiations on the subject are one of the few parts of the Doha round of global trade talks progressing well. But some of the plans require money, which for very poor countries may mean aid. And progress in making aid cohere with trade is slower.
Parallel to the Doha talks, "aid-for-trade" discussions are going on including the world's main donors - the World Bank, the International Monetary Fund and rich country governments.
More challenging is to use technical assistance and aid to improve detailed matters like customs procedures and product standards.
It can be done: the European Commission, a voluble supporter of aid-for-trade, says the port of Casablanca cut its container processing time from 18-20 days in 1996 to a few hours now. And the benefits can be huge. A study by the Asia-Pacific Economic Co-operation group of Pacific rim countries suggested a comprehensive trade facilitation programme was twice as effective as cuts in tariffs for increasing trade.
Paul Wolfowitz, the World Bank's new president, has made enthusiastic noises about aid-for-trade. But a report just published by the bank's watchdog said it still had a long way to go. Sustaining donor interest may be a struggle. Helping poor countries meet international trading standards may be vital, but glamorous it is not.
In a dusty, nondescript brick building in Lusaka, capital of the poor southern African state of Zambia, Mataa Mukelabai sees the problems first hand. As a least-developed country, Zambia faces few formal tariff or other trade barriers. But speaking to the FT last year, Mr Mukelabai, director of Zambia's Bureau of Standards, furnished examples of how product standards created infuriating obstacles.
He said that a consignment of copper wire, one of Zambia's traditional exports, destined for South Africa was held up for a week. The South African authorities required proof that a "pest risk analysis" had been carried out on the wooden pallets on which the wire was loaded. The ministry of agriculture's registered inspector, at a cost of $100 to the exporter, had to go and check that the wood had been fumigated or dried in a kiln to kill pests.
...And Mr Mukelabai said it was even harder to comply with private sector standards, such as the quality and safety rules for food and flowers set by European grocery chains that require independent certification of farms. "There is a problem with testing for standards that do not emanate from official bodies like the WTO," he said. The bureau does not have its own laboratory for food testing, relying on labs at the health ministry or the university in Lusaka.
Zambia, at least, is trying to get to grips with its problems. Its standards bureau has moved into a new building funded by aid from the EU and is setting up systems such as gas chromatography to do basic tests on chemicals.
But trade facilitation has often struggled to compete for aid and attention with other, more high-profile, priorities. And for the recipient government, such reform frequently requires taking on an entrenched bureaucracy that finds the imposition of multiple checks and rules a perfect opportunity to extract bribes from impatient exporters.
Still, at least there is now a clearer understanding that market access on paper is not enough. As one WTO official says: "We are no longer trying to hide the gap between achieving trade agreements and the ability of countries actually to benefit from them."
Until industry titans support the import of goods into their respective markets, poor countries will always face the challenges like Mr. Mukelabai's. The dilemma is created when the poor countries have no market to offer in reciprocity. That is to say, the poor countries want access to larger, more profitable markets, where more dominant players already compete at very thin margins, but cannot support the supply of goods into their own country. To simply 'regulate' change will never create the level playing field poor countries seek. The poor countries must be willing to negotiate with the large multi-national companies as well as other governments if they truly want to open the doors of trade facilitation.
Part of these negotiations include creating stable, predictable business climates. Zambia, for example, would do well to learn this lesson, "If you want to be treated fairly in global markets, treat global players fairly in your own".
Trade Facilitation - trafac.blogspot.com
Posted by: Greg | Tuesday, May 02, 2006 at 07:03 PM