Business turns to customs reform amid historic trade uncertainty

  • 4 May 2018

Common-sense reforms that make trading easier and faster can have a greater impact than removing every tariff in the world. Global business representatives at an ICC summit in Buenos Aires ahead of the G20 meeting agreed on the importance of furthering trade facilitation.

The G20 meeting in Argentina approaches this year at a time of historic uncertainty around global trade and the future of the multilateral trading system. Fears surrounding this uncertainty are particularly acute for the global business community, as many companies depend on global value chains vulnerable to new trade barriers.

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What was clear at ICC’s Regional Forum on Customs and Trade Facilitation—held in Buenos Aires on 4 May—though, was that, for business, the current economic and political context means that there has rarely been a better time to double down on trade facilitation.

“Trade facilitation is something that everyone can and should get behind,” said Valerie Picard, Deputy Director of the Global Alliance for Trade Facilitation—a public-private partnership that helps implement trade facilitation reforms in developing and least developed countries. “Whether it’s eliminating unnecessary paperwork or introducing advanced customs rulings to make sure products don’t get delayed and expire before they reach their markets, these reforms are beneficial for governments, business and consumers alike.”


20 million jobs

Trade facilitation is the general term used to describe a package of measures that help cut red tape at borders. Burdensome customs requirements present real challenges to companies of all sizes that trade internationally, particularly small- and medium-sized enterprises (SMEs). Economists calculate that inefficient border procedures can cost companies up to 15% of the value of their traded goods.

In 2017, the World Trade Organisation’s (WTO) landmark Trade Facilitation Agreement (TFA)—a global deal aiming to make trade easier, faster and more transparent—entered into force after it was ratified by more than two-thirds of WTO members. If fully implemented, it is estimated that the TFA would have a bigger impact on international trade than if all remaining tariffs in the world were removed—reducing trade costs by an average of 14.3% and creating around 20 million jobs in the process, the vast majority in developing countries.

“Fast and predictable customs clearance is key to the success of our global services and burdensome procedures—from excessive paperwork to lengthy inspections—make  it harder for companies to grow cross-border trade, said Norm Schenk, Vice-President of Global Customs Policy and Public Affairs at UPS. “The TFA makes it easier than ever for companies to sell to new markets, which is why we are both excited and committed to the successful implementation of this ground-breaking agreement.”


The e-commerce potential

Nothing better illustrates the importance of customs reform for the future of trade than the challenges and opportunities that e-commerce brings about. Recent cross-border e-commerce growth in many markets has been breathtaking. In China, for instance, e-commerce exports rose 41.6% in 2017, with imports surging 116.4%.

This growth has also increased the volume of small packages being shipped across borders, pushing customs authorities to adapt procedures in a way that facilitates legitimate trade without losing undue revenue or allowing in illicit goods.

“Trade facilitation is key to ensuring e-commerce reaches its potential in Latin America and beyond,” said Matias Fernandez Diaz, Senior Public Affairs Manager for MercadoLibre and Chair of the B20 Argentina Digital Economy and Industry 4.0 Task Force. “In Latin America—a region with one of the fastest-growing Internet penetration rates in the world—we are witnessing first-hand the transformative impact e-commerce is having on how people buy and sell a growing range of goods and services.”

Like trade facilitation reforms, e-commerce is all the more exciting because of its potential to make world trade more inclusive, as the Internet allows new players to access global markets. “E-commerce has proven time and again its ability to democratise trade, extending its benefits to an ever-wider pool of customers and companies,” said Mr Diaz.

ICC’s Commission on Customs and Trade Facilitation has laid out a series of policy recommendations designed to capture the gains from faster, easier and more inclusive trade. Read more about our work on the ICC website.