Economy of Bangladesh

Impacts of Trade Facilitation

Impacts of Trade Facilitation

Md. Joynal Abdin

The Independent on December 18, 2019

Trade is one of the most effective tools of economic development. It facilitates equal opportunities and foster inclusive development in any society. Therefore; global leaders became united and sign GATT (later on established WTO) after the Second World War to reconstruct the destroyed and polarized world. Protectionist world being united under a single umbrella of WTO and liberalized the trade regimes around the world. But dream of the global free market economy is under threat today due to multiple political reason.

It is the global leaders (largest economies) who felt free market economy under WTO will cut their competitive edge. Therefore they are delaying to implement their commitments under WTO and using trade weapons to gain political advantages. Non-performing SAARC, Brexit and recent trade war between US and China are the examples of using trade for political motives. But, the developing countries or LDCs has no alternative but to be united for fostering trade facilitation movement under multilateral, regional even bilateral platforms. Because trade currently represents 30 percent of world GDP and is estimated to grow to 50 percent by 2020. The importance of efficiency in trade is especially important for smaller and more trade dependent countries like Bangladesh.

Trade facilitation could be defined in many ways but most prominent definition of the trade facilitation is adopted by the WTO i.e. the simplification and harmonization of international trade procedures, with trade procedures being the activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade. In other word “Trade Facilitation” refers to the simplification, harmonization and automation of international trade procedures, particularly import and export procedures, transit requirements and procedures applied by customs and other agencies. Implementing trade facilitation parameters could help a country to perform better in the Ease of Doing Business too. Not only ease of doing business but trade facilitation could offer following positive impact on an economy:

  1. Transparency and predictability: According to a recent study conducted by a Swedish Agency it is found that, trade facilitation measures increases the transparency of work of the customs and other agencies involved with international trade. It also reduces unnecessary document requirements for international trade. When the European Single Administrative Document (SAD) was introduced and implemented, over 150 different types of special documentation that previously needed manual data input by companies, were removed. It reduce cost of international trade and time requirement. As a result international trade becomes more predictable.

  1. Reduced Time for Export / Import: The more documentation requirement from different agencies increases clearing and forwarding time in the ports and results as port congestion. Determination and payment of customs, duties, fees, penalties etc. in clearing and forwarding functions increases delay in international shipments. But well-coordinated single window pre arrival declaration, determination and payment system can reduce timing in international transactions. Studies shows that, delays in international trade may cause considerable loss for a company. Delay may increase bank interest of 12 percent, between 3-7 percent of the total value of the goods.

  1. Create Business Opportunities: Too many licenses, permits, registration, NoCs requirements makes business complex and discourage general people to be entrepreneurs. Long list of license, registration, and permits requirement creates opportunities for the bureaucratic corruption. On the other hand less controlling / easy access to international trade can create multidimensional business opportunities for the citizens. Trade facilitation does not create opportunities for the importer or exporters alone. It also creates opportunities for banks, insurance companies, and freight forwarders, clearing agents, transportation companies, distributors and retailers. Thus a single international transaction creates business opportunities for the all relevant stakeholders of export or import.

  1. Better Customer Value: Trade facilitation helps to create logical competitive environment in the market, as a result companies have to offer better delivery service, after sale service and other value added services to the customers. By providing accurate information and in-time delivery of goods government can control market manipulation by any group. Thus trade facilitation could ensure better customer value in a country.

  1. Increase revenue earnings: Hassle free, low cost and less duty trade regime increases frequency and volume of export / import. Thus government revenue earnings will be increased.

  1. Stability & Social Security: Trade facilitation can offer quicker delivery and less time consuming in import and export of goods. It reduces the chances of market manipulation, creates fare competitive market mechanism. Thus it can contribute in stable market mechanism and ensure social security in a stable market.

  1. Increase Trade Efficiency: Trade facilitation measures can foster development of storage, preservation, transportation, distribution etc. business logistics facilities and services and improve trade efficiency.

  1. Increase FDI Inflow: International investor usually enters in an economy where market mechanism is more efficient and international trade is less costly, quicker and easier. Thus implementation of trade facilitation can increase FDI inflow to a particular economy.

All of the above mentioned positive outcomes may be enjoyed by Bangladesh economy when we can implement the trade facilitation measure like, Harmonization of standards and signing mutual recognition agreements with major trade partner countries; Harmonization of customs formalities and reducing documentation formalities in the port / boarder; Reducing port procedures and establishing functional inter agency coordination; Establishing infrastructure and support services in the boarder / port; Easy release / clearance of goods and access to pre-arrival processing, electronic payment, separation of release from final determination and payment of customs duties, taxes, fees and charges; Automation of total boarder / port formalities with a time bound action plan; Finally, Digitization of clearing and forwarding formalities for less time consumption.

We expect all of the above mentioned actions from the government to facilitate trade and easing the doing business process.

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