The Institute for Domestic and International Affairs
United Nations Conference on Trade and Development Development of Transit Trade Rutgers Model United Nations 16-19 November 2006
Director: Ravi Patel
Š 2006 Institute for Domestic & International Affairs, Inc. (IDIA) This document is solely for use in preparation for Rutgers Model United Nations 2006. Use for other purposes is not permitted without the express written consent of IDIA. For more information, please write us at idiainfo@idia.net
Introduction _________________________________________________________________ 1 Background _________________________________________________________________ 2 Constraints on Transit Trade _______________________________________________________ 5 Automated Systems for Customs Data ________________________________________________ 6 Almaty Conference ________________________________________________________________ 7
Current Status ______________________________________________________________ 10 Key Positions _______________________________________________________________ 12 Regional Positions________________________________________________________________ 12 Africa ________________________________________________________________________________12 Asia __________________________________________________________________________________13 Europe ________________________________________________________________________________14
Business Interests ________________________________________________________________ 15
Summary___________________________________________________________________ 17 Discussion Questions _________________________________________________________ 18 Works Cited ________________________________________________________________ 19
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Introduction According to the United Nations Conference on Trade and Development (UNCTAD), landlocked developing countries (LLDCs) have a common problem of geographical remoteness and high international trade transaction costs. These two factors make the integration of trade into the mainstream economy very difficult for LLDCs, even though for most states, trade represents the single largest source of revenue. Landlocked nations have an additional logistical cost to transport their cargo, as they need to transport goods through a second nation before there is any access to global markets, and these goods are subject to customs and border regulations of the intermediary state. Traders must therefore adapt to the regulations of the transfer states, often resulting in costly delays. Throughout the years, conferences have convened to address and offer solutions to the problem of enhancing trade in LLDCs. One of the most notable conferences took place in Almaty, Kazakhstan in 2003, resulting in the Almaty Programme of Action, which offers solutions for these states to reduce costs for international trade transactions and increase trade efficiency. Most notably, this conference acknowledged that in most cases in which a landlocked country is forced to trade across the borders of a neighbor, the neighboring country is suffering from similar development challenges.
The
Programme of Action seeks to identify ways in which these two states could cooperate so that they can both gain from the trade, resulting in broader relations among states. The steps taken to diminish the restrictions facing transit developing nations result in better trade facilitation, and usually include improvement of infrastructure, developing and implementing new methods of transport, and increased transport security. Technology has helped the development of trade by implementing the Automated Systems for Customs Data (ASYCUDA), and has made the management of customs and border procedures a much easier task for states that have undertaken this strategy. This computerized system manages cargo manifests, accounts, and is able to accommodate the varying customs clearance procedures in different states. While to date, some 85 nations
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have implemented ASYCUDA, many of the poorest developing states have been unable to do so due to high implementation costs. Even though technology has enhanced transit trade, UNCTAD has identified fourteen major constraints that hinder this process. The overarching connection between the difficulties can be addressed through the revision of customs procedures and the development of infrastructure that more effectively accommodates the needs of trade, including everything from cargo clearance to account management to logistics. Resolving these issues are at the center of UNCTAD’s goals, and it is believed that once achieved, trade transactions will be much more fluid and efficient. Recent advances in this area have resulted in the development of the Integrated Framework (IF) for traderelated technical assistance, a joint effort between several United Nations bodies, such as UNCTAD and the World Bank, as well as other outside organizations. This program seeks poverty reduction to promote economic growth, and therefore growth in trade, calling upon public and private sectors of transit states to cooperate more closely with each other. The more compelling reason to implement programs such as these is perhaps counter-intuitive. When customs procedures and tariffs make trade costly and slow, goods are smuggled across borders, unregulated by any government entity. As a result, no tariffs can be levied, and the result is an insecure and uncontrolled border, offering an opportunity for expanded illicit activity.
Background Trade can be traced back to the origins of civilization when it took the form of barter, but today, trade is more associated with the exchange of goods between two entities, or states. As an organization, the United Nations Conference on Trade and Development (UNCTAD) seeks to “maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the
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world economy on an equitable basis.”1 It does so by promoting the development of relationships among states and through the simplification of trade policies among those states. As the world has grown smaller over time, trade has grown from a relationship among partners in close proximity to each other to a relationship in which the ends of transactions happen on different continents. While much of the world borders oceans and other waterways, many states do not have access to these transportation advantages, and are forced to conduct their trade through nearby or bordering states. The United Nations defines transit trade as “a country’s foreign trade that passed through a third country’s territory prior to reaching its final destination.”2 Difficulties arise when cargo passing through a third state and is held up by customs barriers or tariffs. The implications of transit transport are the changing conditions of borders, which results in additional cost and time before transactions can be completed. The nations most affected by transit trade are landlocked developing countries (LLDCs), and are typically states that have difficulty growing their economy due to geography.
Tariffs: a tariff is a tax imposed on imported goods that increases the cost of the goods to importers, and hence increases the price of these goods on the market. Domestic goods, of course, pay no tariffs, and the price is lower than the imports. In this way many countries have protected their own industries from foreign competition. The spread of free trade has removed most tariffs, and removed the protection countries can give to their own industries. Source: www.naiadonline.ca/book/01Glossary.htm
Throughout history, considerable effort has been made by states to gain access to coastlines. Water affords states the opportunity to reach the global marketplace directly, and without the potential for hold up to occur as goods are held in intermediary states. Should a bordering state seek to harm the economy of a bordering country, all it needs to do is stop trade goods in ports for considerable periods. Especially in the case of perishable goods, this delay can make trade cost-prohibitive. Landlocked nations have the biggest disadvantage since they have no direct access to a port, thus having to go to farther lengths for international trading to occur. 1
“About UNCTAD” UNCTAD. http://www.unctad.org/Templates/Page.asp?intItemID=1530&lang=1 (Accessed 24 March 2006. 2 “TD/B/COM.3/EM.22/2 Design and Implementation of Transit Transport Arrangements.” United Nations. 4 October 2004. http://www.unctad.org/en/docs/c3em22d2_en.pdf.
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According to UNCTAD, these countries are distributed as follows: “15 are located in Africa, 12 in Asia, 2 in Latin America and 2 in Central and Eastern Europe.” 3 The UN also states that LLDCs are amongst the most disadvantaged nations in the world, because they face “severe challenges to growth and development due to a wide range of factors.”4 These countries also depend on the use of transit trade for their integration into the world economic market. Since the inception of the United Nations Conference on Trade and Development, there has been an ongoing focus on the development of landlocked nations. Some LLDCs also fall under the category of Least Developed Countries (LDCs), and the average GDP per capita of these LDCs “is less than a third of that of coastal developing countries.”5 Landlocked states have the common problem of “geographical remoteness and high transport costs in international trade transactions.”6 According to the UN, Kazakhstan is the most remote nation, having to transport goods approximately 3,750 kilometers before they reach the sea. According to UNCTAD, “on average [,] landlocked developing countries spent almost two times more of their export earnings for the payment of transport and insurance services than the average for developing countries and three times more than the average of developed economies.”7 Reducing these costs can greatly increase the productivity of a nation’s economy. In modern times, certain methods of trading of goods are encouraged, including combinations of modes of transport, usually done by carriers operating on land, sea, and air. Land transport is usually done by rail, or on the road, by trucks. Most of the world’s trading, however, travels the seas despite the numerous methods of land transit. Of course, this poses a huge hindrance on nations that do not have direct access to the sea or to ports. 3
“About UNCTAD” Ibid. 5 TD/B/COM.3/EM.22/2 Design and Implementation of Transit Transport Arrangements” 6 “UNCTAD/LDC/2005/3 (Part I) Effective Participation of the Landlocked countries in the Multilateral trading system,” United Nations., 7 June 2005. http://www.unctad.org/en/docs/ldc20053p1_en.pdf (Accessed 20 February 2006). 7 “Landlocked Developing Countries,” United Nations, http://www.un.org/special-rep/ohrlls/lldc/default.htm (accessed 20 February 2006). 4
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Constraints on Transit Trade States that must engage in transit trade, which hinders their access to global markets. Some of these constraints overlap and link with each other, but have their own characteristics.8
In order to alleviate the added costs of this form of trade, these
constraints must be addressed either by the landlocked states themselves, or by regional and multilateral trading organizations. Border and customs control affect the different safety, environmental and other standards and regulations.
Put simply, every time cargo
passes through a different border, it is subject to costs and delays as well as additional constraints placed by the state.
Moreover, potentially
dangerous goods, such as chemicals and pesticides, may be forbidden from entering certain states, further increasing transshipment costs by exporting states.
Inadequate transport infrastructure often
complicates the transport process because there may be times where a heavy influx of cargo may not be able to be accommodated by the existing transport systems and can cause bottlenecks causing the delay in shipment of other goods.
Fourteen Major Constraints Facing Transit Trade • different safety, environmental and other standards and regulations; • inadequate transport infrastructure; • insufficient use of information and communication technology (ICTs); • visa and other requirements for drivers or crews; • protection of national operators; • risk and insurance; • security checkpoints; • lack of coordination; • transportation documentation; • inadequate legal framework; • inexistence of a national customs transit system; • border crossing formalities and delays; • transit fees; and • unilateral actions.
Information and communications
technology (ICTs) can affect the logistics of the transport system. The crews of the freight transport may also be subject to visa and customs regulations at national borders. Administrative issues, such as insurance and permits, can complicate the entire trade processes, as specific rules can very considerably among states. An adequate legal framework governing international trade needs to be developed to assist the states required to trade in this fashion. If the implementation of an international regulatory 8
Ibid, 5-7.
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system were in place, this would effectively solve the issues regarding the complicated customs issues. According to UNCTAD, transshipment costs relative to the costs of goods sold for African landlocked developing countries was “20.7%, which is four times as high as the average for developed market economic countries (5.1%) and almost twice the average of African developing countries(12.7%).”9 It is no surprise that the cost of transporting freight is higher for landlocked countries, but the four-fold makes growth in these states difficult. If these costs were to be reduced, increased profits could be reinvested into infrastructure to better facilitate future trade.
Automated Systems for Customs Data In 1981, benefiting from the advances in information technology the UN Conference on Trade and Development developed the Automated Systems for Customs Data (ASYCUDA), a computerized management system “which covers most foreign trade procedures. The system handles manifests and customs declarations, accounting procedures, transit and suspense procedures.”10 This system is configurable by individual countries to specific needs for their trade transactions. The goals of the ASYCUDA program are to reform “the customs clearance process. It [also] aims at speeding up customs clearance through the introduction on computerization and simplification of procedures and this minimizing administrative costs to the business community” and the country’s economy.11 UNCTAD implements the ASYCUDA system at the request of a given nation, and most of the funding required for the implementation of the ASYCUDA system comes from UNCTAD. At the onset of systems implementation, all “procedures, documents, and codes are harmonized and the software is adapted to the country’s needs.”12 The final step involves the training of customs officials and installment of systems. 9
TD/B/COM.3/EM.22/2 Design and Implementation of Transit Transport Arrangements” “About ASYCUDA.” 11 “The ASYCUDA Programme,” ASYCUDA, http://www.asycuda.org/programme.asp, (accessed 1 March 2006). 12 “How ASYCUDA is implemented” ASYCUDA. http://asycuda.org/project.asp 10
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In October 1994, the United Nations International Symposium on Trade Efficiency was held in Columbus, Ohio, and sought to technical assistance in trade facilitation as well as “identification measures to improve the efficiency of international trade transaction and provide a favorable international transport and trade-related environment.”13 A major development resulting form the conference was the improvement of the Automated Systems for Customs Data. At the time, ASYCUDA sought to develop and modernize “customs including the automation of the customs process and procedures. It aims to achieve trade facilitation by accelerating the clearance process through the use of information technology.”14 Since then, newer, and more capable versions of ASYCUDA have replaced earlier versions and are in the pilot phase at multiple ports.
Almaty Conference As concern for developing landlocked countries grew, the need for a concrete dialogue on how to address the growth problem became apparent. In August 2003, the International Ministerial Conference of Landlocked and Transit Developing Countries and Donor Countries and International Financial and Development Institution on Transit Transport Cooperation was held in Almaty, Kazakhstan. The primary outcome of the conference, called the Almaty Conference for short, was the Almaty Programme of Action, emphasizing that “infrastructure development and maintenance, transit policy issues, and trade facilitation measures,”15 were necessary for nations develop their economies. The plan also lays out the framework for transit transport cooperation for landlocked and transit developing states. One of the most important aspects of efficient transit transport between nations is a healthy partnership between neighboring states. According to the Almaty Programme of Action, “efficient transit transport systems can be established through genuine partnerships between landlocked and transit developing
13
UNCTAD Technical Assistance in Trade Facilication, ASYCUDA.org Ibid 13. 15 “Landlocked Developing Countries,” United Nations, http://www.un.org/special-rep/ohrlls/lldc/default.htm, (accessed 10 February 2006). 14
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countries and their development partners”16 at different regional levels.
These
partnerships should take into account the macroeconomic environment of both nations, the role of the private sector in transit transport services, and the extent of regional Five Priorities in the Almaty Programme of Action •
•
•
•
•
Policy Improvements – reducing customs bureaucracy and fees, designed to cut costs and travel days for landlocked countries’ exports Improved rail, road, air and pipeline infrastructure – projects will reflect local transport modes; in Africa, road is the predominant mode of transport; in South Asia, rail is more common International trade measures – to give preferential treatment to landlocked countries’ goods, making them more competitive Technical and financial international assistance – donor countries will lend knowhow and money to landlocked and transit countries for infrastructure and policy improvements Monitoring and follow-up on agreements – measurable criteria, such as travel days and costs, will be used, and an annual review before the General Assembly is possible.
Source: Land Locked Developing Countries. http://www.un.org/special-rep/ohrlls/lldc/default.htm
cooperation.17 The Almaty Programme of Action calls for specific actions with regard to landlocked
and
transit
developing
countries. The primary objective of the Programme of Action is “a new global framework for action for developing efficient transit transport systems in landlocked
and
transit
developing
countries, taking into account the interests of both landlocked and transit developing countries.”18 These actions mainly suggest increased
financial
assistance
and
appropriation for the development of infrastructure and transit systems, with
special attention given to the role of the private sector. There is also much concern about the status of railway systems in these areas, as they have always held a crucial role in the transport realm, since they link different nations to ports. Most developing countries have a poor rail transit system made up of poorly maintained trains.
The Almaty
Programme of Action recommends that governments adopt a universal protocol for international rail transport.
16
“A/58/388 International Ministerial Conference of Landlocked and Transit Developing Countries and Donor Countries and International Financial and Development Institution on Transit Transport.” 23 September 2003. http://www.un.org/special-rep/ohrlls/imc/A-58-388-final.pdf (Accessed 17 February 2006). 17 Ibid 11-12. 18 Ibid.
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The Almaty Programme of Action is a list of priorities to be accomplished by transit states desiring to expand their access to trade, including fundamental policy issues, infrastructure development and maintenance, international trade and trade facilitation, international support measures, and implementation and review. Fundamental policy issues are the issues dealing with customs and international trade partnerships. The second priority, infrastructure development and maintenance, is divided into seven subsections, dealing with different aspects of infrastructure development and maintenance, and calls upon states to improve the maintenance and quality of each mode of transportation to promote smoother and easier trading procedures. Air transport is an excellent method of overcoming the obstacles associated with landlocked nations, however the costs associated with this method of transport limit it to low-bulk and highcost items, and inferior communications systems handicap the quick movement of cargo as they are in transit.
UNCTAD recommends the installation of cargo monitoring
systems, which “give advance and tracking information on cargo and moving along modes, could significantly reduce delays.”19 The third priority listed in the Almaty Programme of Action is international trade and trade facilitation, and recommends that nations cooperate by making multilateral trade agreements. The fourth priority lists international support measures, in which foreign states should aid transit developing nations by “providing technical support through partnership … increased foreign direct investment to contribute to the development of transit transport infrastructure.”20
UNCTAD urges the international
community to expend resources to aid economy of these developing nations. In August 2001, the fifth meeting of Governmental Experts from Land-locked and Transit Developing Countries and Representatives of Donor Countries and Financial and Development Institutions offered recommendations used to aid the development of landlocked nations. Some of the conclusions drawn at this meeting relate to the reduction of operating costs and to enhancement of efficiency. 19 20
Ibid, 9. Ibid, 11.
For example, one of the
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recommendations formulated during the convention calls for “the elimination of nonphysical barriers which compromise the competitiveness of trade to and from the landlocked transit countries.”21
Current Status Recently, the focus on developing LDCs has resulted in a project between the United Nations Conference on Trade and Development, the International Monetary Fund (IMF), the United Nations Development Fund (UNDP), the World Trade Organization (WTO), International Trade Commission (ITC), and the World Bank. This project, called the International Framework (IF), seeks to facilitate “the coordinated delivery of traderelated technical assistance to LDCs with a view to mainstreaming trade in the national development and poverty reduction strategies of these countries.”22 In effect, the IF serves to bolster the trade economies of these states by helping them to compete with the rest of the global market, helping to reduce poverty and further developing the economy. The Integrated Framework program began in 1996 by the World Trade Organization primarily to aid forty-nine eligible LDCs. As of 2004, USD $21.2 million have been pledged to IF for the procurement of its goals.23 The implementation of IF involves three parts, including preparatory activities, a diagnostic phase, and finally the follow up activities. The preparatory activities start with a request from a state to participate in the program, technical review of the application, and finally the establishment of a steering committee to implement the IF framework.24 Once the first part of the process is cleared, the next step, the diagnostic phase, is carried out, in which a Diagnostic Trade Integration Study (DTIS) “assesses the competitiveness
21
Report of the Fifth Meeting of Governmental Experts from Land-locked and Transit Developing Countries and Representatives of Donor Countries and Financial and Development Institutions. 23 Aug 2001. United Nations Resolution 22 “Integrated Framework (IF) Trade-related technical assistance for least developed countries,” UNCTAD, http://www.unctad.org/Templates/webflyer.asp?docid=6055&intItemID=1397&lang=1&mode=highlights (Accessed 20 March 2006) 23 Ibid. 24 “About Integrated Framework. Integrated Framework,” http://www.integratedframework.org/about.htm,” (Accessed 20 March 2006).
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of the economy and of the sectors that are engaged in international trade or have such potential.25” In the last part, the follow up activities, the results of DTIS are then integrated “into the elaboration and validation of an action plan, which serves as basis for trade-related technical assistance delivery.”26 The IF process is still in an experimental phase, and is constantly being reevaluated and altered to achieve the best possible results. In 2005, LLDS ministers adopted the Asunción Platform for the Doha Development Round of World Trade Organization negotiations, recognizing their need for integration in the global economy. This meeting, held in Asunción, Paraguay, sought to benefit the trade efficiency of landlocked nations and reaffirmed the Almaty Program of Action with a request for timely implementation of the recommendations made at the earlier conference.
The agreement included everything from trade facilitation to
agriculture to technical cooperation and capacity building.
With respect to trade
facilitation, the agreement reaching in Asunción strongly emphasizes that “transit services should be further liberalized to encourage competition.
Transit rules and
regulations should be simplified, harmonized, streamlined and made transparent. Furthermore, national treatment should be applied in transit services”27 The meetings also encouraged landlocked nations not yet members of the World Trade Organization to join and take advantage of joining the global trade body. The WTO offers such benefits as “‘Special and differential treatment’ for the landlocked countries among WTO members should go beyond only granting transition periods for implementing new commitments, and more thoroughly recognize needs and priorities, including through provision of technical assistance for capacity-building.”28 In October of 2006, the United Nations Conference on Trade and Development held an Expert Meeting on Trade Facilitation, which sought to increase the participation 25
“Diagnostic Phase,” http://www.integratedframework.org/diagphase.htm, (Accessed 8 March 2006). “IF process,” http://www.integratedframework.org/process.htm, (accessed 8 March 2006). 27 “Asunción Platform for the Doha Development Round,” UNCTAD.org, http://www.unctad.org/en/docs//a60d308_en.pdf, (accessed 20 March 2006). 28 “Landlocked Countries join with ‘small and vulnerable economies’ in bid for improved trade access, as Paraguay’s meeting concludes.” UN Press release. 10 Aug 2005. http://www.un.org/News/Press/docs/2005/dev2534.doc.htm, (accessed 20 March 2006). 26
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of developing nations in global trade. In particular, the meeting focused on the use of information and communication technologies (ICT) “solutions to facilitate trade at border crossings and ports.”29 In order for developing nations to benefit from the work of UNCTAD, they “must be proactive in reaping full benefits from ICT tools available worldwide to reduce transaction costs and enhance supply capacities.”30 As with other partnerships for facilitating trade, ICTs are critical in the development of LLDCs and LDCs. Another program started by UNCTAD is the TrainForTrade initiative, a leading program in capacity building for trade facilitation that operates with a team that “carries out a preliminary analysis of training needs in that country and submits a project document to address those needs. The launching of the project depends mostly on financial contributions from donors, but the country is also asked to share in the costs.”31 TrainForTrade teaches nations and local corporations effective trading strategies, such as cutting costs and port management. Helping developing nations in this fashion ensures a healthy relationship between the UN and developing nations as well as fostering a growing export economy.
Key Positions Regional Positions Africa Fifteen out of thirty-three states classified as LLDCs by the UN are African nations, and twelve of these states are classified as least developed countries (LDCs). The World Bank and the African Development Bank have forged a partnership called the East African Trade and Transport Facilitation Project, and in March 2006 put forth USD $209 million to aid in the development of transit transport in Africa.
According to
Godgrey Onyayo, an official from the Northern Corridor Transit Transport Coordination
29
UNCTAD Transport Newsletter No. 31. 26 April 2006. 31 Ibid, 31. 31 “TrainForTrade,” UNCTAD, http://learn.unctad.org/, (Accessed 15 April 2006) 30
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Authority, “when goods come from Kenya to Uganda, they are checked from the Kenyan side, and when they cross the bridge, Uganda’s customs officers recheck them. This is time consuming and at times, goods spend days at the borders.”32 The investment made by the two banks should help alleviate the problem by establishing systems that would allow for the inspection of parcels on just one side of the border. An important problem with regard to transit trade is the ability to bypass the standards and regulations imposed by third party nations on traders. For example, transit trade abuse is so prevalent in Ghana that companies use preventative measures to circumvent draconian customs procedures. Importers sidestep regulations by “consigning goods to known foreign names in Niger, Mali and Burkina Faso while others used forged transit stickers and attempt to smuggle goods out of the ports, thereby, avoiding scanning [by customs officials].”33 These efforts have led to a decrease in state revenue produced by transit trade, and as a result, the Ghanaian Customs, Excise and Preventative Services (CEPS) has required evidence “certificate of title, certificate of origin, certificate of retail sales and a sill of sales” before goods can leave port facilities.34 These measures should ideally resolve the transit abuse in African areas, as they require goods to be accurately declared as they progress along their way. Other proposals to resolve transit abuse include the implementation of a tracking and monitoring system on the cargo.
Asia Trade agreements are common among nations throughout Asia. Specifically, a multilateral agreement between Russia, Mongolia, and China strengthens the relationship in trade facilitation, and seeks to “provide a favorable arrangement for facilitating traffic transit through the territories of the states.”35 As Mongolia has historically been a disputed area between China and Russia, customs agents in these areas hold up goods emanating from that state for significant periods as a means to negatively affect the 32
“World Bank, ADB Offer $209 Million for Transport.” Africa News. March 31, 2006. Lexis Nexis Korantemaa, Gifty. “The Abuse of Transit Trade.” Ghanaian Chronicle. October 27, 2005. 34 Ibid. 35 “Draft Transit Agreement Between the Governments of the People’s Republic of China, Mongolia, and the Russian Federation.” 16 Feb 2005. 33
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economy of the landlocked country. These efforts have sought to force Mongolian companies to rely upon the Chinese and Russian governments to participate in the global marketplace. Seeking to reduce smuggling in Pakistan, the government has sought to reduce the abuse of transit trade. Afghan traders smuggle in hundreds of billions of dollars worth of goods each year by establishing markets in the tribal areas of Pakistan. This is a quite difficult process because of the social structure of the nation. As tribal leaders control much of the rural region of Pakistan, the central government has little ability to enforce laws in these regions, and these local dominions have “little interest in cracking down on a trade that brings prosperity to their domains.”36 This inability by the government to effectively regulate trade decreases government revenue by almost $100 billion per year. Although the government realizes the problem, meaningful reform will likely be impossible without the support of these regional leaders.37
Europe Although there are land-locked European nations, Western European states are considered developed states. Some nations in Eastern Europe, however, fall under the LLDC classification, and are being encouraged to model their trading practices after their western neighbors.
The Trade and Transport Facilitation in
Southeast Europe (TTFSE) program cultivates trade by “promoting more efficient and less costly trade flows across the countries in Southeast Europe and provides European Unioncompatible customs standards.”38 Perhaps more importantly, the TTFSE program aligns trade and border regulations with those of
Participants in TTFSE Albania Bosnia and Herzegovina Bulgaria Croatia, FYR Macedonia Moldova Montenegro Romania Serbia
the European Union, allowing these states to more smoothly join the EU when their economies develop enough to become active members in that organization. As with
36
“Smuggler’s Trail.” Economist, 4/8/95. Vol 335. Ibid. 38 “Trade and Transport Facilities in Southeast Europe Program,” http://www.seerecon.org/ttfse/, (Accessed 20 April 2006). 37
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other programs, TTFSE seeks to reduce transport costs while minimizing smuggling and illegal border crossing. Funding from this program comes primarily from the World Bank and the United States.39 Once fully implemented, the TTFSE program will move into a second phase, which aims to achieve higher goals, including an increase in “the trade competitiveness of Southeast Europe through improving the availability of adequate logistics services connecting the region with its neighbors.”40 Increasing cooperation between trading states, heightening border security, and maintaining stronger logistical management will help in the achievement of these goals.
Business Interests Cooperation between non-governmental organizations (NGOs) and public organizations is a key factor in the development of transit trade.
Public-private
partnerships (PPP) are a collaborative effort between “public organizations and corporations, companies, or non-governmental organizations working in collaboration to achieve mutually beneficial results.”41 This partnership enables the improvement of the transport system by improving the efficiency of public and private “management of the international supply chain ... [these] supply chains are created by businesses for the efficient manufacturing, transfer, and trade of goods.”42 The primary purpose of these groups is to reduce the costs of trade while improving its efficiency. Both the government and traders seek transparency in trade to promote economic growth. Traders must comply with the trade regulations of government agencies, and it is incumbent upon government officials that the rules of procedure are clear and can be implemented by companies, regardless of size.
By having transparency in trade
procedures, there is an increase in efficiency of trade.43 39
Ibid. Ibid. 41 “Public-private partnerships in trade and transport facilitation”. Global Facilitation Project for Transport and Trade. June 2005. 42 Ibid. 43 “Trade Logistics: Practical Measures.” Global Facilitation Project for Transport and Trade 40
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Until recently, most of the world largest companies provided numerous services to many different markets. As the global economy develops, small and medium sized enterprises (SMEs) increase the effectiveness of international supply chains, as local companies
can
provide
supply-chain
management
functions
to
multinational
corporations. According to the Global Facilitation Project for Transport and Trade, SMEs account for “60 to 70 percent of employment [in the areas in which they operate] … and in developing countries, this number is often much higher.”44 There is, however, one notable limitation in SME’s, in that they are more likely to fail in developing countries due to a variety of barriers that limit their organic growth. Therefore, while it is important to focus development on these local businesses, large trading operations need also focus on established trading networks to ensure price and logistical stability.
44
“Enabling SMEs to Enter the International Supply Chain..” Global Facilitation Project for Transport and Trade. July 2005.
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Summary Globalization has benefited countries throughout the world, however in the process, it has identified landlocked countries as most vulnerable to trade barriers. Since they are required to ship their goods through a neighboring state in order to have access to port facilities, these states are forced to rely upon established infrastructure networks, and the customs regulations of that country. These intermediary states have the ability to significant limit the access of these landlocked states to the global marketplace by implementing severe customs restrictions or significantly delaying goods at ports of call. Realization that these states need specific assistance, much of the global trading community has come together in a series of conferences, including those in Almaty, Kazakhstan and Asunci贸n, Paraguay, to discuss strategies that can support the development of these states. While this increased dialogue is critical to the trade of the states affected by this problem, states need to be proactive to ensure that they have adequate access to the global trading system, lest they continue to have faltering economies, and limited potential for growth from trade. Before real progress can be achieved, landlocked states need to bring their customs regulations in line with the rest of the world so that coordinated growth can help nations throughout the world. When developed states actively cooperate with developing states, the latter are able to implement proven systems without undertaking the extensive costs that go into their development. The AYSCUDA system is an example of a strategy implemented in developing states that was effectively transitioned to developing states, reducing the time and expense necessary to process trade goods at border crossings. As more bordering states harmonize their customs regulations, global trade can become more effective, and the disadvantage of landlocked states can be transcended.
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Discussion Questions • What is the status of Transit trade in your state? With what other nations does your state have trade agreements? • Has ASYCUDA been implemented in the transit trade process of your nation, if so, how many ports and stations is it in use? • How significant are smuggling and other efforts to circumvent trade restrictions in your state? How much government revenue is lost due to this activity? How can this behavior be limited? • Does the United Nations define your state a Least Developed Country (LDC)? If so, what are primary impediments to economic growth? Can current economic systems alleviate these problems, or is further reform necessary? • How can your state reduce the costs associated with transiting barriers? Do your neighbors help or hurt your efforts at accessing the global marketplace? • Which partnerships or alliances regarding the development of trade is your state a member? How have these groups helped your state to develop? • How can small and medium sized enterprises (SMEs) influence the trade economy in your region? Which SMEs are dominant in your state? • Has the Integrated Framework (IF) been implemented in your state? Has it had a measurable impact?
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Works Cited “A/58/388 International Ministerial Conference of Landlocked and Transit Developing Countries and Donor Countries and International Financial and Development Institution on Transit Transport.” 23 September 2003. http://www.un.org/specialrep/ohrlls/imc/A-58-388-final.pdf. “A/60/308 Asunción Platform for the Doha Development Round.” UNCTAD. 29 August 2005. http://www.unctad.org/en/docs//a60d308_en.pdf A/60/308/ “About ASYCUDA.” ASYCUDA. 27 April 2006. http://asycuda.org/aboutas.asp. “About Integrated Framework.” Integrated Framework. 8 March 2006. http://www.integratedframework.org/about.htm. “About UNCTAD.” UNCTAD. http://www.unctad.org/Templates/Page.asp?intItemID=1530&lang=1. “The ASYCUDA Programme.” ASYCUDA http://www.asycuda.org/programme.asp. “Diagnostic Phase.” Integrated Framework. 8 March 2006. http://www.integratedframework.org/diagphase.htm “Draft Transit Traffic Agreement between the People’s Republic of China, Mongolia, and the Russian Federation.” 16 Feb 2005. http://www.unctad.org/Templates/Page.asp?intItemID=3619&lang=1. “Enabling SMEs to Enter the International Supply Chain.” July 2005. Global Facilitation Project for Transport and Trade. http://www.gfptt.org/. Faye, Michael L. “The Challenges Facing Landlocked Developing Countries.” Journal of Human Development. Volume 5, Number 1 / March 2004. 31 – 68. “How ASYCUDA is implemented.” ASYCUDA. http://asycuda.org/project.asp “Integrated Framework for trade-related technical assistance.” World Bank. 13 May 2006. http://www.worldbank.org/oed/gppp/case_studies/trade_finance/iftrta.html Integrated Framework (IF) Trade-related technical assistance for least developed countries. unctad.org. http://www.unctad.org/Templates/webflyer.asp?docid=6055&intItemID=1397&la ng=1&mode=highlights
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Korantemaa, Gifty. “The Abuse of Transit Trade.” Ghanian Chronlicle. October 27, 2005. LexisNexis Lakshmanan, T R, Subramanian, Uma, et. Al. “Integration of Transport and Trade Facilitation: Selected Regional Case Studies.” International Bank for Reconstruction and Development. Washington DC, 2001. “Landlocked Countries join with ‘small and vulnerable economies’ in bid ofr improved trade access, as Paraguay’s meeting concludes.” UN Press release. 10 Aug 2005. http://www.un.org/News/Press/docs/2005/dev2534.doc.htm “Landlocked Developing Countries” United Nations. http://www.un.org/specialrep/ohrlls/lldc/default.htm. “Novelty Customs System to be Commissioned before November 1.” http://www.asycuda.org/asycom/wnfiles/ASYCUDAWorld%20Moldova%20Toda y.GIF “Public-private partnerships in trade and transport facilitation”. Global Facilitation Project for Transport and Trade. June 2005. http://www.gfptt.org/Entities/ReferenceReadingProfile.aspx?id=c25d2ae7-9ed44b17-970b-a482d5524091. Report of the Fifth Meeting of Governmental Experts from Land-locked and Transit Developing Countries and Representatives of Donor Countries and Financial and Development Institutions. 23 Aug 2001. United Nations Resolution. “Smuggler’s Trail.” Economist, 4/8/95. Vol 335. LexisNexiss “TD/B/COM.3/EM.22/2 Design and Implementation of Transit Transport Arrangements.” United Nations. 4 October 2004. http://www.unctad.org/en/docs/c3em22d2_en.pdf. “Trade and Transport Facilities in Southeast Europe Program” 26 September 2005. http://www.seerecon.org/ttfse/ . “Trade Logistics: Practical Measures.” Global Facilitation Project for Transport and Trade. June 2005. http://gfptt.org/uploadedFiles/89c2cc71-ec66-4e17-8f213336a268bcc8.pdf. “TrainForTrade” United Nations Conference on Trade and Development. 15 May 2006. http://learn.unctad.org/
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UNCTAD Technical Assistance in Trade Facilitation. ASYCUDA.org. http://www.asycuda.org/pdf%20docs/UNCTADTechnAssi.pdf. UNCTAD Transport Newsletter No. 31. 26 April 2006. http://www.unctad.org/en/docs/sdtetlbmisc20061_en.pdf. “UNCTAD/LDC/2005/3 (Part I) Effective Participation of the Landlocked countries in the Multilateral trading system.” United Nations. 7 June 2005. http://www.unctad.org/en/docs/ldc20053p1_en.pdf. “World Bank, ADB Offer $209 Million for Transport.” Africa News. March 31, 2006. Lexis Nexis. World Bank. “Global Economic Prospects, 2004: Realizing the Development Promise of the Doha Trade Agenda.” International Bank for Reconstruction and Development. Washington DC, 2003.