trade connections: New OECD Analysis on Trade Facilitation as it Applies to Australia and the World

The Organisation for Economic Co-operation and Development (OECD) recently published the results of research, undertaken to measure the relative economic and trade impacts of trade facilitation measures currently under negotiation in the World Trade Organization (WTO) on trade flows and trade costs across all WTO member countries.

A series of Trade Facilitation Indicators (TFIs) that identify areas for action and enable the potential impact of reforms to be assessed have been identified by the OCED to help governments improve their border procedures, reduce trade costs, boost trade flows and reap greater benefits from international trade (see list of indicators in Appendix 1).

“Trade facilitation is about easing access to the global marketplace,” OECD Secretary-General Angel Gurría said. “Complicated border processes and excess red tape raise costs, which ultimately fall on businesses, consumers and our economies. The trade facilitation negotiations offer countries a golden opportunity to reduce or eliminate these bottlenecks, cut the cost of trading, boost the flow of goods and reap greater benefits from international trade,” Mr Gurría said.

A key message from the OECD research is that a multilateral agreement to cut red tape in international trade would have a significant impact on reducing trading costs and add a much needed boost to the global economy (for details on the the progress of a multilateral agreement, see Appendix 2).

The OECD estimate that comprehensive implementation of all measures currently being negotiated in the World Trade Organization’s Doha Development Round would reduce total trade costs by 10% in advanced economies and by 13-15.5% in developing countries. Reducing global trade costs by 1% would increase worldwide income by more than USD $40 billion, most of which, according to the OECA, would accrue in developing countries.

TFI analysis was conducted on all WTO member countries to measure their relative trade facilitation performance and reveal areas where more can be done to improve trade flows and costs.

How did Australia rank?

Australia performed significantly better than the OECD average in the areas of appeal procedures, border agency cooperation (internal and external) and governance and impartiality. We performed slightly above the average in most other indicators but performed below average for harmonisation and simplification of documents.

The OECD’s quantitative analysis reveals that, for developed countries, the areas with the greatest impact on increasing bilateral trade flows and reducing trade costs are the following:

information availability
advance rulings
fees and charges
automation and streamlining of procedures

Taking into account the OECD research, Australia would benefit from continued improvements in the following areas:

Information availability:

Introduce a full time hotline (24/7) for addressing reasonable enquiries to Customs.
Publish decisions and examples of Customs classification on the Customs website.
Publish examples of judicial decisions on the Customs website.

Advance rulings:

Increase the length of time for which the advance ruling is valid, as it remains lower than the OECD average.

Fees and charges:

Decrease the number and diversity of total fees and charges collected. Interestingly, in the recent budget announcement the Government announced they will be restructuring the Import Processing Charge (IPC) in order to recover the costs of all import related cargo and trade functions undertaken by Customs, which is obviously in contrast to the above OECD recommendation. For details on the IPC changes, please see Appendix 3.

Formalities – Procedures:

Improve the treatment of perishable goods with respect to the separation of release from final determination and payment of Customs duties.
Further develop the Post-Clearance Audit program.
Further develop the Authorised Operators program as the number of authorised operators in the total number of traders remains low compared to the OECD average. However, what the OECD did not mention, or was perhaps unaware, was that Australia does not actually have any Authorised Operators program.
Continue overall simplification of procedures in terms of both time and costs.

What is the ECA doing?

The ECA has long advocated for a reduction in trade facilitations costs. In fact, the ECA is currently working on a research project which analyses the fees and charges businesses across a wide range of industries incur in order to be able to export their product overseas. The results of this research will be used to reveal to government how significant these costs in fact are and how they impede exporters and their ability to compete internationally. If you are interested in being involved in this research please contact Lisa McAuley: lisamcauley@export.org.au.

The ECA has a five point agenda in its Trade Policy paper to be tabled in June. The paper will call on government to:

Address International Trade as an essential aspect of domestic economic policy
Incorporate International Trade in economic and physical infrastructure and investment
Rigorously review all aspects of regulation (both red and green tape) and increase the focus on competition policy
Re-evaluate policy settings in foreign trade negotiations to place greater emphasis on trade.
Ensure International Trade becomes a “whole of Government” issue

In addition, the ECA is involved in the Future Logistics Living Lab which provides industry and research the opportunity to work together to create innovative solutions to logistics challenges. Ultimately, the projects developed through the Lab improve trade facilitation through the increased availability of information and the automation and streamlining of procedures.

Appendices

Appendix 1
OECD Trade Facilitation Indicators:

Information Availability: Publication of trade information, including on internet; enquiry points.
Involvement of the Trade Community: Consultations with traders.
Advance Rulings: Prior statements by the administration to requesting traders concerning the classification, origin, valuation method, etc., applied to specific goods at the time of importation; the rules and process applied to such statements.
Appeal Procedures: The possibility and modalities to appeal administrative decisions by border agencies.
Fees and Charges: Disciplines on the fees and charges imposed on imports and exports.
Formalities-Documents: Simplification of trade documents; harmonisation in accordance with international standards; acceptance of copies.
Formalities-Automation: Electronic exchange of data; automated border procedures; use of risk management.
Formalities-Procedures: Streamlining of border controls; single submission points for all required documentation (single windows); post-clearance audits; authorised economic operators.
Internal Co-operation: Co-operation between various border agencies of the country; control delegation to Customs authorities.
External Co-operation: Co-operation with neighbouring and third countries.
Governance and Impartiality:Customs structures and functions; accountability; ethics policy.

Appendix 2:

Trade facilitation refers to the simplification and harmonisation of international trade procedures to assist the movement of goods. Customs, licensing and transit formalities are areas which can involve complicated administrative processes and additional costs to business.

Negotiations on a multilateral trade facilitation agreement were launched as part of the WTO Doha Round in 2004. Nearly 9 years on there is now a draft negotiating text which is said to be a fairly accurate indication of what the final document might look like. With the Doha Round of negotiations at an impasse, it is hoped that headway on the agreement might be made at a high level meeting to be held in Bali this December.

Organisations that are involved in studying the implications of trade facilitation costs and are actively pursuing the ratification of a multilateral agreement include the WTO, the OECD, the World Bank, the EU, the World Economic Forum and other regional trade forums such as APEC, among others.

Most of the gains attributed to a multilateral trade facilitation agreement would accrue to developing nations and would lead to significant gains to world trade.

Appendix 3: Change to Import Processing Charge for full cost recovery

In the recent budget announcement the Government announced they will be restructuring the Import Processing Charge (IPC) in order to recover the costs of all import related cargo and trade functions undertaken by the Australian Customs and Border Protection Service.

The new charges will take effect on 1 January 2014 and will take effect as follows:

For consignments valued over $10,000 the IPC for electronic sea import declarations will be increased by $102.60 to $152.60 per consignment.
The IPC for electronic air import declarations will be increased by $81.90 to $122.10 per consignment, for consignments valued at over $10,000.
For consignments valued over $1,000 and up to $10,000, the IPC will remain at current levels, being $50 for electronic sea import declarations and $40.20 for electronic air import declarations.
The IPC will continue not to be applied to consignments valued at $1,000 or less.

The increase to the IPC will result in additional revenue of $674.3 million over four years and will be implemented in accordance with the Australian Government's cost recovery policy.

Author

Stacey Mills

Export Council of Australia

Ph: 02 8243 7460

Fax: 02 9251 6492

Email: StaceyMills@export.org.au

Website: http://www.export.org.au/

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For media queries or further information on the Export Council of Australia, please contact:

Lisa McAuley

National Manager