Soapbox - Made in the World
Better border management would break down supply chain barriers and bolster air cargo’s vital role in world trade – by Carlos Grau Tanner, Director General, Global Express Association
The World Trade Organization (WTO) estimates that 50% of world trade consists of components as opposed to finished goods. This reflects the emergence of global supply chains, where goods are made in the world rather than in a specific country.
International air cargo—and express delivery in particular—is a key enabler of this paradigm shift in manufacturing. But express delivery, in turn, is dependent on a number of critical elements. Border management stands out. And it is beyond the industry’s control. The ability to deliver on time in a foreign territory depends on how fast goods can cross an international border.
A two-year study by the Global Express Association (GEA) reveals that the border agencies of the 32 “best in class” group of nations immediately release, on average, over 94% of express shipments. But at the bottom end, more than 32 countries in the world immediately release, on average, less than 40% of all express shipments going into their territory.
In more than half the countries and territories in which the express industry operates, there is a one in four chance that a shipment will be held at the border. In terms of trade facilitation, there is considerable room for improvement.
This matters a lot. A recent study by the Organisation for Economic Co-operation and Development (OECD) suggests that in one case better trade facilitation would bring about a 10% reduction in trade costs. The OECD further suggests that trade facilitation in developing nations would mean a 15% reduction in the cost of trade.
The World Economic Forum goes further. It states: “If all countries reduce supply chain barriers halfway to global best practice, global GDP could increase by 4.7% and world trade by 14.5%, far outweighing the benefits from the elimination of all import tariffs. In comparison, completely eliminating tariffs could increase global GDP by 0.7% and world trade by 10.1%.”
Better trade facilitation leads to more trade, economic growth, and job creation. In these uncertain times, a meaningful WTO trade facilitation agreement would not only signal commitment to a rule-based trading system, but could stimulate trade significantly in the medium term.
The negotiations are at a critical stage. WTO members don't have long if they wish to complete the agreement in time for the next WTO summit at the end of the year. Hopefully this time a strong political vision will prevail.