Leaders of the Asia Pacific Economic Cooperation (APEC)--long at the forefront of reform efforts in the area of trade facilitation--convene in Sydney Australia the week of September 3, 2007.
Following the success of the 2001 Shanghai Declaration in reducing trade costs, APEC member economies have renewed their commitment and now strive towards an additional 5% reduction by 2010.
A new World Bank-APEC trade research paper, "Transparency & Trade Facilitation in the Asia Pacific: Estimating the Gains from Reform" highlights that improving the transparency of trade policy is also a critical aspect of trade facilitation and any structural reform agenda that interfaces with regional or global integration goals.
The potential intra-regional trade gains in APEC from improved transparency are substantial - approximately $148 billion, or 7.5% of (2004) trade (see chart). Action to improve transparency to the regional average, as the study examines, could be undertaken in many forms, including within the current APEC framework or future talks on a Free Trade Area of the Asia Pacific.
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While reform must continue to focus on traditional barriers such as tariffs, transparency—the way in which policies affecting transactions costs are designed and administered—is also critical.
Overall, APEC member economies perform relatively well on trade policy transparency compared with other regions, in part because of the effective use of information technologies by member governments.
The principle of transparency can be applied to a wide range of policies affecting border and “behind-the-border” procedures, say authors Helble, Shepherd and Wilson.
Despite the central role of transparency in support of economic development and trade, this report is the first attempt to comprehensively evaluate the relative impact of transparency and related trade facilitation measures.
Predictability and Simplification
The paper identifies two main touchstones for trade facilitation and transparency reform in APEC's Bogor Goals: predictability and simplification.
Making trade policy more predictable reduces uncertainty, and therefore costs, for business. Possible reforms include:
Binding tariff rates through the WTO
Moving towards “flatter” tariff structures
Making import and export delays less variable
Lowering uncertainty surrounding unofficial payments
Reducing favoritism in administrative decision making.
Simplifying trade policy makes it easier, and therefore less costly, for importers and exporters to identify, assess, and comply with regulation. Possible reforms include:
Streamlining documentary requirements for import/export transactions
Reducing the number of border agencies with which firms must interact
Removing “hidden” trade barriers
Limiting unofficial payments.
The paper uses data on the above indicators to produce summary measures of import and export transparency for each APEC economy. It then uses a standard gravity model to assess the increase in trade flows resulting from transparency reforms.
These results measure increases in trade between APEC economies only, and would likely increase if the rest of the world was included due to the non-discriminatory nature of transparency reforms.
The analysis covers three scenarios involving policy reform to the regional average in relation to tariffs, non-tariff barriers, and transparency. The largest intra-regional trade impact comes from transparency reform (see Figure), and amounts to 7.5% of baseline 2004 trade.
Policies aimed at increasing trade policy transparency in the APEC region appear to have the potential for high impact. Since the three reform scenarios considered are not mutually exclusive, transparency reforms can be seen as an effective complement to traditional tariff and non-tariff barrier reforms.
The paper's findings suggest that in moving forward, there is considerable scope for APEC to consolidate and build on progress already made in the area of transparency and trade facilitation.
Within APEC’s framework of regional cooperation, it will be important for policymakers and stakeholders to develop both a set of substantive goals and concrete policy options that can be implemented with these priority areas in consideration.
Mobilizing the financial and technical resources necessary to ensure that any such reform program is feasible and sustainable across such a diverse regional grouping will require member economies to once again demonstrate the creativity and flexibility for which APEC is so noteworthy.
APEC Economic Committee, 2004, Trade Facilitation and Trade Liberalization: From Shanghai to Bogor, APEC Secretariat, Singapore
Helble, Matthias, Ben Shepherd, and John S. Wilson, 2007, “Transparency and Trade Facilitation in the Asia Pacific: Estimating the Gains from Reform”, Mimeo, World Bank Development Research Group.
Wilson, John S. “Trade facilitation: Why it Matters to APEC and What Next”. APEC Economies Newsletter, Vol. 10 No.9 September 2006, APEC.
The findings, interpretations, and conclusions expressed in this article are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. The analysis summarized here is part of a new Trust Fund project on Transparency and Competitiveness with support from the Government of Australia through the Australian Agency for International Development. It is also part of a broader work program funded through the U.K. Department for International Development.
See http://econ.worldbank.org/projects/trade_costs for more information.