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What Is Trade Facilitation?

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  • Written By: Ray Hawk
  • Edited By: E. E. Hubbard
  • Last Modified Date: 01 October 2014
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Trade facilitation is a process of analysis of trade restrictions at borders and ports and due to restrictive regulations, in order to streamline the process of trade and reduce unnecessary costs built into the system between nations. The World Bank attaches great importance to trade facilitation, with 80 projects underway to streamline trade practices in developing and other nations. A significant component of trade facilitation is that of trade finance, or improving upon payment procedures so that goods can move from sellers to buyers more quickly.

Movement of goods across borders has been studied extensively by the World Bank and resulted in four key indicators as to how trade is restricted. Two of these trade infrastructure indicators are known as hard indicators; restrictions of inadequate infrastructure such as ports, roads, and bridges; and limited telecommunications and information technology abilities. The other two key indicators, considered soft infrastructure, include border and custom controls, including domestic transportation and import/export procedures, and the general business and government regulatory climate in a nation involving issues of transparency and corruption.

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International trade is seen as a key method for developing nations to advance their economies and educate their people. Therefore, trade facilitation projects play a key role in efforts involving such organizations as the International Monetary Fund (IMF), World Trade Organization (WTO), the United Nations Conference on Trade and Development (UNCTAD), the World Customs Organization (WCO), and the United Nations Economic Commission for Europe (UNECE). As of the fiscal years 2004-2006, trade facilitation programs were under the direction of the World Bank in 22 Sub-Saharan countries in Africa, two countries in the Middle East, two in South Asia, one in East Asia and the Pacific region, four in Eastern Europe and Central Asia, and three in Latin America and the Caribbean, totaling a combined international expenditure of $1.92 billion US Dollars (USD).

One of the complexities involved in making trade facilitation reforms work is that it must involve cooperation from three directly affected entities, defined as government agencies, services providers, and traders. Broken down further, this can involve dozens of different organizations in government, including ministers of finance, customs, agriculture, and quarantine agencies. Service providers can include customs brokers, freight transporters, and so on, and the actual traders themselves span a spectrum covering everything imported or exported by a nation. This interconnected practice makes public and private cooperation essential to the reforms that trade facilitation is attempting.

The focus on trade facilitation began to take greater shape in 2001 with what is known as the Doha Development Round, a conference in Doha, Qatar, by members of the WTO, whose aim was to lower trade barriers across borders. Subsequent meetings continued until 2008, when negotiations broke down over issues relating to the reform of agricultural import practices. Though negotiations continued on a more narrow basis between the US, China, and India, agreeing to further trade facilitation reforms has stalled.

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