1DevelopingTransitTrade

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

© 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 [email protected]

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

Rutgers Model United Nations 2006 1

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


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 trade-

related 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


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.

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.

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


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” 4 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).


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. 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.

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.


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” 10 “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


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 14 Ibid 13. 15 “Landlocked Developing Countries,” United Nations, http://www.un.org/special-rep/ohrlls/lldc/default.htm, (accessed 10 February 2006).


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

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.

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 know-how 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


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 high-

cost 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. For example, one of the 19 Ibid, 9. 20 Ibid, 11.


recommendations formulated during the convention calls for “the elimination of non-

physical barriers which compromise the competitiveness of trade to and from the land-

locked 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 trade-

related 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).


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). 26 “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).


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 30 Ibid, 31. 31 “TrainForTrade,” UNCTAD, http://learn.unctad.org/, (Accessed 15 April 2006)


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 33 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.


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 Union-

compatible customs standards.”38 Perhaps more importantly, the

TTFSE program aligns trade and border regulations with those of

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. 37 Ibid. 38 “Trade and Transport Facilities in Southeast Europe Program,” http://www.seerecon.org/ttfse/, (Accessed 20 April 2006).

Participants in TTFSE Albania

Bosnia and Herzegovina Bulgaria Croatia,

FYR Macedonia Moldova

Montenegro Romania

Serbia


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. 40 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


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.


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 Asunción, 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.


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?


Works Cited “A/58/388 International Ministerial Conference of Landlocked and Transit Developing

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“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

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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&lang=1&mode=highlights


Korantemaa, Gifty. “The Abuse of Transit Trade.” Ghanian Chronlicle. October 27, 2005. LexisNexis

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Facilitation: Selected Regional Case Studies.” International Bank for Reconstruction and Development. Washington DC, 2001.

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trade access, as Paraguay’s meeting concludes.” UN Press release. 10 Aug 2005. http://www.un.org/News/Press/docs/2005/dev2534.doc.htm

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http://www.asycuda.org/asycom/wnfiles/ASYCUDAWorld%20Moldova%20Today.GIF

“Public-private partnerships in trade and transport facilitation”. Global Facilitation

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Developing Countries and Representatives of Donor Countries and Financial and Development Institutions. 23 Aug 2001. United Nations Resolution.

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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-ec66-4e17-8f21-3336a268bcc8.pdf.

“TrainForTrade” United Nations Conference on Trade and Development. 15 May 2006.

http://learn.unctad.org/


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the Multilateral trading system.” United Nations. 7 June 2005. http://www.unctad.org/en/docs/ldc20053p1_en.pdf.

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