Trade Facilitation: Impossible Without Facilitating Logistics

Contribution of the Global Express Association (GEA)

2008 WTO Public Forum25 September 2008

The First Great Logistics Model

A Landmark in Logistics Innovation

More Landmarks in Logistics Innovation

Logistics Today

• The emergence of a global economy with transactions occurring over greater distances makes efficient movement of goods increasingly important.

• Modern logistics managers (and competent governments) are engaged in squeezing time and cost out of supply chains; ultimately this benefits consumers and global standards of living.

• Air freight, and express delivery in particular, have largely removed distance as a decisive factor in trade.

Express Delivery Creates New Trade

• International express delivery companies carry US$2.4 trillion in goods across borders annually.

• This is trade that might otherwise not occur. Because of the high quality and end-to-end nature of services provided, express delivery is a higher-priced transport option.

• If traders could maintain the same levels of service, speed, and

reliability using less expensive transport options they almost certainly would.

• It is reasonable to conclude that much of the merchandise trade carried by international express delivery companies occurs because of the availability of express delivery.

Express Delivery Has Special Value for SMEs• “Globalization” offers many opportunities for SMEs

• Online SMEs have been especially successful in developing global markets.

• However, making the perfect shipping arrangements each day for demanding customers in many foreign countries is an enormous challenge for a small business.

• By integrating all of the steps required to move products to customers, express delivery companies place world-class logistics within reach of small companies everywhere, and allow them to share in the benefits of a global marketplace.

SME Success Story #1www.poilane.fr

SME Success Story #2www.rajanacrafts.org

SME Success Story #3www.fpef.co.za

Why Governments Should Care About Improving Logistics• WTO success in reducing trade barriers will create new opportunities for

many exporters – particularly SMEs - that currently have limited prospects for growth within their national or regional markets. But good logistics are critical to exploiting the new opportunities.

• Expanded global competition may force domestic exporters to improve their competitiveness by developing new sources of materials for their own production.

• In response to their own competitive pressures, customers in all parts of the world will become more demanding about speed and reliability of delivery.

• Without better logistics the effectiveness of tax incentives offered by governments for investments in new production will be undermined.

• Governments know this but reforms that would improve logistics efficiency are stymied by official schizophrenia.

Policy Choice for Governments That Affects The Quality of Logistics:National Development Objectives or Domestic Politics

Key Official Restrictions Faced By Express Delivery Companies

• Anti-competitive practices of government-owned or authorized monopolies

• Obsolete restrictions on foreign investment and cabotage– Aviation– Ground

• Inefficient border procedures

Anti-competitive practices of government-owned or authorized monopolies

• Well into the era of a global economy all but a few of the WTO’s 151 members maintain public postal monopolies, many barely viable.

• In some countries monopoly postal operators and private delivery companies co-exist peacefully and even enter into partnerships.

• However, in several major developing markets the postal operator acts in contravention of national development plans and in near defiance of economic ministries.

Restrictions on foreign investment and cabotage (aviation)

• No industry in the world is under greater stress or more in need of rationalization.

• “We must move away from an aviation world dictated by 60- year-old rules and based on flags on aircraft tails.” “We cannot go on with the archaic system: we need to merge, we need to integrate.” IATA DG Giovanni Bisignani

• Bankruptcy rather than policy is driving reform and liberalization of aviation rules, despite the resistance

of governments.

Restrictions on foreign investment and cabotage (ground)

• Fifteen years after the NAFTA was approved restrictions on cross-border trucking services have not been removed.

Freight crossing the border is loaded and unloaded three times at a minimum before it reaches its destination, largely offsetting the benefits of duty elimination.

• GATT Article V – Freedom of Transit – is widely ignored; a promising Doha effort to give it greater effect now appears to have failed.

• The World Bank’s 2007 Logistics Performance Index shows that among the worst performers are landlocked countries of Africa and Central Asia and their neighbors that (unless they have oil or gas revenues) are also among the poorest nations.

Inefficient border procedures• Still too many paper documents• Limited capability to receive release information

electronically in advance of arrival• Absence of automated risk assessment makes customs less

effective and fosters official corruption• Goods held hostage pending completion of all procedures• Chaotic gangs of agencies other than customs at the

borders; no single window • Lukewarm commitment by key governments to harmonized

cargo security regimes • Doha’s finest memorial could be preservation of its trade

facilitation work

Logistics Liberalization: the Next Reform Frontier?

• Even in developed countries, logistics providers operate under rules that have barely changed in a century.

• WTO members have learned that elimination of tariffs and quotas is not sufficient without trade facilitation

• Now they must learn that trade facilitation is not sufficient without logistics reform.

The global economy has changed, but as these images remind us . . .

No matter when or where you are in business . . .

The things you sell must still be delivered to customers.