(Copyright Financial Times Ltd. 2006. All rights reserved.) The security clampdown in the wake of the September 11 terror attacks seems to have greased the wheels of global trade.
The World Bank's 2007 "Doing Business" report shows that initially US-driven requirements for trading partners to increase inspection and screening of containers burdened developing countries, some of which had to open and inspect every single container going through their ports and border crossings.
Ports have since responded with a flurry of upgrading activity, particularly in the last couple of years. Software-run risk management systems can narrow the focus of inspections by identifying high-risk containers judging by the port and company of origin, and x-ray and gamma-ray screening can reduce the need to open containers. Serbia, the best performer according to the report, cut its inspection rates from 100 per cent of shipments to 8 per cent, and reduced the time for importers to clear goods into the country from 44 days to 12.
"The interesting and rather surprising result was that improved security has in many cases made trading across borders faster, not slower," says Simeon Djankov, one of the report's authors. In poor countries, such as in most of Africa, bottlenecks in border crossings and shortages of equipment and staff to test food hygiene and other trade standards are reckoned to restrain exports much more than do trade tariffs. Despite recent improvements in ports such as Accra in Ghana, Africa remains the most difficult continent in which to trade.
Better risk management has often been accompanied by automation in other areas. Even in Pakistan, a country facing serious security concerns, the time taken for an import consignment to clear has been cut from 39 days to 19 by allowing shippers to file cargo declarations in advance and pay tariffs electronically. More generally, traders say, introducing electronic payment of tariffs and port fees reduces the potential for corrupt officials to exact bribes.
The Geneva-based United Nations Conference on Trade and Development (Unctad), which developed one of the first automated customs systems, says it has seen a marked increase in its use. "In Afghanistan, the authorities managed to track down and search all but 60 of 1,500 trucks that had entered the country for transit and then disappeared," says Taffere Tesfachew, chief of staff for Unctad's secretary-general.
Ironically, during this time multilateral talks just across Geneva at the World Trade Organisation failed to hardwire binding rules on streamlined customs into the global trading system. The "trade facilitation" part of the so-called Doha round, although itself progressing well, was suspended in July along with the rest of the negotiations after a deadlock in talks over farm and goods trade. Mr Djankov says that while some regional trade pacts such as the Central American Free Trade Agreement (Cafta) appeared to have spurred changes in border procedures, not one of the dozens of respondents interviewed for the report mentioned Doha.
Parallel to Doha, rich donor countries have promised to redirect some of their aid budgets towards an as yet loosely defined "aid for trade" package. But Mr Djankov notes that streamlining customs procedures is a quick win, or at least a cheap win, for developing countries. The political cost of taking away jobs and bribery opportunities from customs officials is generally far more onerous than the fiscal costs of installing automated replacements.
The risk management software itself costs little or nothing - Unctad provides it free and supplies technical help with installation - and telecoms and other equipment to support it generally cost only Dollars 1m-Dollars 2m for an average developing country. X-ray and gamma screening equipment is more expensive, costing Dollars 15-Dollars 35m, but poor countries can often get the bill paid by the World Bank or other donors.
"These reforms spread quickly from one country to another because they are cheap and easy to replicate," Mr Djankov says. "
Beyond this, improving physical trade infrastructure gets more expensive: it costs an average of Dollars 125,000 to upgrade a kilometre of road from dirt to asphalt in Africa, for example. But on the strength of this report, opportunities remain for quick and cheap gains in building swifter trading across the developing world.
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