Freight forwarders.. key stakeholders in facilitating trade

Freight forwarders.. key stakeholders in facilitating trade FIATA Headquarters Session 2018 15 March 2018, Zurich, Switzerland Dr. Mohammad Saeed Senior Trade Facilitation Adviser, Trade Facilitation and Policy for Business (TFPB), ITC

Agenda 1 The role of SMEs in national economies and challenges in international trade 2 3 4 5 Trade facilitation: its concept and benefits for SMEs The involvement of freight forwarders in trade facilitation The importance to organize yourself as a business community ITC trade facilitation offer: empowering the private sector

Freight forwarding firms are SMEs themselves Size of freight forwarding firms in Germany 29% 11% 60% 1-50 50-200 200+ Around the world, the case of the global freight forwarding industry is one example where networks of SMEs are primarily playing an increasingly important role.

SMEs play a vital role in national economies worldwide Small and medium enterprises (SMEs) are a powerful engine of growth, with a crucial presence in national economies across the globe. They play a key role with their contribution in labor absorption, poverty alleviation and revenue generation. Magnitude of SMEs presence in national economies SMEs represent 93% of all enterprises in non-high income, non-oecd countries, and 95% of all enterprises in OECD countries Micro and SMEs account for around 2/3 of total employment in developing and developed countries alike Contribution to GDP is at around 35% in developing countries and around 50% in developed countries For statistical purposes, the OECD refers to SMEs as the firms employing up to 249 persons, with the following breakdown: micro (1 to 9), small (10 to 49) and medium (50-249).

SMEs are increasingly embedded in global value chains (GVCs) but not everywhere Globalization and increased regional economic integration have triggered new patterns of global business. In participating in global value chains (GVCs), SMEs have the opportunity to upscale their business models and grow across borders. Source: ITC Competitiveness Outlook 2017

Trade costs are magnified in GVCs, and act as a disincentive for foreign investments Private view on the main barriers in connecting firms to value chains (% answers) Transport costs & capacity Customs procedures Licensing requirements Business environment Meeting standards Import duties Power supply Inadequate ICT networks Labour skills Access to finance Meeting deadlines Visa requirements Labour practices Ownership restrictions Security concerns Source: OECD/WTO Questionnaire 2013 9% 9% 6% 6% 5% 5% 3% 3% 3% 29% 28% 25% 25% 36% 50% Trade costs in developing countries are equivalent of a 219% import tariff. For each dollar it costs to make a product, it costs a further $2.19 to bring it to consumers in developing countries. Roberto Azevedo, Director-General of WTO

Logistics efficiency is also crucial for a firm s competitiveness Quality logistics services play an important role in facilitating the transportation of international trade in goods. Inefficient logistics services impede trade by imposing an extra cost in terms of time as well as in monetary terms, concurring in slowing down the delivery or the release of a consignment. Main issues for logistics providers Complying with product-related regulations for preparation of consignment, its packaging and transport equipment used Preparing proper documentation to accompany the goods in the transport chain Dealing with changes in required documents when changing the mode of transport used Dealing with changes in ownership of and responsibilities for the goods and transport Ensuring the security of goods during transport

1 The role of SMEs in national economies and challenges in international trade 2 3 4 5 Trade facilitation: its concept and benefits for SMEs The involvement of freight forwarders in trade facilitation The importance to organize yourself as a business community ITC trade facilitation offer: empowering the private sector

Introducing trade facilitation (TF) The broad concept of trade facilitation involves improving all aspects in the operations of global, regional and local supply chains. It involves reforms in border and behind-the-border operations, including the reliability and efficiency of transportation infrastructure, logistics operations, and customs and border management regulations and procedures. Reducing these barriers is crucial for developing countries, especially landlocked and post-conflict low-income countries. Efficiency and reliability of transport infrastructure Transparent and efficient customs and border management procedures Efficient logistics and transport operations

Broad trade facilitation definition deals with whole of supply chain concept From the producer s premises to the retailer s shelf Buy Ship Pay Prepare for export Export Transport Prepare for import Import Commercial Procedures Transport Procedures Regulatory Procedures Financial Procedures Establish Contract Order Goods Advise on Delivery Request Payment Establish Transport Contract Collect, Transport and Deliver Goods Provide Waybills, Goods Receipts Status reports Obtain Licences etc. Provide Customs Declarations Provide Cargo Declaration Trade Security Procedures Clear Goods for Export/Import Provide Credit Rating Provide Insurance Provide Credit Execute Payment Issue Statements

Trade facilitation is A comprehensive and determined set of actions to reduce the time and cost of trade Premised on intergovernmental cooperation and agreements to ensure global uniformity A collaborative and on-going multiagency responsibility Better achieved through collaboration between public and private sectors

Applying trade facilitation principles 1 SIMPLIFICATION 2 STANDARDIZATION 3 HARMONIZATION 4 AUTOMATION Should be applied to Legislation and regulations Institutional framework Access to information Administrative processes Use of information technology TRANSPARENCY IS THE BACKDROP OF ALL PRINCIPLES

Promoting SMEs competitiveness through trade facilitation reforms Trade facilitation reforms can bring enormous benefits to SMEs in developed and developing countries alike, alleviating some major constraints faced by SME traders - ultimately making it easier for them to connect to regional and global value chains. Simplifying border procedures and removing procedural obstacles Reducing a variety of trade-related costs

Main benefits of trade facilitation reforms for SMEs Enhanced access to regional and international markets Reduced corruption at the border Trade facilitation measures that reduced export time for all firms may boost the share of SME exports by nearly 20% (compared to 15% of large firms).this is because small firms are more likely to start exporting. WTO, World Trade Report 2016 Reduced time and cost of customs clearance Increased transparency and access to information Reduced traderelated transaction costs Reduced time and cost of customs clearance

Trade facilitation: spurring benefits for transport service providers Traders and freight forwarders have a common, overarching objective: increase the volume and pace of business, which also depends on the capacity of fast processing of customs authorities. Trade facilitation reforms will help reduce complicated steps especially of customs processes and achieve harmonization to reduce transportation time and costs at points of entry, and enhance logistics connectivity. Improvements in cargo customs clearance Transparency & efficiency Paperless trading Lower cost of doing business Higher service quality Security of trade documents

Participating in the reforms: freight forwarders in the National Trade Facilitation Committee (NTFC) The WTO Trade Facilitation Agreement (TFA) requires the establishment and functioning of a NTFC, which constitutes an important platform for institutional coordination and stakeholders consultation with balanced public and private sector participation. Purposes of a NTFC: Enable planning and implementation of TFA; Facilitate inter-agency cooperation; Provide directives on major trade facilitation issues; Promote consultations among key stakeholders. Recommendation N.4 of the United Nations Economic Commission for Europe (UNECE)

Silos are only for grains - the business community should act together There are four main types of actions to take as a business community Organize yourself as a voice Engage with crossborder agencies Substantiate your position and recommendation with evidence: data and experiences Get involved in publicprivate dialogue platforms and know your rights

Organize yourself as a voice SMEs play a critical role in the consultative process to advise authorities as to how the TFA is best applied in the national environment Arancha Gonzalez, Executive Director, ITC Organizing yourself as a business voice can come in the form of setting up special task teams as part of Chambers of Business, existing sector associations, or as new organizations. Organisation may mean a number of actions such as: Setting goals and work plans Sharing information and experiences Sharing tools and software

Undertake research activities When making recommendations or identifying problems, it is vital that these submissions are supported by evidence Document experiences in a central place Do business process analysis Collect data from your own company (e.g. clearance time experienced, testimonials) Learn to use third party data sets: Doing Business, LPI, OECD

The TFA accommodates private sector involvement Article 2 Opportunity to comment, information before entry into force and consultations Article 23.2 National Trade Facilitation Committee

Introducing ITC programme for private businesses effective participation ITC publications on trade facilitation

Logistics-related services in ITC s standard TF offer Rwanda Project: Enabling the future of e-commerce Key outputs Streamline e-logistics services requirements and procedures at the national level Enhance the capacity of logistics actors to better support SMEs to trade online Improve access to logistics services for SMEs in Rwanda through E- commerce Support Centers (ECSC) Increase linkages of ECSCs with more logistics service providers through a Digital Freight Logistics Platform

Mastering online tools: e-learning courses on TF Thanks to in-house expertise, ITC is developing an e-learning course on SMEs and TFA tailored to: Build the capacity of the private sector to identify the measures in the TFA that help resolve cross-border inefficiencies; Determine which role the business community can play in the regulatory and implementation process of the TFA An e-learning course on TFA will be developed also for policymakers.

ITC face-to-face training for businesses to make the most of the TFA ITC assistance activity systematically promotes business perspective, with a dedicated focus on SMEs. For this reason, ITC has successfully included in its standard TF offer a two-day training on the requirements and benefits of the TFA addressed to the private sector. Business focused Certified Training the private sector to effectively use the TFA to reduce their transaction costs and to advocate for business-friendly cross-border trade reforms Participants can take an online test after the training, and upon successful completion obtain a certification

Course outline of the ITC TFA training for the private sector Structured Four thematic sessions: 1) Introductory session explaining the costs of cross-border inefficiencies 2) TFA measures promoting transparency and fairness 3) TFA measures promoting efficiency 4) Leveraging business advocacy of private sector to be part of TF reforms Practical 16 case studies and 13 exercises to teach businesses how to use TFA measures and how to improve their compliance with border requirements

Day 1: a closer look to Session I and II Illustrating the cost of cross-border inefficiencies and assessing how they impact businesses Determining how trade facilitation provides solutions to cross-border inefficiencies Identifying the solutions provided by the Trade Facilitation Agreement to address cross-border inefficiencies Assessing the need for transparency in cross-border procedures Understanding how Trade Facilitation Agreement promotes access to information Understanding how Trade Facilitation Agreement promotes fairness and nondiscrimination

Day 2: a closer look to Session III and IV Understanding which are the causes for inefficiency in cross-border formalities Presenting TFA measures that promote greater efficiency in cross-border formalities Assessing how your company can improve on working with cross-border agencies Exploring how your business community can influence efforts to improve crossborder efficiency Developing a set of actions to participate in the drive toward improved trade facilitation

Encouraging follow-up of advocacy actions after the training Participants are split in different groups, representing different public and private stakeholders involved in trade facilitation Each group develops a set of action to be initiated after the training to make the border environment more efficient and fairer

In 2017, ITC has trained in 21 events over 350 businesses in 19 countries Country supported Samoa Vanuatu PNG Solomon Fiji Argentina Costa Rica Mongolia Ghana Liberia Nigeria Rwanda Tanzania Kenya Taiwan Saudi Arabia Sri Lanka Myanmar The training content, the supporting material and the methodology used were very good. The case studies showed and the practical examples brought to our attention were very useful to understand better the issues at stake This training will help business engage with policy makers to address cross-border challenges and to collaborate with other private sector representatives to advocate for reforms It was clearly identified and explained through the workshop how SMEs can benefit from the TFA

33 Thank you for your attention Your contact at ITC Mohammad Saeed Senior Trade Facilitation Officer saeed@intracen.org +41 7 99 52 15 77