Trade and transport facilitation refers to the process of reducing transaction costs and delays by simplifying trade procedures and document flows, harmonizing cross border procedures, modernizing customs and transport systems, promoting quality and safety standards and improving logistics.
According to one study, 25% of the delays on transport corridors are a result of poor infrastructure, 75% are a result of poor facilitation (see Djankov, Simeon, Caroline Freund and Cong S. Pham, "Trading on Time", January 26, 2006, p. 9. Highway improvements save travel time per trip and reduce vehicle operating costs, especially fuel consumption and maintenance costs. Reducing documentation and border delays can save days, thereby (1) enabling greater vehicle utilization and (2) reducing capital tied up during shipments and in increased inventory to hedge against the unpredictability of shipment time.
Major global industries source inputs world-wide and various stages of the manufacturing process are outsourced to the optimal location based on such factors as skilled and/or low cost labor, reliable energy and resource proximity. Modern just-in-time and just-in-sequence manufacturing and retailing techniques minimize the cost of maintaining inventories through "warehousing in transit". Such systems require not only fast, but 100% predictable supply chains, cargo tracking and rapid electronic transfers of information and payments.
Key aspects of facilitation programs include: reduction and simplification of trade documentation, ability to file documents and access clearances electronically, preclearance of transit goods, common customs bonds, regional third party vehicle insurance, regional vehicle registration, one stop border posts, port community systems and electronic tracking and payment systems.
- OECD, Quantitative Assessment of the Benefits of Trade Facilitation, November 2003. Available at www.oecd.org/trade.
- APEC Economic Committee, Trade Facilitation and Trade Liberalization: From Shanghai to Bogor, 2004.
- Djankov, Simeon, Caroline Freund and Cong S. Pham, "Trading on Time", January 26, 2006.
- Arvis, Jean-François,Gael Raballand, Jean- François Marteau, "The Cost of Being Landlocked: Logistics Costs and Supply Chain Reliability" June 2007.