Think Tank Says Sub-Optimal Trade Facilitation Costs Exporters $88 B
A centrist think-tank says that red tape at the border costs U.S. exporters more than twice what they pay in tariffs, and says that the U.S. should continue to push for trade facilitation measures. The World Trade Organization passed a Trade Facilitation Agreement, but developing countries did not have to implement it immediately, and even five years after it went into force about 23% of its provisions have not been implemented. Only half of signatories have established a single window, which helps exporters and importers file most documents electronically. The WTO estimated that full implementation would reduce trade costs by 14.3%.
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The Third Way, citing a Trade Partnership Worldwide estimate, said that if all countries had as good trade facilitation measures as the U.S., American exporters would save $88 billion annually. In 2019, U.S. exports faced an average tariff of 2.64%, which was $36.8 billion.
"For small, medium, and micro businesses without a compliance department, the barrier to entry can be too high, which keeps them from enjoying all the benefits of international customers, diversifying their customer base, and getting their goods into new and developing markets," the new report said.
Trade facilitation covers many aspects of trade, including posting rules and tariffs online; allowing electronic submissions of documents and payments; due process in the case of goods seizures; a streamlined Customs process for low-value shipments; accepting feedback from traders before implementing regulations, and more.
The International Chamber of Commerce estimates that 64 countries do not accept or electronically process data required for release of shipments in advance of their arrival, the Third Way report said.
The authors also noted that not only are digital payments more convenient for shippers, "this limits opportunities for bribery and other corruption."
"If a country doesn’t release a shipment, it needs to clearly communicate the reason why," the report said. Some American firms have complained that China detains goods as a way of punishing the U.S. for its actions.
Trade Partnership Worldwide attempted to model how much exporters would save if various countries improved their trade facilitation. They said if countries implemented best practices, U.S. exporters would save
- $11.8 billion annually in China
- $2.1 billion in Japan
- $1 billion in Vietnam
- $4.5 billion in India
- $5.1 billion in Canada
- $10.8 billion in Mexico
- $5.8 billion in the EU
- $6 billion in Brazil
The think tank noted the proposal to restrict de minimis in the U.S. or to boost filing requirements for imports. "Policymakers must understand that more red tape on trade can have negative consequences for the American economy," the authors wrote.