Global Logistics—February 2013 

Lifting Supply Chain Barriers at the Border

Improving border administration and transport, and telecommunications infrastructure and services, could boost global Gross Domestic Product (GDP) by almost five percent, and world trade by 15 percent, according to a new report by the World Economic Forum in collaboration with Bain & Company and the World Bank. Completely eliminating tariffs, by contrast, would increase global GDP by less than one percent, and world trade by 10 percent.

Reducing supply chain barriers delivers economic improvements that are more evenly distributed across countries versus those achieved by eliminating tariffs, says the report, Enabling Trade: Valuing Growth Opportunities. Streamlining inefficient customs and administrative procedures, complex regulations, and cross-border infrastructure weaknesses is effective because it eliminates resource waste and reduces costs between trading partners as well as end consumers. Countries in sub-Saharan Africa and Southeast Asia stand to gain the most as large increases in GDP directly impact job growth.

The World Economic Forum recommends that:

• Governments create a focal point to coordinate and oversee all regulation that directly impacts supply chains.
• Public-private partnerships be established to undertake regular data collection, monitoring, and analysis of factors affecting supply chain performance.
• Governments pursue a more holistic, supply chain-centric approach toward international trade negotiations to ensure trade agreements are more relevant to international business and more beneficial to consumers.

All Over the Map

The report cites examples of trade barriers in the following locations:

• Brazil. Managing customs paperwork for agricultural commodities exports can take 12 times longer (a full day versus a few hours) than in the European Union.
• The Middle East and North Africa. Local content requirements, rule-of-origin restrictions, and pilferage at the border can increase the costs of consumer technology products by as much as nine percent.
• Southeast Asia. Eliminating supply chain barriers in the rubber market could reduce carried inventories by 90 days, representing a 10-percent reduction in product cost.
• Russia. Product testing and licensing in the computer sector can lead to high administrative costs and delay time-to-market from 10 days to eight weeks.
• India. Preferential Market Access regulation, which provides preference for locally produced high-tech products in government procurement, could increase costs by 10 percent over the cost of imports.

 

U.S., Mexico Strengthen Trade Partnership

Building on the cross-border goodwill that followed a long-overdue resolution to the U.S.-Mexico trucking impasse, U.S. Customs and Border Protection (CBP) and Mexico’s Tax Administration Service (SAT) recently signed a joint work plan that lays out a road map for mutual recognition of the two countries’ authorized economic operator programs: CBP’s Customs-Trade Partnership Against Terrorism (C-TPAT) and SAT’s New Certified Companies Scheme (NEEC).

C-TPAT is a voluntary government-business initiative to build cooperative relationships that strengthen and improve overall security for global supply chains and the U.S. border.

Mutual recognition allows companies enrolled in one program to receive reciprocal benefits from the other, securing the international supply chain and facilitating trade between the United States and Mexico. The agreement, which will be implemented in two years, doesn’t address other outstanding issues between the two countries, such as a dispute over Mexican tomato import prices.

But the move could greatly benefit Mexican shippers looking to tap the U.S. market. If traders are deemed trustworthy and secure by their own government, they will be afforded similar status in the United States, paving the way for more streamlined border crossings.