Press release

New report urges countries to take a ‘horizontal’ view of specific trade barriers to facilitate global trade and increase global competitiveness

New report urges countries to take a ‘horizontal’ view of specific trade barriers to facilitate global trade and increase global competitiveness

The stakes for improving improving trade among countries is enormous, which is driving increased implementation of trade reforms outlined in the Trade Facilitation Agreement (TFA) developed in Bali in 2013.

  • January 23, 2015
  • min read

Press release

New report urges countries to take a ‘horizontal’ view of specific trade barriers to facilitate global trade and increase global competitiveness
  • Efforts of TFA implementation are high in least developed and developing countries, reaching 26% and 44% of implementation respectively
  • TFA implementation can enable more than US$ 30 billion in annual trade cost savings and add more than 1 percentage point  in GDP growth rate
  • TFA implementation will be generally helpful but not sufficient to bring competitiveness. It is necessary to focus on more than one element of the value chain – a ‘horizontal’ approach
  • Download the full report

Davos-Klosters, Switzerland, 23 January 2015 – The stakes for improving improving trade among countries is enormous, which is driving increased implementation of trade reforms outlined in the Trade Facilitation Agreement (TFA) developed in Bali in 2013.  This is particularly true in the developing world where, to date, these countries have achieved 44 percent implementation of the trade facilitation measures laid out in the Bali agreement; least developed countries have achieved 26 percent implementation. Those figures can represent more than US$ 30 billion in annual savings on trade costs and add more than 1 percentage point in annual GDP growth rate. However, the third instalment of the annual Enabling Trade report, released today by Bain & Company and the World Economic Forum (WEF) , determines that the measures spelled out in the TFA and other agreements aimed at streamlining border administration are not enough to help countries most in need to reach their full trading potential.

“The World Trade Organization agreement announced in December in Bali was a necessary step toward trade liberalization and efficiency,” said Mark Gottfredson, a Bain partner and co-author of the report. “However governments and businesses need to take actions across the whole supply chain to increase their country’s global competitiveness.”

Bain-WEF research shows that even without the TFA in place,good examples of trade facilitation initiatives exist in Brazil, Singapore, South Korea, Costa Rica and other countries, but more improvements are needed. The report finds that TFA implementation has been particularly low – just 35 percent – in two important areas:  the release and clearance of goods and the reduction of formalities. In addressing the latter, many countries surveyed have prioritized establishment of facilities, such as single window clearance systems – an electronic process in which trade and transport companies can provide standardized information and documents to fulfil all import, export, and transit-related regulatory requirements.  To date, there are more than 70 single window systems in the world, but only 18 are full single windows, which connect several agencies and deliver a full set of trade benefits.

In the first of two reports, Enabling Trade: Catalyzing TFA in Brazil, Bain and WEF highlight  Brazil’s single window project, Portal Único.  The goal of Portal Único is to reduce the average time to export from 13 days to 8 days and the average time to import from 17 days to 10 days. With one integrated system, Brazil would reduce bureaucracy and paper requirements, simplify procedures and make the process more user-friendly for trade operators.   

“Portal Único is a bold step in the right direction,” said Gottfredson.  “It is well built to deliver a direct and positive effect on trade costs, which can impact trade volumes and mix – and, consequently, economic growth.”

While a single window system may increase  competitiveness in  automotive trade in Brazil, for example, the country is still at a disadvantage, compared to U.S. exports. According to Bain and WEF’s analysis, as a next step, the country must re-engineer port infrastructure, inland transportation, and tax incentives to increase its competitiveness globally.

According to a second report, Enabling Trade: Increasing the Potential of Trade Reforms, countries that implement only certain parts of TFA – even at 100 percent – through a ‘vertical’ approach, have not fully boosted their  competitiveness. Instead, Bain and WEF recommend that countries address supply chain barriers with a ‘horizontal,’ or end-to-end, view of their industries’ unique value chains.  This is critical in pinpointing the specific trade barriers that need to be addressed to allow each industry to reach a “tipping point” when it comes to competitiveness.   

Included in the report are several case examples highlighting the diversity of issues that need to be tackled in different supply chains in Brazil and Nigeria:

  • In Brazil the cost to import a container with auto parts is nearly U$S 1300 more expensive than in developed countries due to supply chain barriers. In addition to addressing these costs, Brazil needs to look into such areas as taxes, labor costs and market access to make its auto industry globally competitive for exports. Removing import barriers would bring nearly US$ 110 million in annual savings for the industry.
  • Today’s soy farm prices allow Brazilian products to be competitive, but logistical challenges such as poor road conditions and lack of port infrastructure increase prices to levels that are uncompetitive with exports from the U.S.. Enabling alternative logistics opportunities could generate more than US$ 120 million annually in savings (nearly 10% of total inland transportation costs) and allow export growth.
  • Strong unions impose some barriers to decrease costs in the paper industry in Brazil. It would be possible to reap savings by negotiating with unions to eliminate some transportation steps. Improving processes could reduce costs by US$ 7 -16 million annually.
  • In Nigeria the clearing costs could reach 35% of the value of goods, when they should be nearer to 8%. Barriers such as poor infrastructure and corruption put a burden on costs and restrict business growth.

Reducing supply chain barriers benefits nations, producers and consumers, which is why so many countries are on board.  As detailed in previous Enabling Trade reports in 2013 and 2014, improving even a restricted set of supply chain barriers halfway to global best practice could increase trade by 15 percent.  This would yield a nearly 5 percent increase in global GDP. By comparison, completely eliminating tariffs could have a much less significant effect, increasing global GDP by just 0.7 percent and exports by 10 percent.

“The World Economic Forum’s Global Enabling Trade Report series focuses on measuring whether economies have in place the necessary attributes for enabling trade and where improvements are most needed,” said Gottfredson. “This year’s reports recommend taking a systematic approach and following specific steps to increase trade facilitation.”  Singapore, which multiplied its GDP per capita five times faster than the world in the last decades, is a good example of how a country can benefit from a systematic approach.

According to the report, reducing trade barriers across the supply chain should occur in thre phases:

  • Phase 1: Prepare, diagnose and prioritize: Prepare structures for project enforcement; Diagnose the main issues; and Prioritize target industries based on potential improvements to value chain costs to identify target value chains and design pilot programs.
  • Phase 2:  Mobilize and execute for select pilot programs to demonstrate results on identified value chains.
  • Phase 3: Mobilize and execute across all value chains to enhance the process, using lessons from Phase 2.

To receive a copy of report or arrange an interview with the Bain authors, contact Dan Pinkney at or +1 646 562 8102.

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