South China Morning Post

Once ratified, new trade deal easing cross-border flow of goods could reduce world hunger

Up to 1.3 billion tons of food are lost or wasted each year because of unnecessary trade barriers, and hunger is a dramatic consequence.

Par Mark Gottfredson and Gerry Mattios

First published on août 06, 2014
min


This article originally appeared in South China Morning Post. As the World Trade Organization nations approach today's deadline to ratify the Bali Trade Facilitation Agreement, dozens of trucks wait to cross the border from Kenya to Uganda. Hauling tomatoes along East Africa's northern border, these truckers have lost up to four hours in reduced speed because of poor road conditions. But when they approach the border, the delays get longer. It takes on average a full day for them to complete the paperwork required to cross from Kenya into Uganda. The delay would cause financial losses with any freight, but it is especially troublesome with agricultural goods, where delays could leave much of a truckload unfit for sale. In a world where 12.5 per cent of the population suffers chronic undernourishment, the fact that 30 per cent of food produced for human consumption is lost or wasted between farm and fork is difficult to comprehend. Along the agricultural supply chain, spoilage, spillage and other contributors to food loss remain a serious problem. The Trade Facilitation Agreement, which was drawn up last December at the WTO's ministerial conference in Bali, sets the stage for faster and more efficient customs procedures that could encourage dramatic changes, not only in the reduction of world hunger but also in fostering environmental sustainability and economic development. It is evident that this agreement poses a clear opportunity for governments to create enormous value for their countries' economies. The sooner it is ratified, the sooner economies and societies will enjoy the benefits. Research conducted for the World Economic Forum by the World Bank and the management consulting firm Bain & Company found that reducing even a restricted set of supply chain barriers halfway to global best practice would yield a nearly 5 per cent increase in gross domestic product. This agreement is a giant leap in the right direction. It supports effective cooperation between customs and other authorities on trade facilitation and customs compliance issues, and provides for technical assistance that will help countries build electronic capabilities to speed the flow of goods. But while the agreement opens the door for improving inefficient - and, at times, corrupt - border administration, it will be up to governments and private enterprises to implement it and to systematically identify and eliminate the other supply chain barriers that keep people hungry and inhibit trade. The public sector is best positioned to reduce these barriers, usually in partnership with private enterprises. Hopeful nations can point to the encouraging advances made by pioneering efforts. When Kenya's government improved the Nairobi-Mombasa road and expanded the Mombasa port's capacity and power, it led to much-needed private sector investment by exporters and transporters. Investments in refrigerated containers and covered trucks, along with support for smallholder farms to acquire export certification, helped reduce food loss and enabled Kenya to reach the tipping point at which it became profitable for the country's enterprises to serve new European markets. When the WTO members ratify the Trade Facilitation Agreement, they can intensify efforts to apply what they've learned from pioneering countries. By eliminating supply chain barriers, they'll set in motion a virtuous cycle, raising global productivity and tackling the enormous challenge of feeding the undernourished. Mark Gottfredson is a Bain & Company partner based in Dallas. Gerry Mattios is a Bain & Company principal based in Beijing.

This article originally appeared in South China Morning Post.

As the World Trade Organization nations approach today's deadline to ratify the Bali Trade Facilitation Agreement, dozens of trucks wait to cross the border from Kenya to Uganda. Hauling tomatoes along East Africa's northern border, these truckers have lost up to four hours in reduced speed because of poor road conditions. But when they approach the border, the delays get longer. It takes on average a full day for them to complete the paperwork required to cross from Kenya into Uganda.

The delay would cause financial losses with any freight, but it is especially troublesome with agricultural goods, where delays could leave much of a truckload unfit for sale.

In a world where 12.5 per cent of the population suffers chronic undernourishment, the fact that 30 per cent of food produced for human consumption is lost or wasted between farm and fork is difficult to comprehend. Along the agricultural supply chain, spoilage, spillage and other contributors to food loss remain a serious problem.

The Trade Facilitation Agreement, which was drawn up last December at the WTO's ministerial conference in Bali, sets the stage for faster and more efficient customs procedures that could encourage dramatic changes, not only in the reduction of world hunger but also in fostering environmental sustainability and economic development.

It is evident that this agreement poses a clear opportunity for governments to create enormous value for their countries' economies. The sooner it is ratified, the sooner economies and societies will enjoy the benefits.

Research conducted for the World Economic Forum by the World Bank and the management consulting firm Bain & Company found that reducing even a restricted set of supply chain barriers halfway to global best practice would yield a nearly 5 per cent increase in gross domestic product.

This agreement is a giant leap in the right direction. It supports effective cooperation between customs and other authorities on trade facilitation and customs compliance issues, and provides for technical assistance that will help countries build electronic capabilities to speed the flow of goods.

But while the agreement opens the door for improving inefficient - and, at times, corrupt - border administration, it will be up to governments and private enterprises to implement it and to systematically identify and eliminate the other supply chain barriers that keep people hungry and inhibit trade.

The public sector is best positioned to reduce these barriers, usually in partnership with private enterprises. Hopeful nations can point to the encouraging advances made by pioneering efforts. When Kenya's government improved the Nairobi-Mombasa road and expanded the Mombasa port's capacity and power, it led to much-needed private sector investment by exporters and transporters. Investments in refrigerated containers and covered trucks, along with support for smallholder farms to acquire export certification, helped reduce food loss and enabled Kenya to reach the tipping point at which it became profitable for the country's enterprises to serve new European markets.

When the WTO members ratify the Trade Facilitation Agreement, they can intensify efforts to apply what they've learned from pioneering countries. By eliminating supply chain barriers, they'll set in motion a virtuous cycle, raising global productivity and tackling the enormous challenge of feeding the undernourished.

Mark Gottfredson is a Bain & Company partner based in Dallas. Gerry Mattios is a Bain & Company principal based in Beijing.