Don't weep for Doha

Don't weep for Doha

The Doha Round of world trade talks round has already died a thousand deaths, so last month's failure to make progress toward an agreement in Geneva hardly warrants another obituary. In fact, outside the trade bureaucracies in Washington, Brussels and Geneva, few are grieving.

That's because the world economy has been moving forward without Doha. As negotiations have sputtered for seven years, annual global trade flows have increased 70 percent to $14 trillion, real annual foreign direct investment flows are up 25 percent to $1.5 trillion, and the global economy has expanded by 30 percent to $54.4 trillion.

These positive trends can and should continue, particularly if governments are willing to ramp up their own trade facilitation reforms.

Trade facilitation is about streamlining the administrative and physical procedures involved in the movement of goods and services across borders. The proliferation of transnational production processes and just-in-time supply chains have accentuated the necessity of trade facilitation reforms, which have contributed importantly to the increase in global trade, investment and output.

In the past three years, 55 countries have implemented 68 reforms to help streamline trading procedures.

India introduced an online customs declaration system, which allows the customs clearance process to begin before a ship docks. It has helped reduce delays for exporters and importers by seven days. Rwanda partially privatized its customs bonded warehouse facilities, which sparked construction of new warehouses and a 40 percent reduction in storage fees. Macedonia eliminated duplicate customs procedures, decreasing waiting times by 75 percent. France is privatizing operations at seven of the country's nine public ports in response to a 50 percent decline in French container traffic, which was lost to European rivals.

While these reforms encourage investment and greater trade flows, there is room for much more progress. In fact, according to research from development and trade economists, trade facilitation could do more to increase global trade flows than further reductions in tariff rates. While stroke-of-the-pen tariff reduction is an important component of increased trade, lower tariffs alone cannot improve trade flows if bureaucratic customs procedures, corruption and shoddy logistics and communications systems remain in place.

The World Bank's most recent Doing Business survey offers the story of a Yemeni fish exporter, Tarik, whose fortunes are limited by the persistence of bureaucratic export procedures. Tarik can sell fresh tuna to Germany for $5.20 per kilo or frozen tuna to Pakistan for $1.10 per kilo. Of course, he would prefer to sell everything fresh to Germany. Instead, because it takes on average 33 days to get official clearance to export from Yemen, he sells only 300 fresh tons to Germany and 1,700 frozen tons to Pakistan, at an opportunity cost of about $7 million per year.

Although serious logistics and administrative problems are more common in poor countries, there is plenty of upside to reform in rich countries, too. Researchers estimate that a one-day reduction in the time it takes to import or export would result in a 1 percent increase in imports or exports, respectively.

Thus, in the U.S., a reduction in import time from five days to four days and in export time from six days to five could increase U.S. trade by nearly $29 billion a year. That's $9 billion more in annual trade than economists attribute to the pending U.S.-South Korea trade agreement.

To achieve these kinds of improvements, Congress and U.S. Customs and Border Protection must be amenable to reconsidering the tenor of our post-Sept. 11 emphasis on security. Security objectives are paramount, but there is no doubt that some security requirements add costs to the supply chain without making us any more secure.

Governments are becoming more aware of the benefits of trade facilitation reforms because the number and quality of companies operating in their countries, employment levels, investment flows and economic growth are all determined to some degree by the trade and business environment they create.

Multilateral agreements to liberalize trade through talks such as the Doha Round are always welcome. But there's no reason that countries should sit idly by when there are plenty of reforms they can undertake to help themselves.