Security's effect on trade

Security's effect on trade

With two years of U.S.-led anti-terrorist security measures in place or under discussion, there is an urgent need to assess their effects on global trade and transport.

With European proposals largely mirroring U.S. requirements, a high proportion of the world's premium markets for manufactured goods could be fenced off by import controls that were unknown five years ago.

Many of these new restrictions discriminate against developing countries. Traders in these countries have many practical difficulties in meeting de-mands for detailed data before goods are loaded on a vessel or aircraft in the country of export. Small and medium-sized enterprises, the backbone of economic expansion and employment, may well lack the reliable and efficient systems that are common in developed economies.

Even U.S. participants are not clear about the real benefits of participation in such voluntary arrangements as the Customs-Trade Partnership Against Terrorism (C-TPAT). There are only strong, informal, hints from security agencies that failure to volunteer could subject a company to the full force of potential hassle and delay to consignments. It seems likely, however, that, after a further period of official reflection and commercial pressure, some tangible inducements may be offered, somewhat on the lines of the facilitated Customs procedures set out in the World Customs Organization's recently revised Kyoto Convention.

At the moment, C-TPAT membership is confined to U.S. companies, and other traders are excluded from whatever benefits it may offer.

There are similar issues with the Container Security Initiative, under which Customs and Border Protection agents screen U.S.-bound cargo at overseas ports. There is no clearly defined set of benefits for goods in containers passing through CSI ports and destined for the U.S., or conversely, of disadvantages for goods moving through other channels.

If U.S. containerized imports are to be given discriminatory treatment according to whether they have come through a CSI port, much importance will attach to the extent to which the CSI system includes ports in developing countries. At the moment, all the CSI action has been with developed countries, with Singapore as a rather untypical example of extension to the Third World, and very recently a CSI agreement with South Africa.

The cumulative difficulties a developing-country exporter faces in sending goods through a non-CSI port without the intervention of a C-TPAT member may constitute a serious non-tariff barrier. This is all the more difficult to assess and tackle because it is impossible to ascertain the exact nature and extent of the privileges and facilities that he would receive if he were a C-TPAT participant, importing his own goods through a CSI port. It would make nonsense of both these security regimes, however, if, in administrative practice, there were no significant differences and related discriminations.

There are additional constraints if the developing-country exporter is among the many enterprising growers of exotic fruit or premium vegetables who have been able to use just-in-time delivery, usually airborne, services to bring their perishable products to the U.S. market, including supermarket chains.

The Bioterrorism Act of 2002 re-quires all such exporters to register and pay for a U.S. agent and comply with strict prior-notice rules. The cost of these requirements must trim already narrow price margins and can hinder exploratory initiatives to achieve market penetration.

Security constraints on air transport confront exporters from developing countries with additional difficulties in sustaining reliable, rapid air delivery of perishable products.

A final, as-yet-only-emerging cost, which developing country exporters will share with all their competitors, will be the undoubtedly heavy reimbursement charges needed by U.S. Customs and no doubt other border agencies to recover some of the massive costs of applying security regulations.

Though the issue may look largely like another North-South divide, it may have some unexpected results for the U.S. economy itself. Many multinationals draw half or more of their income from operations overseas.

It will be interesting to see how all these considerations come to the notice of the World Trade Organization, especially if they arrive on the WTO's agenda just as discussions may be resuming on possible post-Cancun moves to resume the debate on trade facilitation.

John Raven has been active in international trade for more than 50 years. He was a founder of SITPRO in London in 1970 and is a former managing director of the International Express Carriers Conference. He can be reached at john.raven@wanadoo.be.