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1. International Scientific Conference
”Economic Policy and Global Recession”
25/09/2009-27/09/2009
Faculty of Economics
University of Belgrade
Supported by EACES
(European Association for Comparative Economic Studies)
PROCEEDINGS
CD of Conference Proceedings
Session: New Role of Government and Institutions in Economic Policy
Making
http://konferencija.ekof.bg.ac.yu

2. Economic Policy and Global Recession
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ADMINISTRATIVE TRADE BARRIERS AND TRADE FACILITATION
Predrag Bjeli , Ph.D.1
E-mail: bjelic@ekof.bg.ac.rs
Ivana Popovi Petovi , M.Sc.2
E-mail: ivanapp@ekof.bg.ac.rs
Abstract: In the period after 1945 international trade had achieved its ”golden age”. Main factor of this
development of international trade was a significant multilateral trade regime liberalisation under the auspices
of General Agreement on Tariffs and Trade. This liberalisation was achieved true reduction of tariffs in eight
rounds of multilateral trade negotiations. But the expected degree of liberalisation was not as expected since
many countries started to use so-called non-tariff barriers, trade policy instrument that are different from tariffs
We now make distinction between three types of non-tariff barriers – traditional non-tariff barriers, technical
barriers to trade and administrative trade barriers. GATT and later World Trade Organisation rules have
regulated first two groups of non-tariff barriers. Only the third group, administrative trade barriers, have
remained as a main obstacle to international trade. Administrative barriers are caused by bad administrative
regulations and procedures. Most of them are attributed to malfunctioning of customs administration and other
trade capacity failures. These barriers are seen by many as an obstacle to country development. They are
usually referred to as "red tape" and they and they represent one heterogeneous group consisting of: import
licensing, rules for the valuation of goods at customs, preshipment inspection, rules of origin etc.
Sometimes administrative trade barriers are set as a trade policy tool of protectionist behaviour of some
governments. That is the reason why many of multilateral and regional trade institutions set as a priority to deal
with these remaining obstacles. The initiative for regulation of these barriers was launched in WTO in 1996
under the name - Trade facilitation. Aim of this initiative is simplification of trade procedures. The European
Union is working particularly in that field, encouraging trade facilitation in developing countries.
Trade facilitation strategy should be well integrated into a country’s trade policy and certainly is an important
part of each country’s economic development plans, especially in developing and transitional economies. The
economy of Serbia is in a need of trade facilitation since we have many administrative obstacles in foreign trade
of our country.
KEY WORDS: ADMINISTRATIVE BARRIERS, TRADE FACILITATION, TRADE CAPACITY
BUILDING, TRADE PROCEDURES, NON-TARIFF BARRIERS.
1. ADMINISTRATIVE BARRIERS AS OBSTACLES TO INTERNATIONAL TRADE
Tariff barriers have been the dominant obstacles in international trade since its appearance few
centuries ago. But due to the significant multilateral liberalisation of tariffs, in the second half of 20th
century, achieved under of General Agreement on Tariffs and Trade (GATT), tariffs had lost its
dominant position as main instruments of trade policy. During the rounds of multilateral trade
negotiations under auspices of GATT tariff had been reduced significantly in developed countries,
from the level of almost 60% in average to the level of less than 5% after the Uruguay round of GATT
negotiations. But this significant reduction of tariffs across countries in second half of 20th
century did
not mean that the trade policy on most of the countries become completely liberalised since some
other measures become visible as tariffs were reduced. Also these other measures become very
popular as new regulatory instrument of trade policies, especially in developed countries.
Benjamin Arthur Levett, a lawyer who researched customs administration organisation and
functioning, in his renown work "Trought the Customs Maze" published in 1922 had pointed out that
there are some other measures that are not found in the customs schedule but can serve as obstacles to
international trade. In the book he pointed out ”Let me write an administrative regulation and I do not
care who sets the tariffs”3
. He wanted to reiterate that administrative regulations could serve as serious
1
Associate Professor; Institution/Affiliation: Faculty of Economics University of Belgrade
2
Assistant; Institution/Affiliation: Faculty of Economics University of Belgrade
3
Benjamin Arthur Levett "Through the Customs Maze" 1922, p. II.

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obstacles to international trade as well as customs tariffs. This finding has inspired Percy Bidwell to
write a book titled "The Invisible Tariff"4
published in 1939 and who we regard as a first scientific
tractate on so-called non-tariff barriers. In Europe in 1936 Swiss scientist William Rappard in his
paper "Danger of economic and military armament" has stressed the negative effects of economic
measures different than customs tariffs that obstruct international trade. Even if the economic science
has discovered this measures in the beginning of 20th
century they became transparent only in second
half of this century when tariffs have been significantly reduced by GATT.
Non-tariff barriers are all measures other than tariffs that can serve as obstacle to international
trade, not just restricting it but also "unnaturally" promoting the export from one country, and who’s
main aim it the protection of domestic market from foreign competition and not just the alimentation
of state budget. The non-tariff barriers are similar to tariffs in a fact that they are regulatory measures
since they influence a trade regime established between countries in the world.
We classify non-tariff barriers into three broad groups:
1. Traditional non-tariff barriers, which include quantitative barriers, subventions,
antidumping measures, compensatory measures, local content requirement measures and
others;
2. Technical non-tariff barriers, which include non-tariff measures derived from different
national standards and technical regulation;
3. Administrative non-tariff barriers, which include all barriers to trade that are derived from
national laws and regulations and administrative procedures that affect foreign trade.
During the existence of GATT, from 1947, some non-tariff measures have been recognized by
Contracting Parties of GATT and regulated by rules of this international agreement. Regulated mean
that all of these measures have been put into GATT legal framework and not all of them were
forbidden, like quantitative restrictions (quotas), but rather that GATT rules have lay down the
procedures for proper use of this measures, like for anti-dumping measures or compensatory measure.
These procedures were necessary in order that countries do not abuse these measures for protectionist
purposes. The non-tariff barriers that were present during the existence of GATT 1947 and regulated
by this agreement are referred to as traditional non-tariff barriers.5
But GATT 1947 has not regulated some of the measures that fall into the category of non-
tariff barriers, like technical barriers to trade and administrative barriers to trade, and many countries
persisted in using them as important tools of trade policy. We have to stress that many of the measures
are necessary for facilitation of transfer of goods and services in international trade in order to protect
the health, well-being and security of people and the environment. But many of these measures are
abused by some of the countries in order to protect its domestic producers from more competitive
foreign producers. That is what we have in mind when we talk about restrictive effect of
administrative barriers in international trade.
In the graph presented below we can observe the occurrence of non-tariff barriers in two years,
1994 and 2003, by major groups of this barriers. As groups with a largest impact in international trade
we can identify technical barriers to trade, quantity control measures and prior authorization measures.
The data for two nonsequential years allow us to bring some dynamism in our analysis and we see that
technical barriers to trade and prohibitions are recording sharp increase in its frequency in 2006
comparing to 1994, while all other categories of non-tariff barriers have a decrease in its frequency in
the observed period. Many of the measures classified here as technical barriers to trade and
prohibitions are really administrative barriers in international trade.
4
Percy W. Bidwell "The Invisible Tariff – A Study of Control Of Imports into the United States" Council on
Foreign Relations, New York, 1939.
5
For more detail, in Serbian, see: Predrag Bjeli ”Necarinske barijere u me unarodnoj trgovini” Prometej,
Beograd, 2004.

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Graph1. Evolution of Non-tariff Barriers by Broad Category, in %
Source: UNCTAD ”Globalisation and Development: Fact and Figures” Geneva, 2009, p. 53.
Non-tariff barriers today are the most important regulatory instruments in trade policy of many
countries, especially developed and large economies. The presence of non-tariff barriers is more
frequent in industrial sectors than in the commodities trade. For example, agricultural trade is still
regulated by high tariff rates so the presence of non-tariff barriers is not so needed and obvious. But in
trade in industrial goods the non-tariffs are largely used for the restriction of trade since GATT has
significantly lowered tariffs on industrial goods. Part of technical barriers has been regulated by WTO
rules but the only group of non-tariff barriers that remained unregulated are administrative barriers to
international trade.
Administrative barriers to trade are a special category of non-tariff barriers and their main
source are administrative regulations and procedures that have a restrictive effect on international
trade. Some authors6
specify that administrative barriers are administrative measures in the process of
levying customs, applying health regulations and other regulations. But the most comprehensive
definition of administrative barriers to trade defines these measures as obstacles to international trade
derived from differences in national legal and administrative regulations and administrative
procedures that exporter had to carry out in order to put its product on a foreign market.7
All administrative barriers, by their origin, can be divided into two main groups:
1. Legal barriers to trade;
2. Procedural barriers to trade.
Legal barriers to trade are caused by different laws and administrative regulations in national
economies. Every national economy in the world with a full autonomy in international trade relations
can adopt laws and regulations that unilaterally define its trade regime with other economies in the
world. Many of the basic laws are adopted in the past when international trade was not a significant
source of economic growth of many countries in the world and these laws became an element of the
general business climate and an obstacle to which the business community are accustomed. But
nowadays economies tend to introduce new more complicated and more restrictive laws, some of them
even against their international legal obligations, with a sole aim to protect domestic producer from
foreign competition.
6
Kenneth W. Dam ”The GATT: Law and International Economic Organization” The University of Chicago
Press, Chicago and London, 1970, p. 180.
7
Pieter J. Slot ”Technical and administrative obstacles to trade in the EEC” Interuniversity Institute for
International Law T.M.C. Asser Institute, The Hague, 1975, p. 8.

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Procedural barriers to trade are second major group of administrative barriers and they
represent all administrative procedures that obstruct international trade and especially imports. In
World Trade Organization (WTO) they are referred to as trade procedures and they include all
activities, practices and formalities in connection to collection, presentation, communication and data
processing necessary for movement of goods in international trade. All economies in the world require
some administrative procedures before goods are sold on the local market. Many of these procedures
are important, like testing of goods, in order to protect environment of the local economy and the
health of its citizens. Usually administrative procedures are divided into two groups: border barriers
and intraeconomy procedures. The border barriers are closely connected with the functioning of
customs authorities and other state organs present at the border, like sanitary and phytosanitary
inspectors. Intraeconomy procedures incorporate all administrative procedures where state organs in
the departments of the government are in charge of issuing various approvals and clearances that serve
as a precondition for imports as well as for exports. Many of the administrative procedures are usual
and necessary for the protection of health and wellbeing of a nation while some of the procedures are
so obstructive to international trade, unnecessary for the standpoint of health protection and usually
very recently adopted. These administrative procedures have a protective character for a local
economy.
We have to distinguish "naturally" occurring non-tariff barriers, which are caused from
differences in national standards and inefficient customs authorities clearance of goods, from
politically introduced measures that are intended to obstruct import in country which introduce these
measures. The necessary laws and procedures create the political and legal framework of any company
in the word and important think about them is that they are transparent so company can calculate their
effects in their business activities. But in the second half of 20th
century some countries started to
introduce new laws and procedures with a sole aim of obstructing international trade. These non-tariff
barriers are not ”natural” barriers but rather policy oriented measures. Developed countries are the
main creators of this policy-oriented measures. Proving and removing these barriers is very hard since
there in many cases there are not written document on introduction of such barriers or these documents
are highly confidential. This shows that many of the world economies, even developed ones, are not
jet prepared for a full liberalisation of international trade. And since tariffs are consolidated by
GATT/WTO trade regime and traditional non-tariff barriers are also internationally regulated many
economies are using technical and administrative barriers to trade. In developing countries you had a
lot of examples of administrative obstructions of international trade flows but as a difference to
developed countries these obstructions are not policy created but rather customs authorities in
developing countries are inefficient by default.
The group of administrative barriers to trade is also very diverse and is consisted of many
different measures and procedures, some of them being:
• Customs valuation;
• Application of Sanitary and Phytosanitary measures;
• Rules of origin;
• Special customs formalities;
• Preshipment inspection;
• Procedures of Export licences.
In economic literature in the filed of trade policy research the question of measuring the
administrative barriers is very controversial. The general method is to apply the inventory approach
and to calculate in how many sectors, product groups of individual products you have the occurrence
of administrative barriers. For example, if in one sector of the economy you have a production of 10
products and with 5 of them you have an indication of existence of administrative barriers we can say
that the presence of administrative barriers in that sector is 50%. This approach is used in the analysis
used to create the graph presented in the text above. Some other institutions use other methods. World

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Bank uses several indicators to assess the presence of administrative barriers in different economies.
Main indicators used by the World Bank to present the barriers in trading across borders are:
• Number of documents needed to obtain to execute export or import in the economy;
• Number of days need for a procedure of export or import in the economy;
• Costs of exporting and importing measured in USD per container.
All the findings of this World Bank analysis are published annually in the publication ”Doing
Business Report”. In the report published in 2009, as economies most efficient in international trade
are listed developed countries, at first place Singapore, and especially all Scandinavian countries. The
countries with most delays and burdensome administrative procedures by World Bank trading across
borders rank are Angola, Kazakhstan, Kyrgyz Republic, and Iraq. Generally, the two groups of
economies with most favourable conditions for doing business by 2008 data are Developed countries
and countries of Eastern Europe.
In the following table we have presented the results of the analysis of data for 2008 presented
in the World Bank Doing Business 2009 Report. We listed the results for Serbia and its neighbouring
countries and members of CEFTA 2006, in order make the comparison. Let us first present the
referent values for the observed indicators. Measured by the number of documents needed for export
and import most efficient are developed countries, like France, where you need only 2 documents for
both foreign trade activities, while less efficient are Kyrgyz Republic, where you need 13 document to
export, and Central African Republic, where 18 documents is needed for executing imports. If we
observe the number of days needed for export or impost we can find that Singapore is a country with
most efficient procedures, since you need only 5 days to export and only 3 days to make the import.
But in Iraq you needed 102 days to export a product or in Uzbekistan 105 days to import a product in
average. The lowest transport costs are recorded in 2008 in Malaysia for export and in Singapore for
imports, 450 USD per container and 439 USD per container, respectively.
Table 1. Indicators of Foreign Trade Administrative Procedures in Southeast Europe, 2008.
EXPORT IMPORT
Economy Rank Documents
(number)
Time
(days)
Cost
(USD per
container)
Documents
(number)
Time
(days)
Cost
(USD per
container)
Albania 77 7 21 770 9 22 775
Bosnia and
Herzegovina
55
6 16 1,070 7 16 1,035
Bulgaria 102 5 23 1,626 7 21 1,776
Croatia 97 7 20 1,281 8 16 1,141
Macedonia 64 6 17 1,315 6 15 1,325
Moldova 135 6 32 1,775 7 35 1,895
Montenegro 125 9 18 1,710 7 19 1,910
Romania 40 5 12 1,275 6 13 1,175
Serbia 62 6 12 1,398 6 14 1,559
Source: World Bank, Doing Business 2009 Report, Trading Across Borders Indicators, April 2009.
In our region Serbia is among countries with most efficient export and import conditions. By
2008 data in average you needed only 6 documents and 12 days to export from Serbia and 6
documents and 14 days to import products to Serbia. More efficient foreign trade conditions can be
found only in Romania and Bulgaria, two countries from our region already members of the European
Union. All other neighbouring economies of Serbia had less favourable conditions for conduct of
foreign trade. But if we compare Serbia to developed EU countries we are far away from 2 documents
and 3 -5 days needed to execute export or import. But if we look the transportation costs in export and
import Serbia is in middle of the spectrum comparing to the conditions in other countries of
Souteastern Europe.
If we observe World Bank data from ”Doing Business 2009 Report” specifically for Serbia, in
several years, we can see a general trend of reduction of administrative barriers in export and import

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with the rise in the costs of transport. The data presented in the next table shows the reduction in
documents needed for export purposes in Serbia, from 9 in 2005 to 6 in 2008, as well as reduction in
number of documents in imports, from 15 in 2005 to 6 in 2008. And the number of days needed to
execute export and import hade been decries significantly in Serbia. To export from Serbia you needed
32 days in 2005 and in 2008 you need only 12 days in average. In import the situation is similar since
you now need only 14 days to import a product to a Serbian market and not as much as 44 days in
2005. Bu we have also a negative trend in the increase of transport costs in export and import. In 2005
transport costs were 1240 USD per container in export and 1440 USD per container in imports while
now these costs are 1398 and 1559 USD per container, respectively.
Table 2: Trading across borders indicators for Serbia
Indicators 2005 * 2006 2007 2008
Trading across borders rank - 51 58 62
Export
Documents to export number 9 6 6 6
Time to export days 32 11 12 12
Cost to export USD per
container
... 1,240 1,240 1,398
Import
Documents to import number 15 8 6 6
Time to import days 44 12 14 14
Cost to import USD per
container
... 1,440 1,440 1,559
(*) Data for 2005 are for Serbia and Montenegro
Source: World Bank data from Doing Business Report for 2006, 2007, 2008 and 2009.
Even with the significant reduction of number of days and number of documents needed to
execute foreign trade in Serbia this reduction was relatively smaller than in other countries so Serbia
rank by Trade across borders indicators is slipping each year, from 51st
position in 2006 to 62 position
in 2008. Serbia does not have a very favourable general conditions for Doing Business either and is
ranked as 94th
economy out of 181 observed economies in 2008, which puts her in front of Croatia
(ranked 106), Bosnia and Herzegovina (ranked 119) but after Macedonia (ranked 71) and Montenegro
(ranked 90). The general rank of Serbia is also getting worse each year, since Serbia was ranked 91st
in
2008 Report. The urgent measures are needed to improve Serbia standing in the global community in
the area of administrative laws and procedures. The Government of Serbia announces introduction of
such measures in June 2009.
The whole international community headed by WTO are contemplating the ways to reduce
administrative barriers to international trades. With customs and traditional non-tariff barriers
regulated administrative barriers shows its high restrictedness to international trade. Some analysis of
the EU shows that 2-10% of costs in foreign trade are caused by administrative barriers.8
There are
many multilateral and regional initiatives with the aim of removing administrative barriers to trade but
the real will to do so lies in the commitment and resolve of individual national economies to liberalize
and facilitate international trade.
2. TRADE FACILITATION - INITIATIVES FOR THE REMOVAL OF ADMINISTRATIVE
TRADE BARRIERS
2.1. World Trade Organization as a Pillar of Multilateral Regulation of Trade Facilitation
The process of removing administrative barriers in international trade today called Trade
Facilitation, has been the main task of many initiatives at the multilateral and regional levels. There is
no unique definition of that process. The experts of The World Bank point out that trade faciliitation
"covers a multitude of issues that are relevant to the smooth and efficient flow of trade". They also
think that this term "has been used in the context of a broad range of potential non-tariff barriers such
8
EU Website, Internet, Multilateral Issues – Trade facilitation, http://europa.eu.int, 10/04/2000.

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as import licensing, product testing and overly-complex customs clearance procedures."9
In the World
Trade Organization (WTO) that process consists of "simplification and harmonization of trade
procedures".10
Some other definitions exist also: "Trade Facilitation is the name given to measures to
simplify and reduce the impact of import, export and customs procedures", or the other one where the
Trade Facilitation is "very broadly defined as the capacity for goods to be moved more expeditiously
across national borders".11
The results expected after the implementation of the Trade Facilitation
process should be positive but for that we will need globally accepted standards. That does not mean
that all countries will accept the same administrative mechanisms.
Between all existing initiatives for the Trade Facilitation the most recent one, but the most
widespread, is the initiative of the WTO. Just one year after foundation of this Organization in 1995,
first steps in the direction of the facilitation of trade have been made.
The common idea of all existing initiatives for Trade Facilitation is to enhance the
transparency and predictability, by making the information more freely available and published, by
giving enough time for all those involved in trade, traders and people working within in custom
clearance, between the adoption of the new measures and their implementation so that they could
adapt themselves. Also important is a standardization and simplification of data and documentation
requirements and their reduction where it is possible. All of that is mentioned in the three General
Agreement on Trade and Tariffs (GATT) articles 5, 8 and 10. The content of contemporary Trade
Facilitation process is based on the three articles in GATT from 1994. These articles are Article 5
which deals with freedom of transit for goods, then Article 8 concerned with fees and formalities
connected to importation and exportation and finally Article 10 which requires all trade regulations to
be clearly published and fairly administered. The process od Trade Facilitation certainly would
strengthen GATT articles, but more importantly is enhancing the role of WTO in the regulation of
international trade, by respecting general WTO principles: transparency, predictability and non-
discrimination.
Trade Facilitation became a topic of discussion in 1996 at the Singapore Ministerial
Conference. Soon after the establishment of the WTO, in 1996, the First WTO Ministerial Conference
was held in Singapore, when the participants in the Ministerial Declaration adopted the initiative "to
undertake exploratory and analytical work...on the simplification of trade procedures in order to assess
the scope for WTO rules in this area".12
Because this Conference was held in Singapore, all important
questions for further work are called "Singapore Issues". Trade Facilitation even today is called "a
Singapore Issue". During that Conference, Ministers decided to set up three new working groups on
trade and investment, on competition policy and on transparency in government procurement. The last,
but not the least important was the demand addressed to the WTO Goods Council to find possible
ways of simplifying trade procedures which is a synonym for Trade Facilitation.
The main acchievement, or at least the drafts of achievements, in the field of international
trade certainly is the Ministerial Conference held in Doha in 2001. A new round of Multilateral Trade
Negotiations had been launched, the main topic was the relation between developed and developing
countries and besides all that, this Conference included even the Trade Facilitation topic. All four
subjects called "Singapore Issues" were originally included in the Doha Development Agenda. In the
Doha Ministerial Declaration adopted on 14th November 2001, the Council for Trade in Goods should
review, clarify and improve relevant aspects of Articles 5, 8 and 10 of the GATT 1994 and identify the
Trade Facilitation needs and priorities of all members, especially developing and least-developed
9
World Bank (2005), WTO Trade Facilitation Negotiations Support Guide, Document TN/TF/W/51,
Washington, p. 9.
10
Anthony Kleitz (2003), "Costs and Benefits of Trade Facilitation", in Sharing the Gains of Globalization in
the New Security Environment—The Challenges to Trade Facilitation, United Nations Economic Commission
for Europe, New York and Geneva, p. 64.
11
Predrag Bjeli (2009), "Trade Facilitation: Removing Administrative Trade Barriers", in
i i , , N . 1(11), - 2009, p.114.
12
http://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm (Accessed 10.03.2009.)

9. Economic Policy and Global Recession
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countries.13
Although, this topic was delayed for three years to be put on the negotiation agenda of the
Doha round. That happened because during the Doha Conference, the conflict between developed and
developing countries culminated in many different fields of negotiation and the same happened
conserning the question of Trade Facilitation. Developing countries thought that the suggestion of the
European Union, which was supported by other developed countries, could be the basis for a new
dominant role of developed countries in trade relations with developing countries.
The turning point in trade negotiations is the adoption of one document in July 2004 the so-
called "July Package", important from this aspect, because with that Package WTO member countries
agreed on some trade important aspects, between them certainly, the very important question of Trade
Facilitation. Finally, that question was put on the negotiation agenda of the Doha round. This was the
first important movement above all others, considered existing articles of GATT 1994, where we can
find the beginning of the multilateral regulation of Trade Facilitation. These articles are based on
adequate principles, but the effect of their implementation was and still could be caracterised as
indirect and not sufficient. The role of these articles mostly has been just declarative and although they
would have been the basis for future multilateral regulation of the Trade Facilitation process, their
implementation in international trade had realised very modest results, especially in the last twenty
years when the role of implementation of administrative barriers had risen. That is the reason why
many member countries are expecting that the obligations mentioned as GATT Articles have been
turned into binding rules.
On 12th October 2004 the Trade Negotiations Committee established the Negotiating Group
on Trade Facilitation and after that this Group agreed on a Work Plan and appointed meetings. The
Agenda of the Negotiating Group consists of:
• Clarification and improvement of relevant aspects of Articles 5, 8 and 10 of the GATT 1994;
• Special and differential treatment for developing and least-developed countries;
• Identification of Trade Facilitation needs and priorities;
• Concerns related to cost implications of proposed measures;
• Technical assistance and support for capacity-building and
• Working with and the work of other relevant international organizations.14
In the Annex D of "July Package" where the Modalities for negotiations on Trade Facilitation
were formulated, it is said that all the work of the World Customs Organization (WCO) up to then,
was very important and as well as other international organizations joined by the same aim. 15
These
organizations are: IMF, OECD, UNCTAD, and The World Bank. Also it is mentioned that the
position of developed and least-developed countries in these negotiations should be variable, that
means that all member countries should accept the principle of special and differential treatment for
developing and least-developed countries. A very important question in connection with developing
countries is technical assistance and support for capacity building which are vital for them. Only in
this way will they be able to fully participate in negotiatons and have some benefits. For this reason
many countries have offered some donations to facilitate the participation of developing and least-
developed countries in the Doha Round Negotiations on Trade Facilitation. The European
Communities has offered 100,000 CHF to the WTO Trade Facilitation Fund for developing countries.
It is a long and expensive process for all to better adapt their practices and laws to the WTO rules and
disciplines and to improve the implementation of their obligations.16
13
The World Bank, 2005, WTO Trade Facilitation Negotiations Support Guide, document TN/TF/W/51, 6 July
2005, p. 8.
14
Ibid., p. 11.
15
Annex D is an annex to the WTO July Package in which it is explained how the negotiations on trade
facilitation will take place.
16
http://www.wto.org/english/news_e/press08_e/pr539_e_htm, (Accessed 26.06.2009.)

10. Economic Policy and Global Recession
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When we mention the customs procedures, we have to say that the initiative of WTO is very
recent comparing the initiative of the WCO. That is more than 50 years of work which has resulted in
important technical progress in customs clearance and in developing the process of administering and
co-operation of custom services of its member countries. There are many conventions adopted under
the competence of the WCO, but the most important in the field of Trade Facilitation is the
International Convention on the Simplification and Harmonization of Customs Procedures which is
also called Kyoto Convention adopted in 1973 and revised in 1999. All member countries are
committed to achieve simplification and harmonization of their custom procedures. This document
provides basic principles of more efficient custom clearance procedures.17
The work and initiative of
the WCO, like many others has been limited by their competence, while the WTO is concerned for
multidisciplinary work in regulating international trade. Undertaking by the WTO probably "will bring
the political will and commitment, enhaced cooperation from the trade, and the realignment of
resources to customs capacity building, all of which are necessary ingredients for reform and
modernization of customs that the WCO has advocated for years".18
At the multilateral level we can mention a few more initiatives for Trade Facilitation. Firstly
there are efforts of the United Nations and its agencies. Research and analytical efforts have been
made by the World Bank.19
Beside GATT Articles, member countries during Trade Facilitation negotiations decided to
enhance technical assistance and capacity building in this area and to improve cooperation between
customs.
2.2. Trade Capacity Building
Although we have noticed positive effects of Trade Facilitation on economy as a whole, some
developing, poorer countries still seem to view this process as a luxury, or as a need of developed
countries. The lack of an adequate trade capacity in developing and least-developed countries is one
more barrier for these categories of countries to benefit from a multilateral trading system and to
participate in the implementation of the Trade Facilitation process. The trade capacity consists of
human, institutional and infrastructure capacity and is necessary for all subjects who participate
effectively in international trade. To enhance trade capacity, developing countries need a few forms of
assistance. They need more efficient ports, road networks, automated equipment for customs officials
and significant investments in infrastructure. The sources could be funds from international
organisations and contributions from national governments. Building trade capacity needs significant
funds and that could be ensured only by cooperation of WTO with other international organisations
and with contributions from national governments. During the sixth Ministerial Conference of the
World Trade Organisation, held in Hong Kong in the period 13-18. December 2005 some developed
countries promised their help for the project Aid for Trade. Japan has promised USD 10 billion over
three years for development assistance in the field of trade, production and distribution infrastructure.
For the project Aid for Trade US announced grants of USD 2.7 billion a year by 2010 and EU
promised similar spending of EUR 2 billion per year by 2010 for trade related development
assistance.20
The program Aid for Trade is a result of work of WTO Members who have recognized
that the multilateral trade system needs important improvement in trade capacity for implementing
their decisions concerning development of international trade.
17
See more in: Predrag Bjeli (2009), "Trade Facilitation: Removing Administrative Trade Barriers", in
i i , , N . 1(11), - 2009, p. 115.
18
Cit. Kunio Mikuriya, (2003), "Trade Facilitation: Benefits and Capacity Building for Customs", in Sharing the
Gains of Globalization in the New Security Environment—The Challenges to Trade Facilitation, United
Nations Economic Commission for Europe, New York and Geneva, p. 41.
19
See more in: Predrag Bjeli (2009), "Trade Facilitation: Removing Administrative Trade Barriers", in
i i , , N . 1(11), - 2009, p. 116.
20
http:// www.wto.org/english/tratop_e/devel_e/build_tr_capa_e.htm (Accessed 10.03.2009)

11. Economic Policy and Global Recession
10
2.3. The importance of the costs and benefits dimension of Trade Facilitation process in the time
of this financial crisis
As we are all the witnesses of the postwar period as "the golden age" for international trade in
which trade liberalisation regime has contributed to steady increases in trade volumes, it is very
expected that the contemporary financial crisis could be the reason for many distortions in
international trade. These distortions could be applied, among all, thanks to the administrative barriers
to trade, the third category of non-tariff barriers to trade, still unregulated at the multilateral level.
These measures have been derived from national laws and could be connected mostly with
functionning of customs organisation in each country in particular. In the crisis periods many negative
aspects surface. From the macroeconomic point of view, it is neccessary to ensure efficient border
procedures called customs clearance procedures. Inefficient border procedures produce a negative
impact on governments, on businesses and on the customer. The victim is economy as a whole
because businesses pays the price of unpredictability of goods delivery, often slow and more
expensive, costly customs procedures and the loss of time that could be used for new businesses. At
the end of that chain is a customer who pays all these unnecessary costs.
The main category in all metrics are Trade Transaction Costs (TTCs) defined as "costs arising
from supplying documents and information required for border procedures or procedural delays"21
.
Reducing TTCs needs the implementation of reform to improve efficiency, or to eliminate
inefficiences. They also are called "hidden costs" and consist of direct and indirect incurred costs.
Direct incurred costs are expenses relating to supplying information and documents to the concerned
authority and indirect incurred costs are mostly results of procedural delays. These costs jointly, some
authors believe may reach even 15% of the value of the traded goods.22
The arch is from 2% to 15%.
This convince us that TTCs can vary substantially and they differ depending on the efficiency and
integrity of interacting businesses and administrations, as well as the type of goods and businesses.
Despite efforts to decrease TTCs, they cannot be entirely eliminated. According to OECD experts,
reduction in TTCs of 1% of the value of world trade, thanks to the Trade Facilitation, could result in
aggregate welfare gains to about USD 40 billion. Welfare gains could be expected and they are
proportional to the size of cuts in TTCs.23
The expected results of the implementation of Trade Facilitation are quantified in many ways
concerning the impact on trade flows and income levels. There is an UNCTAD analysis estimating the
results of Trade Facilitation equivalent in savings to 2-3% of the value of traded goods. But this is not
the end of the gains, it is expected that the economic welfare gains will tend to be higher because after
reducing the gap between domestic and international prices, additional trade would be stimulated and
further specialisation according to comparative and dynamic adjustments. In APEC countries the
result is expansion of trade related to Trade Facilitation which will produce an increase average per
capita GDP of 4.3%.24
Many studies have estimated different ways of potential welfare gains after the
implementation of Trade Facilitation, mostly using computable general equilibrium modelling. Table
1 presents some results in this field of research and the conclusion of all of them is that global welfare
certainly will increase from faster and more efficient border crossing of goods.
21
Anthony Kleitz (2003), "Costs and Benefits of Trade Facilitation", in Sharing the Gains of Globalization in
the New Security Environment—The Challenges to Trade Facilitation, United Nations Economic Commission
for Europe, New York and Geneva, p. 64.
22
Peter Walkenhorst and Tadashi Yasui, (2009), "Quantitative Assessment of the Benefits of Trade Facilitation",
in Overcoming Border Bottlenecks — The Costs and Benefits of Trade Facilitation, OECD, p. 31.
23
Ibid., p. 41.
24
Ibid., p. 31.

12. Economic Policy and Global Recession
11
Table 3. Welfare effects from Trade Facilitation measures
Key findings
Francois et al.
(2005)
Based on a CGE model exercise, the authors estimate that world annual income will
increase by USD 72 billion (USD 151 billion) following a 1.5% (3.0%) reduction in TTCs
for goods trade. In proportion to national income, most of these gains would benefit
developing countries. All regions or major trading nations would benefit except China in
the 1.5% reduction scenario. All countries/regions would benefit in the 3.0%, or "full
liberalisation"
OECD Based on a CGE (GTAP – Global Trade Analysis Project) model exercise, the authors
estimate that a 1% reduction in TTCs for goods trade will bring annual gains of about USD
40 billion on a world basis. Most of these gains will benefit developing countries in relative
terms. There are no losers. Estimates as share of GDP reveals that Middle East and North
Africa (0.27%), non-OECD Asia Pacific (0.25%), OECD Europe (0.19%) and Sub-Saharan
Africa (0.18%) would be particularly well off.
Wilson et al.
(2002)
Based on a CGE model execise for APEC economies, the authors estimate that a 5%
reduction in TTCs for goods trade will raise APEC GDP by USD 154 billion, or 0.9%.
Commonwealth
of Australia
(2002)
In terms of annual increases in real incomes measured in 1997 prices, gains from reforms
of customs procedures are estimated to be USD 0.4 billion in the Philippines, USD 2.3
billion in Singapore and USD 1.2 billion in Thailand.
UNCTAD
(2001)
A 1% reduction in the costs of maritime and air transport services in developing countries
could increase global GDP by USD 7 billion (1997 value).
Source: Michael Engman, (2009), "The Economic Impact of Trade Facilitation", in Overcoming Border
Bottlenecks — The Costs and Benefits of Trade Facilitation, OECD, p. 85.
The process of the implementation of Trade Facilitation will certainly produce some costs.
These costs will be caused by reducing TTCs because this will require higher operational expenses
and investments. Firstly, all modernizations and reforms will start from customs services, but it will
not be the only investment. Other government services in correlation with border procedures also have
to be improved. The volume of investments depends on the general economic environment presented
by the existing level of infrastructure, the size of government services and the educative level of
human resources. This is not a inexpensive investment, but once the country improves functioning
border procedures, that system has to be updated from time to time and expenses are transferred to
traders in one group of countries and financed from government budgets in other countries. In last ten
years The World Bank from a multilateral point of view has helped many developing countries to
improve their customs services. Only in 1999 The World Bank extended 15 adjustment loans for that
purpose. Among many initiatives is investment of USD 78 million for customs improvements in six
South-eastern European countries. Besides economies in transition, The World Bank has taken part in
many investments in developing countries, concerning Trade Facilitation, for example financing the
project for export development in Tunisia.25
Beside the process of trade liberalization in different areas, mostly conducted by WTO in the
last 14 years, the most benefits for trade liberalization as a whole, is expected from the process of
25
Peter Walkenhorst and Tadashi Yasui, (2009), "Quantitative Assessment of the Benefits of Trade Facilitation",
in Overcoming Border Bottlenecks — The Costs and Benefits of Trade Facilitation, OECD, p. 29.

13. Economic Policy and Global Recession
12
Trade Facilitation. The results of three studies in figures show that the Trade Facilitation "is a major
avenue for achieving trade liberalization benefits".26
Table 4. Estimated benefits of Trade Facilitation in different studies
Additional GDP growth
(billions UDS)
Share of Trade Facilitation benefits
in overall liberalization
Dutch study 72 34%
OECD study 76 65%
APEC study 154 56%
Source: Anthony Kleitz (2003), "Costs and Benefits of Trade Facilitation", in Sharing the Gains of Globalization
in the New Security Environment—The Challenges to Trade Facilitation, United Nations Economic Commission
for Europe, New York and Geneva, p. 65.
In the complexity of the process of Trade Facilitation, we cannot expect maximum egality for
all participants. All partners in the trading process have to make efforts, altough it is hard to measure if
they are not equivalent. The distribution of gains and benefits is also not expected as equal. Some
statistical models with simulations show that the benefit from Trade Facilitation will be for all, but not
equally. From more efficient border procedures, the greatest benefits will experience countries that
have less eficient customs and administrative procedures.
3. CONCLUSION
Since tariffs have been significantly reduced in GATT multilateral trade negotiations rounds
during the second half of the 20th
century some other obstacle have became visible for companies
engagded in international trade. This other opstacles that are not tariffs are reffered to as non-tariff
barriers. There are many causes of non-tariff barriers so these measures can be classified in three
broad groups – traditional, technical and administrative non-tariff barriers. Traditional non-tariff
barriers have been regulated under GATT rules and later WTO international trade regime and a part of
technical barriers to trade so this measures could not be abused as instruments of trade policy. The
only group of measures still unregulated by GATT/WTO rules are administrative trade barriers.
Administrative barriers to trade are a special category of non-tariff barriers and their main source are
administrative regulations and procedures that have a restrictive effect on international trade. These
measures are seen by many as main obstacles to interntional trade flows today and main trade policy
instruments of developed countries. There are many international initiatives to regulate administrative
barriers but trade facilitation initiative remains most significant due to WTO mandate.
In todays global financial crisis it is very possible to expect the growth of many distortions in
international economy, especially, in international trade flows. That is the reason why the acceleration
of the regulation of still unregulated fields of the international trade at the multilateral level is
necessary. Beside the initiative of the WTO we can notice important steps in the process of the
regulation of non-tariff barriers made by other multilateral organizations. The WTO has the mandate
to incorporate all of them in one single regulation. The WTO initiative ona Trade Facilitation has the
aim to make the whole trading process simpler and smoother and the work on fulfilling of these tasks
has been started by launching negotiations on this subject. The precise date of achieving the agreement
is unpredictable, but one fact is clear. By lowering trade transaction costs, or in other words, by
increasing the efficiency of customs administration, Trade Facilitation measures will improve
international trade flows and increase a country`s attractiveness for investments. For achieving the
maximum benefits of Trade Facilitation and implementing all agreed rules it will be necessary to join
that WTO agreement with the provided technical assistance and help for trade capacity building.
26
Anthony Kleitz (2003), "Costs and Benefits of Trade Facilitation", in Sharing the Gains of Globalization in
the New Security Environment—The Challenges to Trade Facilitation, United Nations Economic Commission
for Europe, New York and Geneva, p. 66.

14. Economic Policy and Global Recession
13
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121-141.
Bjeli , P. (2009), Trade Facilitation: Removing Administrative Trade Barriers,
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Engman, M. (2009), The Economic Impact of Trade Facilitation, Overcoming Border Bottlenecks —
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Kleitz, A. (2003), "Costs and Benefits of Trade Facilitation", in Sharing the Gains of Globalization in
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UNCTAD (2009) Globalisation and Development: Fact and Figures, Geneva.
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Overcoming Border Bottlenecks — The Costs and Benefits of Trade Facilitation, OECD, Pp 19-49.
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