Commentary: Taking the measure of trade facilitation

The World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA), which entered into force earlier this year, provides hope that trade bottlenecks can be cleared, as WTO members have committed to removing administrative and customs-related barriers.    It always seems so simple. A decision is made to expand your company’s supply chain, or to follow a customer into a new overseas market. You take a quick look at the map and start asking yourself how you are going to get product and equipment from Point A to Point B.
   The call to action goes out across the company, and eventually down to logistics, and even further into the customs group. Then the question comes back: “How in the world will we get it there?”
   Like other companies, you have a highly evolved, complex international supply chain and customer base, so what gives with the questions? Why the pushback?
   And the answer is: No matter how smart your people, no matter how sophisticated your systems, going into new markets is a headache! There are roadblocks and delays baked into the system, at nearly every port of entry. Why have we not figured out a way to solve this?
   At the senior management level in most companies, there is little patience for service failures, delays or loss of product. Crossing new oceans, skies and rivers to deliver your products and services must happen with great predictability. Yet the daily challenges of cross-border trade press hard against the growing expectations of global supply chains and business models.
   The World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA), which entered into force earlier this year, provides hope that trade bottlenecks can be cleared up. As I have written previously, WTO members are committed to removing administrative and customs-related barriers to trade, in order to speed the movement of goods across borders.
   Once implemented, TFA is expected to spur global economic growth and create some 21 million new jobs – 18 million in developing countries alone – while adding $1 trillion to global GDP. But none of this will happen automatically. The focus in trade circles has shifted now to continued ratification, implementation with an eye on compliance at the country level, with commitments.
   In order for the full benefits of the TFA to be realized, it is key that industry push countries to robustly implement all provisions of the agreement.

Measured Improvement. In my days in engineering class, we learned that when you measure something, you can also assess improvements in a system. More generally, it is a truism in business that “what gets measured gets managed.”
   But how do we measure the critical aspects of trade efficiency? We know total dollars, total containers, total ships, even the number of containers lost at sea (which are reassuringly low, it turns out). But we have very poor comparable metrics on trade clearance and efficiency, from one end of the process to the other, that would provide necessary insights to resolve bottlenecks and sluggish performance.
   The World Customs Organization (WCO), in its 2011 Time Release Study Guidelines (which are well worth dusting off and re-reading), captured the essence of this challenge. One bottleneck, it noted, forms in discharging the often-complex tasks of revenue collection, security, applying environmental and health standards, and enforcing relevant national trade policies. Customs administrations and governments need to have direct access to, and often must take temporary custody of, export and import consignments.
   The WCO observed that, with the evolution of just-in-time business models, the time period during which customs and border agencies require to apply these controls would need to shrink to avoid halting the movement of goods overall. It noted that governments and the trading community have a powerful common interest in this regard, and called for improved efforts to calculate and record the time needed to release goods, as well as the identification of policy and regulatory improvements to ensure the effective facilitation of trade.

Boosting U.S. Exports. Maybe it’s time we started measuring the process port by port? After all, the goal of these measurements is to identify problems and solve them. The WCO called for time release studies to establishing baseline trade facilitation performance measurement, identify opportunities for trade facilitation improvements, and estimate each country’s comparative position as a benchmarking tool.
   It’s high time that governments around the world started taking such performance measurements seriously. It’s time to measure up. The bottom line is this: What we measure, we can improve. It’s time for the trade community to have meaningful, transparent metrics to identify problems and bottlenecks affecting the efficiency of international commerce.
   Given the investments that the United States has already made to improve goods clearance time, developing and sharing our best practices with other WTO members will undoubtedly provide a lift to U.S. exports overall. By identifying and helping to improve troublesome ports of entry and related processes that hamper the execution of international trade, we would be doing not only those countries, but our own, a huge service.

   Jerry Cook is vice president of government and trade relations with Hanesbrands. He chairs the Customs and Trade Facilitation Committee of the U.S. Council for International Business, and can be reached by email at Jerry.Cook@hanes.com.