Thierry Geiger: “The world needs a more inclusive trade” (World Economic Forum & Global Alliance for Trade Facilitation)

Blogs are the author’s own opinion and not necessarily representative of Misys or the World Trade Board.

Many thanks to our colleagues at the World Economic Forum and the Global Alliance for Trade Facilitation for providing us this blog to share.

Thierry Geiger, Economist at the World Economic Forum and contributing editor to the Global Enabling Trade Report, blogs about removing the barriers to a truly global marketplace.

“Singapore, Netherlands and Hong Kong SAR lead the 2016 edition of the Enabling Trade Index rankings of 136 economies, featured in the Global Enabling Trade Report recently published by the World Economic Forum and the Global Alliance for Trade Facilitation.

Amidst a backlash against globalization and faltering international governance, international trade remains a vector of development and poverty reduction. Yet is has become clear that trade has not lifted all boats. While it has contributed to growth, it has also resulted in unintended, adverse and often overlooked distributional effects and broader economic and environmental consequences. This reality, however, should not lead to the conclusion that less trade or less open borders are the solutions. What the world needs instead is a more inclusive trade to help those made worse off by it. Measures include re-distribution policies, active labor market policies, safety nets. But not protectionism.

At the same time, the results of the Enabling Trade Index (ETI) suggest that millions of businesses and entrepreneurs around the world are actually missing out on global trade. Poor connectivity, regulatory and logistical constraints and inefficiencies represent obstacles that hurt disproportionally micro-enterprises and SMEs, especially outside urban centres, in their capacity to export, compete, and, in turn, benefit from global trade. Removing these practical barriers to trade would make trade more inclusive, too.

Secondly, the ETI also shows that large emerging countries still apply relatively high tariffs. Tariffs are much lower in advanced economies, but this apparent openness often conceals highly complex, hard-to-navigate tariff regimes. In this context, further trade liberalization could yield sizeable welfare gains.

Thirdly, the ETI reveals that there is much room for improvement in the area of border administration. A unique combination of political feasibility, affordability, promises of additional revenues, momentum and resource availability suggests that this area is low-hanging fruit for policymakers hoping to stimulate trade. In addition, upgrading digital and transport infrastructures and connectivity, and improving the overall operating environment are longer-term, much more complex and more costly efforts. But these offer the potential of enormous societal and economic benefits, well beyond boosting export competitiveness.

Since its inception in 2008, the Index has provided a benchmarking tool to monitor progress on trade facilitation. It is agnostic about the solutions, but represents a necessary first step in the reform process. It informs decision making and help with prioritization. The ETI helps identify good practices and success stories across the development ladder that can be emulated or scaled up at the regional level. The improvement of ten places or more in the rankings achieved by certain developing countries in the span of just two years is an encouraging sign and proof that the strikingly close relationship between income level and capacity to enable trade is by no means ineluctable.”

Download your copy of the Global Enabling Trade Report here.