Mr. Morshed Murad Ibrahim,
President of the Chittagong Chamber of Commerce and Industry, Ambassador Hannan Members of the Chamber,
Ladies and Gentlemen,
Last year when I visited Bangladesh I was struck by the number of persons who insisted that I must visit the port of Chittagong — the heart of the economy of Bangladesh handling more than 90% of seaborne export-import trade. This port has held many names throughout the ages but only one real purpose: to connect this country to the outside world through trade and to serve as a conduit for other countries to connect with each other. The efficiency of the port has improved over the years and many consider it to be the most efficient container port in the South Asian region. It is thus with genuine pleasure that I was able to return to Bangladesh with the fundamental aim of seeing this Port in action and hearing from those whose business and livelihood relies on this conveyor belt of commerce and trade.
Even as transportation costs decrease and the reach of technological innovations advance, the role of the ’simple harbour’ remains absolute. Ports do not just facilitate trade, they make trade happen. In a world still recovering from the 2008 economic crisis and where the very nature of the export-import equation is being deconstructed with new statistical and policy approaches on the true value of trade, the daily activities of Chittagong are a microcosm of what is happening in every quarter of the globe. The payment of fees and charges; risk management; electronic payment; expedited shipments; authorised traders; single windows; advance rulings — these are the processes — the spokes — that allow the wheels of trade to move.
These are the issues, and many more, which are being discussed in Geneva in the negotiations for a multilateral trade facilitation agreement. These are not esoteric concepts. These are the bread and butter of facilitating more trade quicker, easier and less costly. For governments and especially for the private sector these three terms — quicker, easier and less costly — are the simplest ways of looking at competitiveness. And I am yet to find a Government or business which does not have competitiveness at the core of their development or business strategy.
Multilateral trade negotiations can sometimes be difficult to relate to the day to day work of doing business. Not so for trade facilitation. There is nothing that brings the work in Geneva closer to the reality of trade than the nuts and bolts of improving trade facilitation processes and procedures. Effective trade facilitation increases customs productivity, improves tax collection at the border and helps attract Foreign Direct Investment. A multilateral agreement on Trade Facilitation would expedite the movement of goods across borders and would improve the transparency and predictability of trade and of doing business. With the growing prevalence of regional and global supply chains, effective and predictable trade facilitation is an essential ingredient in making supply chains work for developing countries. The figures speak for themselves.
The costs of trading across borders is estimated at US 2 trillion dollars. If we further break this down by the actual nature of the barriers we see that of this 15%, 5% is as a result of tariffs and 10% is as a result of border and customs procedures. Globally, removing these barriers to trade and cutting red tape in half, which is what a multilateral Trade Facilitation Agreement could deliver, could stimulate the US 22 Trillion dollar world economy by more than US 1 trillion dollars! Simply reducing this red tape by half would have the economic effect of removing all tariffs. The income creating impact of that is further multiplied for goods and services in regional and global value chains which may have to cross different borders several times in their production and distribution cycle. This has real economic deliverables for a country such as Bangladesh that has the potential to exploit its comparative advantage in labour and in the garments industry.
To further illustrate this, a recent study by the World Economic Forum just released last week in the margins of the Davos meetings concluded that reducing barriers to trade in supply chains could increase world GDP by 6 times more than just eliminating tariffs. It estimates that by reducing these barriers — many of them regulatory in nature — global GDP would increase by 4.7% versus just 0.7% gain if the focus was just on removing tariffs. It further notes that there would be a 14% gain in trade after reduction of barriers versus only a 10% gain for tariff removal.
Trade Facilitation is good for exporting AND importing. The character of international trade is increasingly becoming one of trade in value added. The expansion of regional and global value chains means that most products are assembled with inputs from many countries with products crossing borders frequently during various stages of assembly. Trade in intermediate goods is the most dynamic sector of international trade growing at a rate of 6 per cent per year and almost 60% of global commerce involves intermediate products with 30% of the total conducted between affiliates of the same corporation. The impact of reducing supply chain barriers would be even greater in South and Central Asia than in other regions with projections showing a 65% increase in exports and a 49% increase in imports. For a country like Bangladesh which is increasingly importing to add value to its products for export, this could have real economic benefits including on employment generation and making production inputs and final goods less costly for business and consumers.
Just last week in Davos, Trade Ministers agreed that the WTO’s 9th Ministerial Conference in Bali should address Trade Facilitation. Trade Facilitation is one of a number of important elements that could be considered in Bali. A package of Least-developed Country specific elements is another. I applaud the Government of Bangladesh for its active engagement to ensuring mechanisms are embedded in the international trade architecture to facilitate a greater integration of LDCs into the multilateral trade system.
I expect that Bangladesh will consider the merits of a Trade Facilitation Agreement and will take a proactive approach in ensuring that the negotiations on Trade Facilitation are completed in a way that strengthens the rules, regulations and processes of ’doing trade’ but which also seeks to develop a framework that provides the necessary technical assistance and capacity building to developing countries, especially to LDCs, that may require such assistance to implement the Agreement. The negotiations on Trade Facilitation are the proverbial ‘low hanging fruit’ — the value of the measures are not debatable and unlike some other difficult trade negotiations in the Round, there is no risk of farmers, taxi drivers or garment workers protesting in the streets. On the contrary, we have seen that with better import/export procedures there is more work, more customers, less costly inputs and better revenue collection at the border.
Visiting Chittagong today, and speaking with representatives of the Government yesterday, including the Minister of Commerce, confirms that Bangladesh sees trade as a path to growth and development. I recognise the challenges that the country has but I also welcome the tremendous strides that have been made in the economic and social field over the last few years, including in meeting several Millennium Development Goals.
I appreciate, however, that many challenges remain. As the most densely populated country in the world you have a large comparative advantage in the provision of labour and in services, but this also means a tremendous responsibility to ensure that this population has access to food, shelter and education. Developing the agriculture sector is a necessity for food security. Increasing the production and productivity and ensuring that goods reach both the domestic and export market are priorities.
Using the development finance of Aid for Trade and foreign direct investment is one avenue to increase the efficiency of the sector. Aid for Trade, an initiative which I launched at the WTO Ministerial Conference in 2005, is premised on using development assistance to increase the supply side capacity in developing countries based on their own priorities.
In 2010, Bangladesh was the 8th largest recipient receiving US 1.2 B in Aid for Trade — a figure which does not include humanitarian aid, other forms of non-concessional finance nor assistance from other developing countries such as China and India. Nevertheless, I recognize the need for greater resources to strengthen the infrastructure bottlenecks including road infrastructure and deficient energy supply. I hope the Government will continue to make efforts to leverage Aid for Trade mechanisms as well as other channels to increase the level of FDI and to mobilize greater concessional financing to make the necessary interventions in the economy which can further facilitate trade.
As WTO Members prepare for the Ministerial in Bali in December this year, I expect that Bangladesh will continue to play a pivotal role, especially in ensuring that LDC issues are reflected in any input to and outcome from Bali. The voice of the private sector must also feature in this context and I urge the government to continue to dialogue with you on trade issues and for you, the Chamber, to maintain open channels of communication. In 2012, I launched a Stakeholder Panel on Defining the Future of Trade. This panel, made up of twelve highly respected and knowledgeable individuals, has been tasked with looking at the drivers of today and tomorrow’s trade, to look at trade patterns and at what it means to open global trade in the 21st century.
The report of this Panel will be released in a matter of months but I welcome any input that you may have on these issues today.
Once again I thank you for your hospitality and look forward to our dialogue this afternoon.