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2014 the Role of FTA Trade Facilitation Rules in Promoting

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   _______________________________________________________________     _______________________________________________________________    Report Information from ProQuest October 29 2014 09:00  _______________________________________________________________     AURO UNIVERSITY, SURAT 29 October 2014ProQuest   able of contents 1. Trade Facilitation and Global Supply Chains : The Role of FTA Trade Facilitation Rules in PromotingGlobal Supply Chains......................................................................................................................................129 October 2014iiProQuest  Document 1 of 1   Trade Facilitation and Global Supply Chains The Role of FTA Trade Facilitation Rules in PromotingGlobal Supply Chains Author Lee, Hyo-young   ProQuest document link   Abstract One of the important goals of trade facilitation is to lower the costs of trade that serve as a barrier tothe developing countries from enjoying the benefits of increased trade and becoming integrated into globalsupply chains that account for nearly 60 percent of global trade today. The high trade costs that are plaguingmost developing countries is mainly incurred from the lack of adequate trade-related infrastructure and lowquality of institutions that hinder the efficient flow of goods across and within borders. Therefore, the tradefacilitation rules that are contained in FTAs among bilateral trading partners are inevitably aimed at deepeningtheir participation in the global value chain network. However, an observation of the FTAs concluded by Koreaand the trade facilitation rules contained therein shows that the current trade facilitation rules in bilateral FTAsmay be of little practical use for countries that lack the capacity to be involved in the international productionactivities in the first place. From the development perspective, the recently concluded WTO agreement on tradefacilitation which takes full account of the special and differential treatment needs of the less developed countrymembers appear more likely to contribute to providing the trading environment that is free from the barriers totrade that have inhibited the less developed countries from integration into the global supply chains and thebenefits thereof. Full text Headnote  Abstract One of the important goals of trade facilitation is to lower the costs of trade that serve as a barrier to thedeveloping countries from enjoying the benefits of increased trade and becoming integrated into global supplychains that account for nearly 60 percent of global trade today. The high trade costs that are plaguing mostdeveloping countries is mainly incurred from the lack of adequate trade-related infrastructure and low quality of institutions that hinder the efficient flow of goods across and within borders. Therefore, the trade facilitation rulesthat are contained in FTAs among bilateral trading partners are inevitably aimed at deepening their participationin the global value chain network. However, an observation of the FTAs concluded by Korea and the tradefacilitation rules contained therein shows that the current trade facilitation rules in bilateral FTAs may be of littlepractical use for countries that lack the capacity to be involved in the international production activities in thefirst place. From the development perspective, the recently concluded WTO agreement on trade facilitationwhich takes full account of the special and differential treatment needs of the less developed country membersappear more likely to contribute to providing the trading environment that is free from the barriers to trade thathave inhibited the less developed countries from integration into the global supply chains and the benefitsthereof. Key Words : Trade Facilitation, Global Supply Chains, FTA, Logistics Performance, Aid for Trade JEL Classification : F15 &F17 1. INTRODUCTION Why Trade Facilitation and Global Supply Chains? The importance of trade facilitation has risen significantly with the growth of global supply chains, in whichgoods cross borders multiple times, initially as inputs and ultimately as final products. Today, about 60 percentof global trade consists of trade in intermediate goods and services that are incorporated as production inputsand outputs in various stages of the global production process. In such a trading environment, the cost of trading across borders would serve as a barrier to the cross-border flow of exports and imports in global 29 October 2014Page 1 of 11ProQuest  production networks. According to WTO estimates, such cost of trading amounts to some $2 trillion, two thirdsof which is a result of border and customs procedures.^sup 1)^ Also, there are several empirical analysis resultsshowing that the gains in global trade from smoother border procedures could be higher than the gains fromtariff reduction.^sup 2)^ With reduced tariff levels as a result of a series of multilateral trade negotiations under the auspices of theWTO, trade facilitation has been the subject of growing attention in international trade as a means to improvethe 'quality' of trade environment for efficient trade operations.^sup 3)^ Trade facilitation refers to the eliminationof inefficiency caused by non-tariff barriers not only on the border, such as burdensome customs procedures,but, more broadly, also covers the behind-the-border regulations and trade-related infrastructure, the lack or inefficiency of which may hinder the flow of goods to the customer or final user. In order for a good to enter animport market, it not only has to go through customs and other administrative procedures that delay promptclearance of goods, but the domestic logistics and communication infrastructure may also serve as a major barrier to the prompt delivery of goods to the intended destination even after crossing the border. Furthermore,various forms of domestic regulations, such as safety-related product standards or technical regulations mayalso inhibit the smooth entry of the imported goods into the domestic market. On the other hand, the growth of global supply chains has also encouraged the establishment of 'deep' bilateraltrade agreements that go beyond tariff reduction. The increased amount of trade in parts and components aspart of the international production network is shown to be closely associated with the greater depth of newlysigned agreements among FTA members. In fact, several empirical analysis have shown that the greater thedepth of an agreement, the larger the increase in trade among FTA members.^sup 4)^ Therefore, it seems thatcountries that are already involved in global supply chains are more willing to sign preferential trade agreementswith their partners in order to secure their trading relationships as providers of intermediate goods and services. As a result, it would be only natural that such FTAs to secure the trading environment for global supply chainsprovide rules for facilitating trade through simplified import and export procedures at the border, in addition tomany other trade and investment liberalizing measures, for the members to engage more freely in internationalproduction activities. Trade Facilitation Rules for Promoting Global Supply Chains The trade facilitation rules that are needed to promote active participation in global supply chains have beenidentified in several previous research. According to a recent report by UNCTAD (2013) on global supplychains, the key location-specific policy determinants for a country to become engaged in global supply chainactivities are quite broad, ranging from customs and border procedures to investment policy and intellectualproperty regimes. The trading environment for promoting integration into global supply chains, in fact, may notbe much different from the general environment for promoting global trade, since essentially, trade costs wouldhave to be lowered. However, in addition to the reduction of tariff levels and border procedures, the promotionof global supply chains requires a solid transportation or logistics infrastructure that would enable the smoothflow of the input and output goods between the local production sites and transportation sites (i.e. ports,airports, railway). The improvement in such logistics performance has been empirically shown to have thegreatest positive effects in expanding trade for developing countries.^sup 5)^ In particular, one of the problems the developing countries are facing that inhibit their integration into theinternational production network is the lack of adequate infrastructure for trade logistics (transportation andtelecommunication), which is an essential element for the movement of goods in a rapid, reliant, and less costlymanner. In fact, while reducing tariff and non-tariff barriers may be important requirements for trade promotionin general, the trade-related infrastructure may indeed be an essential and basic element for the less developedeconomies. Even for the faster developing countries among the less developed economies, improved efficiencyin trade logistics inevitably leads to enhanced performance in the global supply chain network.6) Furthermore, the negotiations in the WTO which are based on reforms to the traditional rules on trade 29 October 2014Page 2 of 11ProQuest
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