This afternoon, Brazil’s Ministry of Industry, Foreign Trade and Services and Argentina’s Ministry of Production announced a technical cooperation with the Inter-American Development Bank.
The goal is to intensify areas for dialogue between Brazilian and Argentinian governments and private sectors to effectively implement measures to facilitate bilateral trade. The IDB will provide technical assistance to implement a plan of action approved by the participants.
This cooperation agreement evolved from the Memorandum of Understanding signed between Argentina and Brazil this past summer, to establish a partnership on trade facilitation.
This is an important step forward in terms of deepening trade ties in the region and boosting economic activity.
Indeed, trade facilitation has been gaining increasing traction among policy makers and trade practitioners throughout Latin America, as a pragmatic and effective way to reduce barriers, improve trade flows and help boost economic performance. The World Trade Organization estimates that if the Trade Facilitation Agreement is implemented it could reduce trade costs by 15% on average. In Latin America alone, trade costs are estimated to be reduced by 10% to 23%.
One of the major selling points of trade facilitation is the fact that it does not require formal negotiations like free trade agreements, which gives governments more flexibility in implementing new trade facilitation initiatives. What’s more, trade facilitation directly targets specific trade barriers, providing an effective tool to improve the efficiency of the existing regulatory trade architecture, address new structural changes in trade, and maintain the momentum of trade liberalization.
Throughout the region countries are making trade facilitation a priority.
For example, the Pacific Alliance (PA) requires that all members make trade documentation available online, simplify customs procedures to expedite the release of goods, and automate procedures. One such initiative is the creation of an interoperable electronic single window (RED VUCE) to carry out all administrative trade procedures. This eliminates the need to physically deliver documentation to multiple offices for approval, thereby improving the end-to-end efficiency and security of supply chains and reducing transit times. In fact, an IDB survey of AEO certified companies found that more than 90% said their supply chain security had improved significantly, and 65% reported a reduction in time and dispatch of physical inspection and dispatch of cargo.
In Central America, SIECA approved the Trade Facilitation Strategy and Regional Competitiveness plan, focused on improved border management. Part of this includes a Central American digital trade platform and border integration measures like early transmission of documents for cargo, only carrying out immigration controls in the country of departure, and the use of electronic system for documentation. In South America, UNASUR has directed their efforts to modernizing border crossings and border management to promote development in the region.
Important work is also being conducted bilaterally.
For example, the most recent Mercosur Summit, the group prioritized defining a joint strategy to improve its participation in trade and cooperation in Latin America and abroad. This includes strengthening dialogue with the PA on issues like trade facilitation, customs cooperation and digital certification. In the same vein, Argentina and Brazil both signed agreements with the United States on trade facilitation, committing themselves to cooperate on regulatory issues, technical capacity building, technical border management in order to reduce the cost of doing business and advance the trade facilitation agenda.
The region should build on this momentum and expand cooperation among countries – especially those countries that are not linked by an FTA – to work towards a regional agenda on trade facilitation that improves existing policies and procedures and encourages coordination among national authorities.
For example, expand the interoperability of single windows systems so that customs authorities can exchange and process information faster. Similarly, countries with AEO programs can mutually recognize companies’ certified status, expanding the opportunities and benefits for participating firms.
Many countries in the region have similar development challenges. These can be addressed more effectively through regional collective action and cooperation. Facilitating trade benefits all trading partners and would provide a much-needed boost to economies throughout the region.