UNCTAD - Transit

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Constraints on Transit Trade ............................................................................................................... 5 Automated Systems for Customs Data ................................................................................................ 7 Almaty Conference ................................................................................................................................ 8 2

Transcript of UNCTAD - Transit

RUMUN 2006



5Constraints on Transit Trade

6Automated Systems for Customs Data

7Almaty Conference

10Current Status

12Key Positions

12Regional Positions




15Business Interests


18Discussion Questions

19Works Cited


According to the United Nations Conference on Trade and Development (UNCTAD), landlocked developing countries (LLDCs) have a common problem of geographical remoteness and high international trade transaction costs. These two factors make the integration of trade into the mainstream economy very difficult for LLDCs, even though for most states, trade represents the single largest source of revenue. Landlocked nations have an additional logistical cost to transport their cargo, as they need to transport goods through a second nation before there is any access to global markets, and these goods are subject to customs and border regulations of the intermediary state. Traders must therefore adapt to the regulations of the transfer states, often resulting in costly delays. Throughout the years, conferences have convened to address and offer solutions to the problem of enhancing trade in LLDCs. One of the most notable conferences took place in Almaty, Kazakhstan in 2003, resulting in the Almaty Programme of Action, which offers solutions for these states to reduce costs for international trade transactions and increase trade efficiency. Most notably, this conference acknowledged that in most cases in which a landlocked country is forced to trade across the borders of a neighbor, the neighboring country is suffering from similar development challenges. The Programme of Action seeks to identify ways in which these two states could cooperate so that they can both gain from the trade, resulting in broader relations among states. The steps taken to diminish the restrictions facing transit developing nations result in better trade facilitation, and usually include improvement of infrastructure, developing and implementing new methods of transport, and increased transport security. Technology has helped the development of trade by implementing the Automated Systems for Customs Data (ASYCUDA), and has made the management of customs and border procedures a much easier task for states that have undertaken this strategy. This computerized system manages cargo manifests, accounts, and is able to accommodate the varying customs clearance procedures in different states. While to date, some 85 nations have implemented ASYCUDA, many of the poorest developing states have been unable to do so due to high implementation costs.Even though technology has enhanced transit trade, UNCTAD has identified fourteen major constraints that hinder this process. The overarching connection between the difficulties can be addressed through the revision of customs procedures and the development of infrastructure that more effectively accommodates the needs of trade, including everything from cargo clearance to account management to logistics. Resolving these issues are at the center of UNCTADs goals, and it is believed that once achieved, trade transactions will be much more fluid and efficient. Recent advances in this area have resulted in the development of the Integrated Framework (IF) for trade-related technical assistance, a joint effort between several United Nations bodies, such as UNCTAD and the World Bank, as well as other outside organizations. This program seeks poverty reduction to promote economic growth, and therefore growth in trade, calling upon public and private sectors of transit states to cooperate more closely with each other. The more compelling reason to implement programs such as these is perhaps counter-intuitive. When customs procedures and tariffs make trade costly and slow, goods are smuggled across borders, unregulated by any government entity. As a result, no tariffs can be levied, and the result is an insecure and uncontrolled border, offering an opportunity for expanded illicit activity.


Trade can be traced back to the origins of civilization when it took the form of barter, but today, trade is more associated with the exchange of goods between two entities, or states. As an organization, the United Nations Conference on Trade and Development (UNCTAD) seeks to maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis. It does so by promoting the development of relationships among states and through the simplification of trade policies among those states. As the world has grown smaller over time, trade has grown from a relationship among partners in close proximity to each other to a relationship in which the ends of transactions happen on different continents. While much of the world borders oceans and other waterways, many states do not have access to these transportation advantages, and are forced to conduct their trade through nearby or bordering states.The United Nations defines transit trade as a countrys foreign trade that passed through a third countrys territory prior to reaching its final destination. Difficulties arise when cargo passing through a third state and is held up by customs barriers or tariffs. The implications of transit transport are the changing conditions of borders, which results in additional cost and time before transactions can be completed. The nations most affected by transit trade are landlocked developing countries (LLDCs), and are typically states that have difficulty growing their economy due to geography. Throughout history, considerable effort has been made by states to gain access to coastlines. Water affords states the opportunity to reach the global marketplace directly, and without the potential for hold up to occur as goods are held in intermediary states. Should a bordering state seek to harm the economy of a bordering country, all it needs to do is stop trade goods in ports for considerable periods. Especially in the case of perishable goods, this delay can make trade cost-prohibitive.Landlocked nations have the biggest disadvantage since they have no direct access to a port, thus having to go to farther lengths for international trading to occur. According to UNCTAD, these countries are distributed as follows: 15 are located in Africa, 12 in Asia, 2 in Latin America and 2 in Central and Eastern Europe. The UN also states that LLDCs are amongst the most disadvantaged nations in the world, because they face severe challenges to growth and development due to a wide range of factors. These countries also depend on the use of transit trade for their integration into the world economic market. Since the inception of the United Nations Conference on Trade and Development, there has been an ongoing focus on the development of landlocked nations. Some LLDCs also fall under the category of Least Developed Countries (LDCs), and the average GDP per capita of these LDCs is less than a third of that of coastal developing countries.

Landlocked states have the common problem of geographical remoteness and high transport costs in international trade transactions. According to the UN, Kazakhstan is the most remote nation, having to transport goods approximately 3,750 kilometers before they reach the sea. According to UNCTAD, on average[,] landlocked developing countries spent almost two times more of their export earnings for the payment of transport and insurance services than the average for developing countries and three times more than the average of developed economies. Reducing these costs can greatly increase the productivity of a nations economy. In modern times, certain methods of trading of goods are encouraged, including combinations of modes of transport, usually done by carriers operating on land, sea, and air. Land transport is usually done by rail, or on the road, by trucks. Most of the worlds trading, however, travels the seas despite the numerous methods of land transit. Of course, this poses a huge hindrance on nations that do not have direct access to the sea or to ports. Constraints on Transit Trade

States that must engage in transit trade, which hinders their access to global markets. Some of these constraints overlap and link with each other, but have their own characteristics. In order to alleviate the added costs of this form of trade, these constraints must be addressed either by the landlocked states themselves, or by regional and multilateral trading organizations.

Border and customs control affect the different safety, environmental and other standards and regulations. Put simply, every time cargo passes through a different border, it is subject to costs and delays as well as additional constraints placed by the state. Moreover, potentially dangerous goods, such as chemicals and pesticides, may be forbidden from entering certain states, further increasing transshipment costs by exporting states. Inadequate transport infrastructure often complicates the transport process because there may be times where a heavy influx of cargo may not be able to be accommodated by the existing transport systems and can cause bottlenecks causing the delay in shipment of other goods. Information and communications technology (ICTs) can affect the logistics of the transport system. The crews of the freight transport may also be subject to visa and customs regulations at national borders. Administrative issues, such as insurance and permits, can complicate the entire trade processes, as specific rules can very considerably among states. An adequate legal framework governing international trade needs to be developed to assist the states required to tr