Securing Trade in Latin America and the Caribbean

Events such as the terrorist attack on the United States (US) in 2001; the global recession in 2008/9; the continuous ‘war’ against ‘tax havens’; and the reduction of preferential market access, have all served to make trade more difficult for developing countries. Terrorist attacks, in particular, have led to various trade security initiatives being implemented by developed countries along with international organizations such as the International Labour Organization and International Maritime Organization.

In one instance, the EU’s policy, through the amendment of their Community Customs Code in 2006, focuses on supply chain security and is not limited to containers. Their framework is a combination of electronic systems and practical tools for the collection of information before arrival to and departure from Europe. On the other hand, the US’s three main container initiatives are the Customs Trade Partnership Against Terrorism (C-TPAT), the Container Security Initiative (CSI) and the 24-Hour Rule as amended by the Trade Act of 2002. The former is a non-contractual voluntary agreement and the others are mandatory. In 2007 the US also passed, “Implementing Recommendations of the 9/11 Commission Act”, legislation mandating the 100 percent scanning at foreign ports of all US bound containers.

The US’ actions have triggered an international debate and have been strongly opposed by business communities, governments and even security specialists the world over. The changes have affected developed and developing countries, particularly the latter. UNCTAD and the European Commission conducted several studies which reveal that implementing US obligations would be very costly, possibly act as a barrier to trade that would marginalize SMEs and increase difficulty participating competitively in international trade. Despite the foregoing, developed countries and larger developing countries are nevertheless implementing systems to secure trade. Developing countries in Latin America and the Caribbean (LAC) are, in a sense, forced to participate in agreements that set standards that are not suited to their particular needs or circumstances.

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Such happenings beg the question; what can LAC do to participate competitively in secure international trade?

One initiative already employed in the Region, which shows great potential, is the International Transit of Goods (TIM). TIM is an electronic system for managing the flow of goods in transit. It was designed to address three challenging areas of trade across the border between El Salvador and Honduras (the area with the highest volume of trade-related transactions in Central America). Poor interoperability; slow and cumbersome customs and administrative procedures; as well as limited use of IT are the three challenges identified. These challenges have in turn led to issues such as limited data sharing, duplication of procedures, inefficiencies, unnecessary delays, limited trade opportunities, and other barriers to trade. The use of this initiative has resulted in greater productivity, transparency, and competitiveness of the countries, and has increased trade. A major shortcoming of TIM however, was the large number of public and private sector agencies required to be involved in its design and implementation.

Another recommended initiative, that would require amendments to address the needs of LAC, is the Authorized Economic Operators (AEO) programme. The AEO is an integral part of the World Customs Organization’s SAFE Framework and the EU’s supply chain security policy. The framework is designed to enhance trade and security simultaneously. Its core elements include: harmonizing the advance electronic cargo information that Customs needs on inbound, outbound and transit shipments; employing a consistent risk management approach to use the advance information to identify high risk consignments and address security threats; the examination of outbound high risk consignments (preferably using non-intrusive detection equipment such as large scale X-ray machines and radiation detectors); and the offer of benefits to businesses that meet minimal supply chain security standards (World Customs Organization).

The last element would be very encouraging in LAC but real benefits such as expedited clearance should be offered to businesses that meet the standards. These standards should be realistic, considering the fact that most firms in LAC are SMEs and are also the main players in supply and value chains. The standards should not form barriers to trade.

Of course to be truly successful, it is recommended that the LAC adopt a regional approach to securing trade. This would alleviate the high costs that would be associated with implementation and should provide the necessary high level political support and private sectors commitment; areas identified as challenges in the implementation of TIM.

 

Deborah Barrow-Graham has worked for over 9 years at the Caribbean Community (CARICOM) Secretariat in the area of trade and legal research. Her passion for trade and law motivated her to complete a Master’s Degree in International Trade Policy, which covered both areas. She is a part-time lecturer at the Law Faculty, University of Guyana. Deborah’s goal is to assist developing countries in enhancing their socio-economic position in the global market.

 

Featured Photos from JAXPORT and Ted McGrath.

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