Geneva: Even as world trade recovered towards the end of 2020, Landlocked Developing Countries (LLDCs) exports continued to decline by as much as 8 per cent, while global exports grew by 7 per cent, according to a new World Trade Organization (WTO) publication launched on December 8, 2021, highlights the high trade costs faced by LLDCs due to their isolation from the world’s largest markets.
The study finds that LLDCs’ trade costs are 1.4 times higher than those of developing countries with a coastline. It also details LLDCs’ vulnerability to climate change but notes the benefits that trade in services and e-commerce can bring to these countries.
Higher trade costs for businesses in LLDCs result from the many challenges they face in trying to integrate into global supply chains, and the COVID-19 pandemic has magnified those challenges across a number of areas.
LLDCs are mostly commodity exporters. The export of commodities itself is not the main economic development hindrance for LLDCs, as other developing countries primarily export commodities as well.
However, LLDCs exports are not as competitive due to higher transport costs. According to the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), LLDCs on average pay more than double in transport costs than transit countries and experience longer times to send and receive merchandise from overseas markets. These high transport costs discourage investors, impede economic growth and limit the capacity of LLDCs to achieve sustainable development.
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Since LLDCs rely solely on transit countries for their external trade, they are subject to the quality of transport infrastructure, transit laws (i.e. insurance, licensing) and bureaucracy of their neighbours, who often are themselves developing countries.
The main trade bottlenecks identified (including examples), both at the border and within LLDCs, commonly include
the following (Also see Figure 1):
- a lack of coordination in the development and maintenance of transport infrastructure (e.g. inefficient border infrastructure);
- a lack of standardization and harmonization (e.g. transloading from and between different modes of freight);
- a lack of border coordination and cooperation between customs and other border agencies and traders (e.g. unwarranted long waiting times at customs);
- burdensome documentary requirements and paper processing of documentation (e.g. multiple clearances and
declarations at customs); - a lack of human and financial resources (e.g. shortage of skilled staff to promote better understanding of the TFA);
- a lack of equipment and digital infrastructures (e.g. information communications technology (ICT) and laboratory equipment for the implementation of the TFA).
LLDCs, including least-developed countries (LDCs) that are landlocked, highlighted how the pandemic magnified the existing challenges they face arising from a great digital divide among and within countries. A large portion of their businesses have not digitalized and have had to close during the pandemic. Only a few domestic online business operators concentrated in major cities have been able to run their business smoothly due to insufficient health protective measures and disruption in domestic transportation and supply systems. Many businesses are located far from the border, so without a fully integrated domestic business structure (including an ICT system), it is not possible for the domestic supply chain to be fully operational and linked with cross-border trade. Besides, border closures because of lockdowns to curb the spread of pandemic often have unintended effects on trade bottlenecks, since many border closures also apply to traders and maritime, road and rail transport workers.
This trend in LLDC trade highlights the importance of implementing the WTO’s Trade Facilitation Agreement (TFA) in LLDCs to simplify, modernize and harmonize export and import processes.
Freedom of transit has always been part of the international trade architecture. Article V of the General Agreement on Tariffs and Trade (GATT) 1994 and Article 11 of the TFA makes provision to facilitate the freedom of transit for goods between WTO members. Although the freedom of transit provisions help to establish guidelines to facilitate
LLDC trade, they are insufficient and would benefit from recognition of the special needs of LLDCs.
In her opening remarks, WTO Director-General Ngozi Okonjo-Iweala reiterated her commitment to promoting a more inclusive multilateral trading system: “LLDCs face particularly acute versions of realities that all members must grapple with, as complex emerging challenges, such as climate change, threaten development possibilities and future prosperity. We must leverage the potential of trade to meet these challenges. … We must also ensure that the gains from trade are equally distributed. Enhancing integration into regional and global value chains of women, youth and small businesses creates jobs and opportunities, and helps reduce inequality … In a world marked by the COVID pandemic, the paths that lead to economic growth cannot be separated from those that lead to inclusion.”
– global bihari bureau
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