World Trade is currently facing a severe threat through faltering global economic activity, but there is a longer-term threat growing. The mistrust and insecurity engendered by the tragic events of 11th September 2001 is resulting in draconian moves to control the movement of international trade. These controls will distort trade flows, the sourcing and manufacture of goods and there is a high probability that the countries that will suffer most will be the poorest, who are in most need of the export-led growth through international trade.
Over some considerable time international trade growth has been encouraged though progressive facilitation achieved through simplifying procedures, increased use of information technology and electronic communication, together with the use of sophisticated risk management. This has been achieved without sacrificing control or security.
We are now faced with the ascendancy of control over facilitation. There is an ambition to achieve total security through increased information requirements and the control of all goods. We are suffering from a lack of confidence in the use and enhancement of risk management techniques to improve control and thereby security.
The United States Container Security Initiative is one of the greatest threats to international trade in the future. Last year the United States processed 5.7m, containers. In order to improve the control and security related to movements, they have identified 20 ports where containers destined for the United States will be scrutinised. Felixstowe is the only UK port authorised by the United States. All other container traffic destined for the United States will be subject to rigorous control and inspection before it enters the United States, and this will significantly increase delay and thereby costs. Already the US Customs Service are saying that they need increased resources.
Besides the increased control of international trade, action is also being taken to greatly increase the information requirements for international transactions, and a range of different government departments are pursuing their own objectives independently. If a significant number of the major trading countries take the same action as the United States, then international trade will be significantly inhibited.
About the author
David Wakeford is Chief Executive of SITPRO. Prior to this he managed his own company, Global Trade Knowledge Ltd.
For the majority of his career he worked for ICI, starting as a research chemist, he then moved into an international commercial role as Purchasing Manager for ICI Plastics Division. His final position in ICI was as the International Trade Manager where his responsibilities covered trade policy issues, commercial regulatory issues and customs management. He chaired a number of international committees and in 1992 was honoured in the United Kingdom with an MBE for services to the chemical industry in the area of trade policy.
When he is not at work, David is an avid sailor.
Facilitation is in danger of being ignored, despite it being the only way in which improved security can be effectively managed in a scenario of global economic wealth generated through international trade. Risk management is key! At least 80% of international trade is between related parties and multinational companies that have excellent track records related to trade. A proportion of the remaining 20% of international trade is between unrelated multinational companies having excellent credentials. These facts cannot be ignored and must be used effectively to enhance the control and security of higher risk transactions. Nobody disputes that a legitimate reaction to the events of last year is the need for higher security, but the only way of achieving this, without bringing the world economy and developing countries to their knees, is the rapid introduction of modern trade practices. Risk management in combination with authorisation of traders and supply chain integrity has to be the way forward.
To influence the crucial developments related to increased security requirements, SITPRO is working actively with businesses and authorities. On the 2nd October we have arranged a Forum to raise key business concerns with government and we are involved in a number of key meetings in the World Customs Organisation, focussing on the issue of security and facilitation.
Return to SITPRO News: Issue 40, August/September 2002
