Open markets, closed borders

By Matthew T. McGrath -- Logistics Management, 8/1/2000

The "New Contrarian" coalition of environmentalists, labor activists, and anarchy-is-fun hobbyists, who had their coming-out party at the World Trade Organization's Ministerial Meeting in Seattle, continued their attack on globalization at the semiannual Washington meetings of the World Bank and International Monetary Fund in April.

What the New Opposition has not yet grasped is that the most effective barrier to globalization is notto be found in halting the WTO's expansion or in demanding debt forgiveness by the World Bank. As any logistics professional can attest, the most pernicious barriers to trade with less-developed countries are non-transparent customs rules; poor logistics infrastructure; and good, old-fashioned corrupt border officials (the world's third-oldest profession).

To be sure, unilateral or multilateral efforts like the recently enacted African Trade Act, under which most U.S. imports from sub-Saharan countries will be entitled to duty-free treatment, help to attract investment to under-developed nations. But the lack of efficient local customs processing and fundamental distribution capital instantly cancel out such benefits.

Both the World Trade Organization and the World Bank now recognize how essential efficient customs and transport regimes are for trade facilitation and sustainable development, and are incorporating these concerns into their core policy objectives. Following Seattle, several WTO members (dubbed the Colorado Group) agreed to include trade-facilitation principles in any future global negotiating round and to provide expanded training and resources through the World Customs Organization (WCO). Their belief is that the developed world must provide the wherewithal for Third World countries not only to open their markets, but also to realize the benefits to their local economies of reduced tariffs and predictable technical rules. Otherwise, trade agreements are effectively one-sided.

Likewise, the World Bank, which lends funds to developing countries with the goal of achieving "sustainable development," has established a Global Facilitation Partnership, with the objective of disseminating customs and transport expertise and establishing public-private logistics liaisons in World Bank client countries. Measurements of customs efficiency, transport improvement, and integrity are proposed conditions for future lending programs.

Both the WTO and World Bank must take care not to be seen as forcing complex, corporate-friendly, and sanctions-enforced procedures on impoverished nations. The resistance by such countries to ratification of the amended Kyoto Convention, which provides for standardized customs modernization, is an example of the developing world's ambivalence about rules-driven "improvements." Thus, the initial focus is on non-compulsory programs, such as a World Bank initiative that promotes the advantages of transportation and distribution efficiencies in Southeastern Europe.

The renowned philosopher and international logistics expert Yogi Berra once said, "If you don't know where you are going, you will wind up somewhere else." International trade agreements usually have a clear "destination," but their framers often don't recognize that the procedures for getting there are just as important as the goals themselves. The realistic programs started by the WTO and World Bank are intended to make sure that exporters don't wind up somewhere other than where they want to be.

Matthew T. McGrath is a partner in the law firm of Barnes, Richardson & Colburn in Washington, D.C., specializing in customs and international trade law practice. Mr. McGrath is a member of the ICC's Committee on Customs and Trade Regulations, which participates in deliberations of the World Customs Organization, and also is Washington Counsel to the American Association of Exporters and Importers. He may be reached at (202) 457-0300.