. /.RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/76
8 December 1998
(98-5009)
Council for Trade in Services Original:  English
COMMUNICATION FROM THE UNITED STATES
Distribution Services
The following communication received from the delegation of the United States was
circulated informally on 25 June 1998 to the Members of the Council for Trade in Services to assist in
the discussion on Distribution Services in the context of the Information Exchange Programme.
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Distribution services, particularly the movement of goods through the supply chain, has
become an integral part of consumer product manufacturing and marketing. The most efficient
economies, where consumers enjoy a high standard of living, a wide array of consumer goods, and
low consumer prices, are those in which the distribution economy, and the supply chain, have been
left relatively free of government regulation that limit investment and entry.  Such economies also
recognize that manufacturers need a reliable, low cost, and timely inflow of raw materials, parts and
other supplies and outflow of products to distributors, retail outlets or direct to consumers.
Distribution is an essential linchpin of trade; in fact, it is the backbone of trade.  Without the
free movement of goods, many of the benefits of liberalized trade are stunted.  Customers and
businesses are forced to pay more for goods and technology because distribution services are not truly
open to fair competition and available to all.  Businesses must often curtail manufacturing and export
activities because inefficient and slow distribution procedures do not take into account just-in-timeoperations and processes.  Unpredictable delivery or long lead times due to customs administration or
other government regulations can require the maintenance of excessively large “safety stock,” with
unacceptable inventory carrying costs and, ultimately, higher shrinkage and waste.  These types of
problems can inhibit capital investment and site selection or unwittingly direct them elsewhere.
In many countries, new technologies have completely reengineered the supply chain, leading
to huge efficiencies that inure directly to users and the consuming public.  The emergence, in almost
every industrialized economy, of efficient transport carriers and mass-market retailers has resulted in
lower inflation and better consumer value.
Technology has played and will continue to play an important role in the supply chain.
Point-of- sale data collection, satellite communica tion technology, enterprise computing solutions,
and sophisticated warehousing technologies have squeezed costs out of the distribution of goods to
consumers.  With the latest communications equipment, carriers can quickly determine the exact
location of a particular shipment in the journey to its destination.  Retailers can communicate instantly
with carriers.  In the future, retailers will use new information system technologies to appeal directly
to individual consumers in one-to-one marketing approaches.  Today, retailers communicate directlywith manufacturers in sophisticated partnerships th at increase stock turnover, eliminate out-of-stocks,
ensure just-in-time delivery of merchandise and lower consumer costs.S/C/W/76
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Distribution and information technologies operate synergistically in the global market and, to
fully realize the fruits of WTO basic telecommunications and ITA liberalization, WTO Members
should also address distribution.  The symbiotic relationship between improved information
management systems and modern logistics systems has fuelled much of the economic growth in the
United States and its trading partners during the past decade.  Today's high speed logistics networkshave profound implications for high value-added trade.
Some countries have successfully adapted high-technology methods to distribution services,
thereby cutting costs of goods, speeding deliveries, and improving profits for business enterprises and
benefits for consumers.  “Just-in-time” inventory management, assisted by integrated, regional
express-delivery services is a good example.  Computerized checkout, automatic inventory control
and prompt re-stocking at retail outlets is another example.  Changes in business organization andregulatory reform have contributed to the efficient operation of this sector.
Distribution inadequacies promote inefficient investment decisions, ones that do not depend
on the efficiency of the workforce, availability of world-class material suppliers, access to other
markets, or the maintenance of an effective system of commercial law.  Inefficiencies in distributionmay even overwhelm the advantages to be gained from economies of scale, often requiring the
construction of small, inefficient plants in several markets that could be served by a single,
scale-efficient factory.  Improvements in distribution will lead to investment decisions increasingly
based on the market’s ability to provide an environment conducive to the establishment and
maintenance of world-class manufacturing operations to serve the regional market and to produce forexport.
In short, distribution does more than facilitate trade: it is trade.  The ability to maintain a
reliable, low-cost and just-in-time flow of raw materials and components into a manufacturing facility
and an effective system to keep finished products flowing out of the facility is a critical component ofpromoting regional trade and investment, which creates jobs and fuels economic growth.  Any
world-class manufacturing facility must have access to world sources of raw materials and
components, as well as to world markets for its products.  Certainly, many quality inputs will be
available locally.  However, a single market can ra rely produce all of the inputs needed to compete in
today’s marketplace.  Consequently, access to imported raw materials and components, as well as
production equipment, is an important consideration in plant location.
WTO Members have already recognized the important role that telecommunications and
financial services can play in establishing a strong and flexible infrastructure for goods and services.
As with telecommunications, an efficient distri bution network can assist in attaining economic
objectives, benefitting those in the economy consuming the services and helping to ensure that
businesses have low-cost access to global networks.  Information available through these networkshelps producers respond to and anticipate changes in consumer preferences, and helps them get
products to market on a timely basis.  Such a system can help provide the supplies needed by
businesses and households at low cost, thus enhancing purchasing power and the quality of life.
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