   
  
WT/GC/W/772  
 
3 May 2019 
(19-3070) Page: 1/4 
General Council  Original: English  
 
OUTCOME  OF THE WORK ON "CHALLENGES SMALL ECO NOMIES EXPERIENCE IN  THEIR 
EFFORTS TO REDUCE TR ADE COSTS, PARTICULARLY  IN THE AREA OF  
TRADE FACILITATION "* 
 
The following communication, dated 2 May 2019, is being circulated at the request of the delegation 
of Guatemala on behalf of the Group of Small, Vulnerable Economies (SVEs).  
 
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1  BACKGROUND  
1.1.  At the Eleventh Ministerial Conference in Buenos Aires,  Argentina,  Ministers adopted a 
Ministerial Decision on the Work Programme on Small Economies (WT/MI N(17)/63)  reaffirming their 
commitment to the Work Programme and instructing the Secretariat to provide relevant information 
and factual analysis for discussion among Members in the  CTD's Dedicated Session, in particular to 
continue its work on the challenges small economies experience in their efforts to reduce trade costs, 
particularly in the area of trade facilitation.  
1.2.  In response to this mandate, the SVEs group presented a proposal o n the work on "Challenges 
small economies experience in their efforts to reduce trade costs, particularly in the area of trade 
facilitation " (WT/COMTD/SE/W/33/Rev.1) which was agreed by consensus by the CTD Dedicated 
Session on Small Economies. Based on th is proposal, the Secretariat would issue a background 
document that disaggregated relevant statistical information from the "Aid for Trade at a Glance  
2015" study, in particular, statistics on important sources of trade costs in goods and services most 
commonly identified by small economies in their survey responses. The note would also consider 
impacts from policy actions taken to reduce trade costs, and types of policy actions that have 
achieved the most positive results in reducing trade costs for goods and services.  
1.3.  After the publication of the background note, an introductory meeting was held, where the 
Secretariat had the opportunity to present the documen t and Members  had an opportunity to 
comment on it. Following this initial session, two more sessi ons were held, one focused on the most 
important sources of merchandise and services trade costs and challen ges SVE Members  faced in 
order to reduce them. The third session focused on the actions and policies associated with the most 
positive results in re ducing trade costs for goods and services.  
2  TOPICS OF DISCUSSION   
2.1  Trade costs in goods  
2.1.  The background note of the Secretariat identified the following as the main challenges 
(mentioned in descending order of importance) for SVEs in the goods side: transpor t infrastructure, 
NTMs, border  procedures, tariffs, fees and other charges and access to trade finance.  
2.2.  SVEs are devoid of raw materials and therefore have to import all production inputs which 
increases the final cost of production in view of the cost in volved in importing these inputs. It was 
mentioned that one way of addressing this issue from a trade perspective was to substantially review 
                                                
* This document was also circulated as WT/COMTD/SE/W/38  dated 15 April 2019 . WT/GC/W/772  
 
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  the rules of origin requirements to make them more flexible for small economies, not only at a 
multilateral level,  but in the context of bilateral and regional agreements.  
2.3.  With regards to commodities, it is a matter of concern that massive subsidies provided by big, 
competitive economies to some of their commodities are having a devastating impact on small 
economies.  Outcomes in negotiations on domestic support in agriculture could help SVEs maintain 
their competitiveness.  
2.4.  As regards to the regional export markets of SVEs, the main challenges were: transport 
infrastructure and border procedures, closely followed by N TMs. 
2.2  Transport Infrastructure and costs  
2.5.  Transport is one of the highest costs in SVE countries. In fact, for Small Island Developing 
States  costs are higher than landlocked developing countries and LDCs.  
2.6.  Some of the reasons for these high costs where the distance from SVEs to their main 
export/import markets; high costs imposed by main freight companies; economies of scale; and 
deficient port infrastructure.  
Some of the solutions mentioned were:  
• Better p ort infrastructure . 
• Better port efficiency . 
• Port privatization in the exporting country . 
• Better connectivity, which fosters competition among carriers which may result in a reduction 
of freight prices.  
 
The following policy solutions were mentioned:  
• Include transport connectivity in planning and trade models: for this purpose, improved data 
on maritime transport networks in necessary.  
• Opportunities from modern network technologies: cargo and vessel tracking, and other 
digital developments can help en hance maritime connectivity.  
• Linkages between national, regional and intercontinental shipping services.  
• Plan port investments jointly to accommodate the vessel that will serve the route.  
• Investments in the form of PPPs  for the improvement of seaport inf rastructure and 
intermodal connections . 
• A Member  mentioned that in some circumstances, government support to help lower freight 
costs might be necessary, but in this sense , flexibility might be needed for SVE countries 
since the SCM may consider such suppo rt as a prohibited subsidy.   
 
2.3  Border Measures and Procedures  
2.7.  During the sessions, SVEs highlighted specific border procedures that they considered to be 
the most burdensome regarding costs:  
• Delays in examining cargo . 
• Lack of inter -agency coordination . 
• Multiple submissions of applications at the border . 
• Multiple payments . 
 
2.8.  Many SVEs highlighted the importance of the implementation of TFA measures  to reduce these 
challenges, but many also recognized that further measures would be needed for SVE Members to 
fully respond to the high costs of border procedures.   WT/GC/W/772  
 
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  2.9.  One of the possibilities was Customs Modernization, that could include organization and 
restructuring, legal reforms, and in particular automation and business process re -engineering with 
tools like:  
• Digital manifests (real time online submission of cargo manifest) . 
• Digital customs declaration (real -time online submission of customs declaration, online 
assessment of taxes payable) . 
• Online payments . 
• Paperless processing: digitally signed customs declara tion, commercial invoice, bill of 
lading, delivery order and other documents.  
• Implementation of national single window . 
• Establishment of central cargo examination centre . 
• Implementation of container tracking system and automated gate . 
 
2.10.   It was also mention ed that many of these tools represented a considerable investment, and 
that SVEs would need financial and technical support to implement many of them.  
2.11.   Regional integration was identified as an important tool for reducing trade costs and allow 
better econom ies of scale. In the area of trade facilitation, some of the possible solution s were:  
coordinated customs administration, use of regional certification centres, fostering harmonization or 
equivalence of standards, and postal services agreements.  
2.4  Trade cos ts in Services  
2.12.   The background note of the Secretariat identified the following main drivers of high costs in 
many SVEs, in the area of services: network infrastructure, transport infrastructure. Non -recognition 
of professional qualification and the restri ctions on movement of natural persons, poor regulatory 
environments, low level of skills in the services sector, restrictions on commercial presence and 
tariffs on product inputs.  
2.13.   In the case of services trade in regional markets, the first driver of high  costs was the 
non-recognition of professional qualifications, restrictions on movement of natural persons, poor 
network and transport infrastructure, restrictions on commercial presence and inefficient 
government regulations.  
2.14.   It is becoming increasingly difficult for small states to compete on the goods export market 
given their smaller size, low production capacity and connectivity issues. That is why many small 
states have tried to diversify their economies into trade in services.  
2.15.   Various reports have p ointed out that there is a direct correlation between efficient business 
services and enhanced competitiveness on the goods trade. Countries that undertake enhanced 
liberalization commitments experience a reduction transaction costs and hence higher produc tivity.  
2.16.   During the meetings, a Member suggested  a services waiver for SVEs where preferences to 
services and service suppliers from small economies could be granted.  
2.5  Technology and Trade Costs  
2.17.   During discussions, the importance of technology in reducing t rade costs was highlighted. 
Many ICT  solutions targeted different aspects of border measures and procedures, payments, costs 
in services, but in order to make use of these tools, there are several elements that have to be in 
place such as:  
• Updating nation al legislation: SVEs are yet to reach the fifth generation of regulations, many 
are only in the second or third generation . 
• Investing in digital skills and life -learning training .  
• Appropriate ICT infrastructure . 
• Payment solutions . 
 WT/GC/W/772  
 
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  2.18.   During discussions, it was evident that Aid for Trade and  other types of cooperation to the 
ICT sector remains limited. There is also a need for greater country -specific analysis of the digital 
dimension in order to better understand the AFT needs.  
2.6  Non-Trade Measures  
2.19.   NTMs comprise a significant source of trade costs, and SVEs identified the difficulties they 
experienced  with these barriers. Usually, small economies are more specialized in products that are 
significantly exposed to NTMs, especially SPS meas ures. For example, fats, oils and vegetable 
products, and foodstuffs. According to the Secretariat 's background note, foodstuffs is the product 
group with the second highest number of TBT notifications  and the highest number of TBT significant 
concerns. In  addition to these difficulties, many SVEs have poor access to information and an 
impossibility to comply with product standards and certification procedures due to their high costs.  
2.20.   Most of the companies in SVE countrie s are MSMEs,  and they face serious d ifficulties when 
trying to adapt to constant changes in private standards, TBT and other NTMs.  
2.7  Natural Disasters and their impact in trade  
2.21.   Exogenous sources of trade costs were also discussed, in particular the effects of natural 
disasters in trade. SVEs are vulnerable to natural disasters, in particular due to their geographical 
location, dependency on agriculture, among others. Damages to infrastructure due to natural 
disasters, in particular on roads and port infrastructure were recognized as increasing  significantly 
the costs of trade.  
2.22.   As the WTO Secretariat is currently working on the topic of natural disasters and their effect 
on trade, the group will seek further in-depth  discussions on this issue.   
 
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