Chapter 9 Assessing trade facilitation implementation in the era of e-commerce: a comparative analysis of Jordan, Oman and Kong,

Taleb Awad-Warrad, Houcine Boughanmi and Youwon Hwang* Abstract

The emergence of e-commerce is driving important changes in the ways of conducting international trade. It has become clear that improvements in trade facilitation implementation should be supported by electronic systems. Through a comparative study of a number of reports issued by international organizations – the International Telecommunication Union (ITU), the Organisation for Economic Co-operation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD) and the World – on topics of e-commerce, logistics and trade facilitation, we examined the status and performance of Jordan, Oman and , China. Based on this analysis, Hong Kong, China, shows one of the best practices of modern trade facilitation and customs, and we found that governmental willingness is influential in expediting trade facilitation provisions. Jordan and Oman recently made trade reforms to improve trade facilitation, but they still need to bridge the gap between policy and actual practice in all governmental organizations in terms of trade facilitation and e-commerce, as well as build citizens’ capacity. By improving the implementation of trade facilitation measures and increasing e-commerce capacity as Hong Kong, China, has done, Jordan and Oman will succeed through trade prosperity driven by the global digital economy.

* The contents of this chapter are the sole responsibility of the authors and are not meant to represent the position or opinions of the WTO or its members. 196 CHAPTER 9

Introduction place digitally, while the delivery process can be either online or When e-commerce crosses countries’ offline. E-commerce can facilitate the borders, trade facilitation becomes one sales of goods and services whether of the most critical issues to global domestically or across borders consumers, because the status of through reducing the final costs of trade facilitation implementation in transactions and enabling closer each country significantly affects the customer relations among different cost of trade. Improving the efficiency actors from , households of trade logistics is a key element to and governments. However, to reducing trade costs and promoting succeed on the e-commerce front, global and regional trade. Trade costs it is crucial to have a well-developed are still high despite the reduction in logistics system, that is, smoothly trade barriers and improvement of working road transport, ports, postal communication brought by the digital delivery services and customs, to help technology. Trade costs are estimated ensure effective order fulfilment. Trade to be equivalent to a 170 per cent logistics, including trade facilitation, tariff on international trade globally and is one of the seven policy areas that, 231 per cent for developing countries according to the United Nations (WTO, 2016c). Trade facilitation has Conference on Trade and Development been referred to as the “the grease (UNCTAD), are essential to help create in the wheel” of international trade, an environment that is more conducive as it focuses on reducing all the to reaping the benefits of e-commerce transactions costs associated with (UNCTAD, 2017). the enforcement, regulation and administration of trade policies A large number of studies found a (Staples, 2002). Available figures positive relationship between improving indicate that implementing the the trade facilitation environment and multilateral Trade Facilitation international trade flows. According to Agreement (TFA) would reduce trade Anderson and Marcouiller (2002), a cost by an average of 14.5 per cent 10 per cent increase in a country’s (Hillberry and Zhang, 2015) and index of transparency and impartiality increase global export between leads to a 5 per cent increase in its US$ 750 billion and US$ 1 trillion imports. Hoekman and Nicita (2008) per annum (WTO, 2016c). Developing found that improvements in logistics countries gain proportionally more from performance and trade facilitation have trade facilitation as they have more a greater effect on increasing trade for room for improvement. a country than lowering tariffs. According to gravity trade model, E-commerce and reducing transaction costs related to trade facilitation trade, by changing public policies and improving regulations and procedures Any sales activity, whether conducted for import and export supply chains, is domestically or internationally, is critical for enabling a country to expand composed of a set of processes: its trade opportunities. ordering, paying, shipping and delivering. A transaction is considered The emergence of e-commerce is to be e-commerce if the ordering takes driving the huge movement in the CHAPTER 9 197 international trade arena. Estimated the provision of efficient infrastructure global sales through e-commerce of transportation and logistics (Jordan are expected to surpass US$ 2.3 Investment Commission, 2018). Jordan trillion (Gain, 2017). In order to identified digital development as a high provide e-commerce-based services, priority for the country’s social and other technologies, such as economic development (Harake, telecommunications, internet, logistics, 2019). The launch of 4G LTE services transportation and electronic systems, in Jordan has led to a growth in data should be available in advance. revenues for mobile operators (De Therefore, it is important to identify Rosbo, 2020). whether current infrastructures are available to support e-commerce and Revenue in the e-commerce market trade facilitation implementation in the in Jordan is expected to reach selected economies – Jordan, Oman US$ 525 million in 2020, and the and Hong Kong, China – for the number of e-commerce users will comparative study. be around 3.3 million (Statista, 2020b). Jordan became one of the first Logistics, trade facilitation countries in the MENA region to and e-commerce enact laws regarding information and communications technology Jordan (ICT) related transactions following Transportation infrastructure in Jordan the spread of internet use. The has been evaluated as comparatively Electronic Transaction Law (ETL), well-developed among the Middle East drafted first in 2001, covers a wide and North Africa area of internet (MENA) region transactions including (Jordan Investment “Improving computer information Commission, 2018). the efficiency transactions, general Thanks to Jordan’s sale of goods and strategic location, the of trade logistics services via the internet transport sector is a key element and other inter-party contributed around to reducing transactions conducted 10 per cent of the GDP trade costs online (Yaseen, 2016). in Jordan, and employed and promoting Jordan and the United about 7.2 per cent of States signed the Joint the work force (Harake, global and Statement on Electronic 2019). The annual regional trade.” Commerce in 2000. growth of the However, a clear set of transportation and regulations and laws logistics sector is estimated to covering e-commerce transactions has increase from 5 to 6 per cent by 2030 not been prepared yet. (Jordan Investment Commission, 2018). In Jordan, the air transport In 2019, the Cabinet decided to infrastructure and connectivity is impose customs fees on online among the highest in the MENA region purchases of foreign clothes, shoes, (World Economic Forum, 2017). foodstuffs and children’s toys over Jordan’s abundance of electricity and JOD 200 per month, with an annual telecommunications services support cap of JOD 500 (Jordan Post, 2019). 198 CHAPTER 9

The Jordanian people were concerned that, in its five-year development plan, that imposing higher customs fees Oman is expecting to invest OMR 6 on e-commerce commodities might billion in building and expanding have a negative effect on online trade. airports and seaports in three main Still, Jordan Post referred the hubs: Salalah, Sohar and Duqm). The establishment of a special centre full operation of these three main ports to deal with e-commerce items and is expected to reduce trade cost by 10 took the first step to develop an per cent (Al Shammakhi, Akintola and electronic tracking system for serving Boughanmi, 2018). The results show the global market and its customers that trade facilitation improvement will (Jordan Post, 2019). have a positive gain in terms of GDP (an increase of 4.3 per cent) and Oman (an increase of almost The logistics sector plays a vital role in 1.3 per cent) (Al Shammakhi, Oman’s modern economy and is Akintola and Boughanmi, 2018). viewed not only as a core sector but also as the backbone of the economy, The Omani government issued the facilitating the growth of many other Electronic Transactions Law in 2008, sectors. With revenues amounting to which covered the fast development of US$ 7.87 billion in 2013 (Ithraa, 2016), technology and the internet in the sector contributed 4.9 per cent to processing operations and concluding Oman’s GDP in 2015 (Ithraa, 2016). transactions locally and internationally The logistics is expected to (Al Barwani, 2018). Furthermore, the grow at an annual growth rate of 7 per government established the Information cent between 2015 and 2020, Technology Authority (ITA) to ensure enhanced by government investments proper implementation of the in ports (Duqm and Sohar), free zones provisions of the Law. ITA indicated (Sohar, Duqm, Salalah and Al that the development of e-commerce Mazunah), industrial estates, roads, depends on policies and laws, as well airports (Sohar, Muscat, Salalah, as access to goods and services via Adam and Duqm) and the rail network. the internet and logistics services, These investments would facilitate among other factors (Times of Oman, trade with neighbouring Gulf 2019). Oman’s Ministry of Commerce Cooperation Council countries and and Industry announced new also open a window with Asia and regulations that will be issued to Sub-Saharan Africa as trade maintain the rights and the confidence destinations (Ithraa, 2016). of e-traders (Al Nasseri, 2020). The revenue in the e-commerce market in An empirical assessment was Oman will be expected to reach US$ conducted to look at the probable 800 million in 2023 (Statista, 2020c). economy-wide and sectoral impacts of improving efficiency in the logistic Hong Kong, China sector in Oman (Al Shammakhi, The Hong Kong Trade Development Akintola and Boughanmi, 2018). The Council (HKTDC) states that trading assessment considers a scenario of and logistics accounted for 22 per cent trade facilitation whereby Oman of the city’s GDP and provided improves its trade facilitation by 10 per 727,500 jobs in 2017 (2019). Also, cent. This scenario is built on the fact the logistics industry alone contributed CHAPTER 9 199

3.2 per cent to the GDP and 180,600 different forms of digital payment jobs in same year (HKTDC Research, (Ince, 2018). 2019). E-commerce revenue in Hong Kong, China, is estimated to be Comparative analysis US$ 5,511 million in 2020, and the number of e-commerce users will be In order to understand the e-commerce 5.7 million in 2020 (Statista, 2020a). environment and trade facilitation “Given the externally-oriented and implementation in each country, open nature of Hong Kong’s economy, international organizations have the development of international trade developed several indices. UNCTAD, policy in and through the WTO is of for example, developed the B2C vital importance to Hong Kong E-commerce Index to measure a because of the possible impact on country’s preparedness to support external trade, and its knock-on effect online . The UNCTAD B2C on industry and employment” (GovHK, E-commerce Index includes various 2016). As a matter of fact, Hong Kong, indicators, such as share of individuals China, became the first member to using the internet, share of individuals ratify the TFA (WTO, 2015a). Hong with an account, secure internet Kong, China, offers customs servers and postal reliability. The 2019 procedures that are ranking of Jordan, among the easiest and Oman and Hong Kong, fastest worldwide, with China, were 87th, 59th virtually all customs “The emergence and 15th, respectively, declarations and related of e-commerce is among 152 economies documents processed driving important (Table 1). Jordan’s score electronically in its changes in on the B2C E-commerce entirely free port. the ways of Index shows that it conducting needs to improve in all Doing business in indicators, whereas Hong Kong, China, international Oman received relatively is beneficial to trade.” good scores except in e-commerce store the category of secure owners in particular internet servers. Hong because it has access to the planet’s Kong, China, received better scores leading manufacturing centre: for all indicators than did Jordan and (Yatprom, 2019). Oman. The percentages of internet The , users in Jordan, Oman and Hong China, first enacted the Electronic Kong, China, were reported as 85.3 Transactions Ordinance to provide per cent, 78.5 per cent, and 89.3 per a clear legal framework for the conduct cent in other sources (Internet World of e-business in 2001. The ordinance Stats, 2020). was mostly focused on the use of electronic records and electronic and On the ICT Development Index 2017, digital signatures. The Commerce and which reflects ICT access, ICT use Economic has and ICT skills, Jordan, Oman and taken responsibility for the operation Hong Kong, China, were ranked as of e-commerce, and the Hong Kong 70th, 62th and 6th, respectively, Monetary Authority has ensured among 176 economies (ITU, 2017) 200 CHAPTER 9

Table 1: UNCTAD B2C E-commerce Index, Jordan, Oman and Hong Kong, China

Universal Share of Share of 2019 B2C Secure Postal Union individuals individuals E-Commerce internet (UPU) postal using the with an rank servers reliability internet account score Hong Kong, 15 89 95 85 92 China Oman 59 80 74 47 72 Jordan 87 67 42 43 44

Source: UNCTAD (2019).

(Table 2). ICT access indicators the specific aspect related with trade, include the data of the available ICT the ’s Logistic Performance infrastructure and individuals’ access Index (LPI) was used to compare to basic ICTs. ICT usage indicators the performance of the three reflect ICT intensity and usage. Also, economies. Jordan, Oman and Hong ICT skills were determined by years of Kong, China, ranked 84th, 43th and schooling and secondary and tertiary 12th, respectively, out of 160 enrolment ratios. In the 2017 ICT economies in the LPI Index (Table 3). Development Sub-Index, Hong Kong, Jordan’s ranking is in the middle range, China, was ranked higher than Jordan while Oman ranked 3rd in the MENA and Oman in all three subcategories. region in 2019 following the United However, although Oman had better Arab Emirates (UAE) and Qatar. As ranking than Jordan in the main index, per the LPI Index, Hong Kong, China, Jordan scored better than Oman in the stands as the world’s top performer in Sub-Index of ICT use and ICT skills. logistics, particularly in the categories of international shipments and Both the UNCTAD B2C E-commerce customs. The World Bank indicates Index and the ICT Development Index that global logistics have changed help us to understand the general level as a result of the development of of support for e-commerce, but they e-commerce, use of technology, new cannot indicate the nature of the risks (cybersecurity), etc. Six indicators relationship between e-commerce and in the LPI Index are closely related to trade in the three countries. To study ICT development, however, they have

Table 2: ICT Development Index, Jordan, Oman and Hong Kong, China

2017 ICT 2017 ICT 2017 ICT 2017 ICT use Development access skills sub-index Index ranking sub-index sub-index Hong Kong, 6th 3rd 10th 32th China Oman 62th 48th 55th 90th Jordan 70th 83th 54th 77th

Source: ITU (2017). CHAPTER 9 201

Table 3: World Bank LPI indicator ranking 2018 of the MENA Region, Jordan, Oman and Hong Kong, China

Hong Kong, MENA Jordan Oman China Indicators Score Rank Score Rank Score Rank Score Rank Overall LPI 2.78 - 2.69 84 3.20 43 3.92 12 Customs 2.54 - 2.49 88 2.87 44 3.81 9 Infrastructure 2.76 - 2.72 70 3.16 39 3.97 15 International 2.73 - 2.44 119 3.30 36 3.77 8 shipments Logistics 2.68 - 2.55 93 3.05 49 3.93 12 competence Tracking and 2.79 - 2.77 84 2.97 66 3.92 15 tracing Timeliness 3.18 - 3.18 76 3.80 29 4.14 15

Source: World Bank (https://lpi.worldbank.org/international/global). a limited ability to explain the effect of and time to import are declining in all e-commerce on logistics. three economies, but not as much as cost to export in Hong Kong, China. It According to the Doing Business can be inferred that the recent report Trading Across Borders, both reduction of cross-border trade cost the cost of and the time to export and and time was supported by electronic import are decreasing in Jordan, Oman infrastructure. and Hong Kong, China (Table 4). The report shows that Hong Kong, China, To understand the trade facilitation takes only 2 hours of procedures to efforts in Jordan, Oman and Hong export and 20 hours to import. Cost Kong, China, OECD Trade Facilitation

Table 4: Changes in cost and time to export and import in Jordan, Oman and Hong Kong, China (2013, 2016 and 2019)

Indicator Year Jordan Oman Hong Kong, China 2013 2016 2019 2013 2016 2019 2013 2016 2019 Cost to export 825 577 231 745 630 386 575 557 12 (US$ per container) Average time 312 38 59 240 91 59 120 22 2 to export (13 days) (10 days) (5 days) (hours) Cost to import 1,335 606 396 680 674 518 565 619 323 (US$ per container) Average time 360 141 134 216 101 77 120 22 20 to import (15 days) (9 days) (5 days) (hours)

Source: World Bank, Doing Business Report (2013, 2016, 2019). 202 CHAPTER 9

Figure 1: Trade facilitation performance by OECD indicators in Jordan, Oman, MENA and Hong Kong, China, 2019

Governance and impartiality

Procedures

Source: OECD, 2019.

Indicators and the OECD “Compare and Oman in most subcategories your country: trade facilitation” tool related to e-commerce, with the was also used for the analysis. The exceptions of “Processing system- Average Trade Facilitation Performance electronic payment” and “ITC quality”. scores of Jordan and Oman are 0.93 Both Jordan and Oman got the best and 0.97, respectively out of 2, while score in “Customs website” , “Online Hong Kong, China’s score is 1.72 feedback” and “ITC quality”. Jordan is (Figure 1). Hong Kong, China, working better than Oman in received the highest score, 2, on “Electronic import declarations” and the “Advance rulings” indicator, and “Full-time automated processing”. it received high scores on “Fees and Oman performs better than Jordan charges” and “Documents”. By in “Information on fees”, “Electronic examining 11 OECD indicators, pre-arrival processing”, “Electronic we found that all subcategories payment”, “Processing system- of “Automation” and parts of Sub- electronic system”, “Automated risk categories of “Information availability”, management” and “External data “Fees and charges” and “External harmonisation”. The comparative border agency co-operation” have a analysis of subcategories of OECD close relationship with internet and ICT Trade Facilitation Indicators clearly technology. Hong Kong, China, shows shows the specific areas in which better performance than both Jordan Jordan, Oman and Hong Kong, China, CHAPTER 9 203 need to make improvements regarding Conclusion e-commerce infrastructure for trade. The emergence of e-commerce Recently, the governments of Jordan is driving important changes in the and Oman introduced a number of ways of conducting international trade reforms to address some of the trade. We can say that every single issues outlined above and to improve improvement of trade facilitation trade facilitation. For example, Jordan implementation should be supported also implemented the UNCTAD by an electronic system. In order Automated System for Customs to provide e-commerce-based Data (ASYCUDA) to administer services, other technologies, such customs’ clearance operations as telecommunications, internet, (WTO, 2015b). The WTO stated logistics, transportation and electronic that Jordan’s customs practices lead systems, should be implemented in the Middle East in the implementation advance. Fortunately, the statistics of a “single window” system (WTO, show that Jordan and Oman have 2015a). In addition, Jordan makes better infrastructures than surrounding trade-related information available countries. Jordan and Oman issued in a transparent manner. Jordan laws to oversee electronic transactions completed the implementation of early on, and trading activities through UNCTAD ASYCUDA (Automated e-commerce have been increasing in System for Customs Data), both countries. computerization of customs procedures in 2010, which has Through a comparative study in resulted in reduced declaration terms of e-commerce, logistics and processing time and increased trade facilitation, we have reviewed accuracy of verifying declarations the status and performance of Jordan, without additional manpower Oman, and Hong Kong, China. (UNCTAD, 2011). Likewise, in 2016, The study showed that Hong Kong, Oman transferred all cargo operations China, implemented modern trade from Sultan Qaboos port to the more facilitation measures compatible modern Sohar port. This will reduce with its reputation of being the time for border compliance for both world’s best open market. Hong exporters and importers. In 2017, Kong, China, provides the easiest Oman also introduced a new single and fastest customs procedures in window, a one-stop facility, to allow the world with virtually all customs for fast electronic clearance of goods. declarations and related documents The empirical assessment indicates processed electronically in its free that other countries in the region can port. Also, comparisons of data from be affected by trade facilitation the UNCTAD B2C E-commerce Index, improvement in Oman (Al Shammakhi, the ITU ICT Development Index, the Akintola and Boughanmi, 2018). Both World Bank LPI and the OECD Trade Jordan and Oman are making efforts Facilitation Indicators showed that to improve trade facilitation Jordan and Oman need to prepare a implementation with more advanced better e-commerce environment and to systems and ICT development in order work on several of the trade facilitation to meet the rapid changes of global indicators in order to catch up with the trade environment. performance of Hong Kong, China. 204 CHAPTER 9

It is important to understand the goal resources, such as water and oil (CIA, of Hong Kong, China, of free trade 2019). Jordan had a budget deficit of influences in all areas related to approximately US$ 9.78 billion in 2017, customs, transportation, logistics and the current account balance is and infrastructure. As the case of estimated to minus 8 per cent of GDP Hong Kong, China, shows, in 2020 (World Bank, 2019a). governmental willingness is influential in expediting each trade facilitation Since 2000, Jordan has been provision. Jordan and Oman need to expanding foreign trade in order to bridge the gap between policy and attract foreign investment (CIA, 2019). actual practice in all governmental Recently, Jordan revitalized trade with organizations in terms of trade its neighbours, especially Iraq, Syria facilitation and e-commerce. Oman’s and Iraq, where crises disrupted major ITA calls attention to improve citizens’ trade routes (World Bank, 2019b). The e-commerce skills through awareness percentages of exports and imports and training programs (Times of Oman, were 34.2 per cent and 58 per cent of 2019). It means that building citizens’ GDP, respectively, in 2017 (CIA, capacity is also an important factor of 2019). The simple average tariff rate e-commerce along with government was 9.9 per cent, and the final bound intervention. By improving the tariff rate went up to 16.3 per cent in implementation of trade facilitation 2017 (WTO, 2016a). Jordan’s main measures and increasing e-commerce exported products are garments, capacity, Jordan and Oman can better agricultural products, potassic prepare for trade prosperity driven by fertilisers, medications, natural calcium the global digital economy. phosphates and so on. Jordan’s top imports are agricultural products (22.3 Annex 1 per cent), fuels and mining products (15.8 per cent) and manufactures Brief background on the (57.9 per cent), according to WTO economies of Jordan, Oman statistics (WTO, 2018). and Hong Kong, China, and their trade patterns Jordan’s export percentages by destination are the (21.5 Jordan per cent), the Kingdom of Jordan was reclassified from an (11.3 per cent), Iraq (7.3 per cent), upper-middle-income to a lower-middle India (6.9 per cent) and the United income country by the World Bank in Arab Emirates (UAE) (4.7 per cent). 2017 (World Bank, 2017). Unlike other The most imports come from the countries in the Middle East, Jordan’s European Union (28) (21.9 per cent), economy is not oil-dependent. Hence, China (13.5 per cent), the Kingdom of Jordan mainly consumes the imported Saudi Arabia (13.5 per cent), the energy that accounts for 25-30 per United States (9.8 per cent) and the cent of its imports (CIA, 2019). UAE (4.9 per cent). The statistics Jordan’s economy is one of the inform that Europe and China supply in smallest among Middle Eastern total around 35.4 per cent of Jordan’s countries, and it heavily relies on total imports. Also, the Kingdom of foreign assistance due to the Saudi Arabia is Jordan’s biggest insufficient supplies of natural trading partner among Gulf countries. CHAPTER 9 205

Oman (45.1 per cent), the European Union As classified by the World Bank, Oman (28) (7.8 per cent), China (4.8 per is considered to be an upper-middle cent) and India (4.8 per cent). Within income country with a relatively small the GCC, the UAE is Oman’s biggest oil-exporting sector compared to its trading partner, supplying around GCC neighbours. However, the 45 per cent of Oman’s imports. hydrocarbon sector (oil and gas) The European Union and Central continues to be the main driver of the Asia supply around 11 per cent of economy, accounting for 30 per cent Oman’s total imports (WITS, 2015). of GDP, 73 per cent of government revenues and 53 per cent of Hong Kong, China merchandise exports in 2017 (CBO, The economy of Hong Kong, China, 2017). Despite the recovery of oil depends heavily on the service industry prices and fiscal consolidation, Oman and trade due to the lack of many still had a budget deficit amounting to natural resources. Hong Kong, China, US$ 9.1 billion, or approximately 13 is dedicated to providing the best per cent of GDP in 2017 (CBO, 2017). trade-related services to international The government invigorated its businesses and is a great example to economic diversification policy in study the trade facilitation experience. recent years by improving the Therefore, Hong Kong, China, has investment climate, promoting tourism earned the reputation of being the and enacting laws to encourage world’s freest economy (Heritage investment in the logistics sectors Foundation, 2019). The economy of and trade-related activities. Hong Kong, China, is classified as high-income by the World Bank (World Over the years, Oman has opened Bank, 2020). In addition, Hong Kong, up to international trade to boost its China, was the first member of the economy. In 2015, the value of exports WTO that decided to ratify the TFA. and imports taken together equalled 108.5 per cent of GDP (WITS, 2015). In 2017, the total value of trade The average applied tariff rate was exceeded the GDP in Hong Kong, 5.5 per cent while its bound tariff China, and the percentage of the value stood at 14.01 per cent (WTO, 2016a). of trade over GDP was 189.2 per cent Oman’s main exports are crude (WTO, 2018). Hong Kong, China, has petroleum, gas, refined petroleum, no tariff on imported goods and levies nitrogenous fertilizers and acyclic excise duties on only four products: alcohols. Its top imports are food hard alcohol, tobacco, oil and methyl and agricultural products (12.9 per alcohol. The major exported products cent), fuels and mining products are electronic integrated circuits, gold (13.4 per cent) and manufactures and radio-telephony electrical (73 per cent) (WTO, 2018). apparatus. Trade in commercial services also accounts for a huge The top export destinations of Oman portion of trade in Hong Kong, China. are China (43.6 per cent), the UAE Main imported goods are electronic (7.5 per cent), India (3.8 per cent), integrated circuits, radio-telephony (3.6 per cent) and transmission tools, line telephony the United States (3.3 per cent). The electrical apparatus, gold and main imports originate from the UAE automatic data-processing machines. 206 CHAPTER 9

The main export destinations of Hong (7.2 per cent), the European Union (28) Kong, China, are mainland China (54.1 (6.5 per cent), (6.4 per per cent), the European Union (28) cent), (6.1 per cent) and Other (8.7 per cent), the United States (7.7 (29.3 per cent). Because Hong Kong, per cent), India (3.8 per cent), Japan China, is the world’s best trade hub, (3 per cent) and Other (22.6 per cent). many other countries engage in trade The high-ranked imports originate from with Hong Kong besides main trade China (44.6 per cent), Chinese Taipei partner countries. CHAPTER 9 207

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World Trade Organization (WTO) (2015a), Trade Policy Review: Report by Jordan, WT/ TPR/G/325. 210 CHAPTER 9: COMMENTS

Comments

ALEXANDROS SARRIS*

Electronic commerce and digital trade The efforts of countries to improve have transformed both the nature of trade facilitation is based on the trade as well as the nature of trade perceptions that trade facilitation facilitation in the last three decades. reduces trade costs (Moïsé, Orliac Digitalization has increased the scale, and Minot, 2011) and that lower trade scope and speed of trade (Lopez- costs increase trade (Hornok and Gonzalez and Ferencz, 2018). On Koren, 2015; Martincus, Carballo and scale, digitalization enables firms to Graziano, 2015). Moïsé, Orliac and reach larger numbers of digitally Minot (2011) estimate that the trade connected customers across the globe cost reduction potential of all trade and facilitates outsourcing. On scope, facilitation measures could reach digitalization allows many services 10 per cent of trade values. such as warehousing, logistics, e-payments, etc. to become more Trade facilitation via digitalization is tradable and be combined with goods affected by the degree of digital trade. Finally, trading has become economy maturity, which in turn faster, especially for services, but also depends on communications and enabling goods to move faster across digital infrastructure, such as internet borders by lowering the cost of coverage of the area of the country, customs clearance and processing speed of connections and the of relevant paperwork. The latter are proportion of the population who parts of what is commonly defined are knowledgeable users of digital as trade facilitation. platforms and the internet. Countries,

Table 1: Ratio of trade facilitation indicator value in 2019 to that of 2013 in the three economies analysed in Chapter 9

Jordan Oman Hong Kong, China

Cost to export 0.28 0.52 0.019 (US$ per container) Average time to export 0.189 0.246 0.034 (hours) Cost to import 0.297 0.762 0.572 (US$ per container) Average time to import 0.372 0.356 0.167 (hours)

Source: Computed from Chapter 9, Table 1.

* The contents of this commentary are the sole responsibility of the author and are not meant to represent the position or opinions of the WTO or its members. CHAPTER 9: COMMENTS 211

Table 2: Logistic Performance Index rankings of top 10 and bottom 10 economies in 2007 and 2018 and world competitiveness report rankings 2019

World Bank world LPI index ranking LPI index ranking Top 10 in 2007 competitiveness in 2007 in 2018 ranking 2019 Singapore 1 7 1 2 9 4 3 1 7 4 2 8 Austria 5 4 21 Japan 6 5 6 7 13 5 Hong Kong, China 8 12 3 United Kingdom 9 9 9 10 20 14 World Bank world LPI index ranking LPI index ranking Bottom 10 in 2007 competitiveness in 2007 in 2018 ranking 2019 Guyana 141 132 * Chad 142 123 141 Niger 143 157 * Sierra Leone 144 156 * Djibouti 145 90 * Tajikistan 146 134 104 Myanmar 147 137 * Rwanda 148 57 100 Timor-Leste 149 * * Afghanistan 150 160 *

Source: Computed from World Bank Excel sheet on international LPI from 2007 to 2018; World Bank, Doing Business 2020. * Not reported. in turn, are uneven with respect to Warrad, Boughanmi and Hwang, who digital economy maturity, with examine the improvements in trade developed countries more advanced logistics performance, in the form of than developing countries. cost and time to export, between 2013 and 2019 in the three economies they The heterogeneity of countries’ study, two of which are high-income digital maturity suggests that efforts economies (Hong Kong, China; to improve digital infrastructure and Oman), while the other (Jordan) is digital connectivity will produce considered as upper middle income. uneven results, with advanced In Table 1, we use data from Chapter economies achieving faster and 9, Table 1, to indicate the ratio of the larger improvements in trade facilitation relevant indicator in 2019 to that of than developing countries. This is 2013. It is notable that all ratios are documented in Chapter 9 by Awad- smaller than 1, with some being much 212 CHAPTER 9: COMMENTS

lower than 1, suggesting large trade competitiveness rankings for both facilitation improvements in a developed and developing economies, short period. and this suggests that competitiveness and trade facilitation go together. The point of the above is to indicate that advanced economies are likely An aspect of the new international to achieve faster trade facilitation economy is the proliferation of value decline than less developed ones. chains, with products and services Hence trade costs are likely to decline that are intermediate inputs to a final faster in developed product going through economies. This is likely many countries or many to give these economies “Digitalization times through the a further competitive has increased borders of one country advantage compared before reaching the final to developing ones. the scale, scope assembly. This suggests and speed that the longer the To explore this idea, of trade.” product value chain the Table 2 indicates the higher the proportion of Logistics Performance final product value that Index (LPI) compiled by the World can be affected by border measures. Bank for the top 10 (in LPI score) and It follows that the reduction in trade bottom 10 economies in 2007, and costs, via increases in efficiency of their ranking in 2018. It appears that trade procedures, could expand the the top 10 in LPI 2007 largely kept length of a given value chain, by their relative position in 2018. Similarly reducing the costs of extra steps in the for the bottom 10 in 2007 (out of 150), chain. This in turn could reduce their rankings in 2018 (among 160 obstacles for many small and medium- economies) apart from two economies size enterprises to enter some (Rwanda and Djibouti) seem to segments of the value chain, and have stayed near the bottom. The hence enlarge the production and table also exhibits the 2019 world trade opportunities for such firms. competitiveness rankings for the Countries with large improvements economies as reported by the World in trade facilitation will thus have Bank. It appears that the LPI rankings more chances of entering long global are related to the world value chains. CHAPTER 9: COMMENTS 213

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