Trade is an important engine of economic growth and the
globalization of trade is a dominant feature of many national
economies today. The creation of an open and equitable trade
environment is a key goal, particularly in relation to economic
development and poverty reduction. Security issues clearly pose a
real threat to the stability, further development and equalization
of global trade. However, these security issues must be addressed
in such a way as to minimize the potentially negative side effects;
otherwise, a real, and perhaps intended, reward may be handed to
the very groups these measures are meant to defeat. For example,
new measures to reinforce security must not add unnecessary
procedures and costs to international trade transactions, as is the
case with cargoes destined for Palestine arriving via Israeli
ports. Furthermore, we must ensure that no specific country or
group is excluded from the international trading system through
these measures, as exclusion would undermine the basic foundation
of security, which is a society free from poverty and
degradation.
In the Name of Security
Security has always been a factor in international trade and many
mechanisms and procedures already exist to address this issue.
However, both the nature of the security threat and, more
importantly, the perception of the nature of that threat have
changed dramatically since the September 11, 2001 attacks. The
focus has shifted from the relatively minor threats to trade -
thefts, hijackings, terrorist interventions, etc. - to the much
more alarming threat where terrorists could use the mechanisms and
processes of trade as a weapon against the developed and, indeed,
the developing world. Although the nature and extent of this threat
is, fortunately, mostly speculative at present, it is essential to
understand the seriousness with which many countries approach this
issue. For example, in the name of security, Israel has imposed
strict restrictions on the movement of goods and people in and out
of the West Bank and Gaza. This has cost the Palestinian economy
millions of dollars and has impacted industries across the
Palestinian private sector, leading to an increase in unemployment
and poverty.
The Access and Movement Agreement (AMA) signed on November 15,
2005, between Israel and the Palestinians in the presence of U.S.
Secretary of State Condoleezza Rice to facilitate and enhance the
movement of people and goods to and from Gaza after the Israeli
disengagement, has not been implemented. The rigorous security
measures at the Karni and Erez crossings are still in place and
closures remain the status quo at most of crossing points,
especially after the Hamas win in the legislative elections in
January 2006. Israel's dramatic perception of security persists to
this day, in spite of the international pressure that has been
brought to bear on it, calling on it to ease the closures. That
said, the Israeli private sector is also suffering from the
closures and is losing millions of dollars in contracts.
On the other hand, the Paris Protocol has tied the Palestinian
economy to the Israeli economy - in favor of the latter - regarding
the control of exporting and importing gateways, an essential
element of the international supply chain. According to
Israeli-Palestinian economic agreements, Palestinian shippers are
to enjoy access to all trade-related facilities used by Israeli
shippers. However, neither before nor after the intifada in 2000
has this been the case. Therefore the Israeli barriers at border
crossings represent the biggest obstacle that Palestinian importers
have to contend with on a daily basis.
Leading trade-related organizations have taken several approaches
to addressing the issue over the past years. Intensive work is
currently under way to develop standards and systems to enhance the
security of the international trade transaction process. The task
is enormous, and there is the obvious danger that the immediate
responses to this threat (real or perceived) may not be consistent
with the longer-term development of an efficient trading system.
The Israeli-Palestinian mistrust is a living example of the
inefficiency of such a system. For example, a cargo to Palestine
can take a minimum of seven days to clear, compared with 24 hours
clearance for an Israel-destined cargo. This is yet another cost
that Palestinian traders have to pay because of Israel's
idiosyncrasies and misconception of "security."
The International Supply Chain
This security shock to the trade system presents an opportunity to
re-examine current trade procedures and processes and to speed up
the implementation of advanced technologies and approaches, such as
risk assessment based on advance information. The challenge is to
facilitate the majority of legitimate international cargo movements
as efficiently as possible, and to simultaneously deal effectively
with the small percentage that could pose a threat to security. To
achieve this, all parties in the trade transaction chain need to
work closely together.
Thus, international trade and security can best be assessed in the
context of the international supply chain. This has been the
approach of the United Nations Economic Commission for Europe
(UNECE) to trade facilitation and e-business analysis for many
years, and is also the approach adopted by the World Customs
Organization (WCO) Task Force on Security and Facilitation.
The international supply chain involves a potentially large number
of activities performed by a considerable number of different
parties. An activity may be carried out by different parties
depending on the terms of business, type of product, country and
market, etc, as well as on the methods of operation of the buyer
and seller. For a supply chain to operate efficiently, the
relationships and activities have to be clearly identified and
managed.
Within the international supply chain some 40 or more actors are
potentially involved. These may be categorized according to four
"actor types," namely:
* Customer: A party who acquires, by way of trade, goods or
services.
* Supplier: A party who provides, by way of trade, goods or
services.
* Authority: A statutory body existing within a jurisdiction
and within a specific area of responsibility that administers
legislation to regulate trade and/or monitors compliance with
existing legislation.
* Intermediary: A commercial party who provides services to
customers, suppliers or authorities within the international supply
chain.
Each type includes several possible actors or roles, some of which
are listed below:
Actor Types Possible Actors & Roles
Customer Buyer
Consignee
Payer
Importer
Supplier Consignor
Payee
Seller
Manufacturer
Exporter
Authority
Chamber of Commerce
Consular
Customs
Health
Agriculture
Environment
Nuclear/Atomic Energy
Intervention Board (EU)
Licensing
Receiving Authority (Port Authority)
Standards Institute
Intermediary
Bank/Financial Institution
Broker
Carrier
Credit Checking Company
Credit insurer
Commission Agent
Export Agent
Freight Forwarder
Import Agent
Insurer
Inspection Company
Receiving Authority
This large number of actors is a key factor in the vulnerability of
the supply chain to infiltration or interference for security
reasons. According to a study conducted by the Palestinian
Shippers' Council, the distortion and imbalance of any of the above
factors can negatively affect the supply chain and increase the
cost for one of the key actors - the customer, as is the case in
Gaza. Therefore, the recent closure of the crossings has
serious implications for Palestinian importers, who have to absorb
tens of millions of dollars in losses and pay additional storage
fees to the ports and delay fees to the shipping companies, all in
the name of security. By the second week of July 2007, the
volume of extra expenses in storage and demurrage fees was
estimated at around $3 million. The study also indicated that more
than 1,600 containers worth over $130 million are presently held up
at the freight terminals and warehouses in the
ports.
The economic situation in Gaza is also affected by bans on exports
and on imports of raw materials for industry production. This will
exacerbate Gaza's high poverty rate (85% of households currently
live under the poverty line) and unemployment, which stands at 65%,
has sharply depressed their purchasing power.
These factors, among other impediments, have impacted the operation
and growth of private sector enterprises. Currently 85% of
establishments have shut down and the rest are operating with 50%
capacity, leading to the laying off of more than 35,000 workers. If
this is the conception of the security management system (SMS) that
is supposed to achieve sound performance and commitment from all
parties involved, then the world in general, and Israel in
particular, have definitely a distorted understanding of the system
intended to provide order and consistency through the allocation of
resources; the assignment of responsibilities; an ongoing
evaluation of practices, procedures and processes; and an active
utilization of inputs from security authorities and other
stakeholders in the supply chain.
Aiming for Security and Trade Facilitation
Setting standards in the area of security and having those
standards implemented in the near future will be an enormous task
that will require considerable resources, and huge sums of money
have already been invested in airports and seaports all around the
world. The international community needs to decide whether it wants
global standards for the security of goods in transit from country
of origin to country of consumption and, if so, whether it is ready
to pay the considerable cost associated therewith. Inability to
agree on global standards is likely to increase the overall cost of
implementation as well as reduce its effectiveness. Therefore,
Israel must understand that its so-called security measures should
not be funded by Palestinian traders but by its national budget and
the Israeli taxpayers. We also have to bear in mind that the
majority of imported goods destined for Palestine go through
international ports that apply the SMS.
On the other hand, the implementation of security standards that
enable the parties in the supply chain to demonstrate their
compliance should provide an excellent opportunity for customs
administrations to grant trade facilitation benefits to the parties
in such certified supply chains. This could include green channel
cargo clearance (nothing-to-declare type of channel) and the
implementation of the integrated seamless transaction concept
whereby the export declaration data may be used as the import
declaration data. The objective should be that the costs associated
with the implementation of security measures would be more than
compensated for by the trade facilitation benefits. A concerted
effort among the relevant organizations involved in international
trade facilitation and standards will be required to ensure that
the developed standards are effective, and that they achieve the
dual aim of enhancing both security and trade facilitation for all
countries.
References:
1. United Nations Conference on Trade and Development
(UNCTAD)
2. Palestinian Shipping Council reports.