DevMode
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.

Comodo SSL