High Transaction Costs are a Burden to Both SMEs and Consumers – Says CUTS International

Global and regional trade facilitation reforms should seek to address specific concerns that are not directly addressed by internal regulations which affect Small and Medium Enterprises (SMEs) as in the end, it is the consumer who pay for those transaction costs,’’ says Simon Ng’ona, Centre Coordinator, Consumer Unity and Trust Society (CUTS) International Lusaka.

“Unlike big companies who benefit from large economies of scale, the smaller ones are very sensitive to unit transaction cost, cannot diversify risk and are price takers. Big firms have better knowledge of the trading system and procedures and are better informed. Trade Facilitation under the WTO framework should aim to bring this missing information and to support SMEs in order to rebalance trade” said Ng’ona.

His remarks come a few days before the 9th Ministerial Conference of the WTO to be held in Bali, whose overall outcome looks bleak according to the WTO. However, expectations regarding a potential trade facilitation outcome are starting to build up.

And CUTS will on the sidelines of the WTO meeting organise an event will seek to identify what are the key issues of interest to consumers and SMEs in trade facilitation reforms in light of experience of WTO members, international cooperation agencies and other stakeholders.

He said tackling transaction costs was also seen as one of the most urgent priorities for developing countries, for they affect business and consumer prices alike.

He added that SMEs were the largest employer in both developed and developing countries and the biggest contributor to GDP in most of the countries in the latter. Facilitated flows of goods can improve the variety, quality and quantity of the offer, push down prices, and increase levels of competition thus benefitting consumers at all levels.

He said the trade facilitation agenda is mainly being pushed by the developed. “But realising the incremental gains resulting from an improved trade facilitation systems(ie road systems, border coordination issues and addressing of other administration barriers etc) in LDCs, it is clear that there is buy-in from LDCs and the intention now is to have a TF outcome which is beneficial to LDCs”.

“Two main issues will be on the table at Bali. Firstly are issues with section one of the trade facilitation proposals which mainly deal with rules governing the TF agreement. Zambia and other LDCs have concerns on a selected number of the rules. Second is with regards to section two of the TF agreement which mainly deals with Technical Assistance. This is where many LDCs are placing emphasis on as implementation of the TF agreement will require more Aid for Trade to be leveraged towards addressing trade facilitation related challenges,’’ he said.

Meanwhile WTO Director General Roberto Azevêdo has indicated that the world cannot be told that they have delivered.

According to the WTO website, the WTO DG said “the most intensive negotiations since July 2008 have allowed WTO members to come “very close to fully agreed texts” but final agreement remains elusive and over the last few days (ie in the run up to the MC9), they had stopped making tough political calls”.

And Ng’ona says that with such signals being transmitted from Geneva which indicate that the chances of a negotiated outcome in Bali is rather slim, it was important for LDCs to start thinking of a post-Bali work programme of the WTO.

To enable the LDCs to secure the expected deliverables, he said most international NGOs working on trade and development issues have advised LDCs to secure commitments on making the envisaged post-Bali work programme concrete and time-bound. “A timeframe for assessment of progress of the work programme should be clearly spelt out in the Bali outcome document”.