How Technology Can Help Beat COVID-19's Cross-Border Trade Disruptions

Pamela Ugaz is an Economic Affairs Officer at UNCTAD. This article has been republished with permission from Tax Prism magazine, a publication of the Kenya School of Revenue Administration. This article represents the personal views of the authors only, not necessarily the views of the UNCTAD Secretariat or member States. The author accepts sole responsibility for any errors.

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The widespread lockdown imposed across the globe has slowed down economic activities, in particular cross-border trade. Export restrictions, the proliferation of border controls and constraints to the free movement of people have triggered crowded border posts, long truck queues, congested warehouses and several delays.

This article explores how tech-related trade facilitation measures are helping border agencies in developing countries to safeguard public health while increasing cross-border trade efficiency.

What are the COVID-19 Challenges to Cross-Border Trade?

Given the high degree of uncertainty about the duration and severity of the pandemic, the world is plunging into recession, driving a slump in cross-border trade. UNCTAD estimates a decline of 26.9% for global trade in the second quarter of 2020.

In an attempt to halt the spread of the pandemic, many governments have directed traffic through fewer border-crossings, conducting at-the-border health checks, quarantining drivers, or reintroducing border controls. This additional time spent in transit for goods leads to more costly trade. The WTO reckons that this rise in trade costs could be equivalent to the imposition of up to a 3.4% global tariff.

Restrictions on the free movement of transport workers have disrupted land, sea and air cargo, affecting international transport and logistics services as well as trade routes. The International Air Transport Association and the Universal Postal Union underscore that the cancellation of more than a million passenger flights along with administrative and regulatory bottlenecks and quarantine restrictions prevented air cargo from keeping pace with e-commerce demand.

What are Tech-Savvy Measures Available to Facilitate Trade?

Social distancing and lockdown policies have increased the urgency of developing countries to catch up in the implementation of tech-oriented measures contained in the WTO Trade Facilitation Agreement (TFA). Therefore, developing countries have accelerated the implementation of the following breakthroughs:

a)    Acceptance of electronic copies

Customs and other border agencies have swiftly adopted the exchange of electronic trade-related documents instead of physical copies to boost procedurual efficiency while maintaining social distancing. To illustrate, South Africa has relaxed requirements for certain commercial documents, accepting electronic documentation subject to regularization, where necessary.

Regarding Sanitary and Phytosanitary (SPS) certificates, eleven WTO Members reported accepting scanned documents instead of originals. At the same time, six have implemented e-signatures, and three have set up dedicated websites for the verification of documents. Some countries go even beyond this, i.e. the United Arab Emirates are developing electronic health certificates and agreeing to verification procedures of certificates to reduce the use of paper health certificates.

b)    Pre-arrival processing

Governments allow traders to lodge import documents and other required information electronically before the arrival of goods. Enabling the pre-assessment of such documents facilitates the identification, prioritization and coordination of import procedures, i.e. Cameroon and members of South African Development Community (SADC).

c)     Electronic payments

Given the high risk in the circulation of physical currency, border agencies have entirely shifted to electronic payment for duties, taxes, fees and charges incurred upon importation and exportation. This measure does not only prevent handling money, but it also limits that traders are physically visiting banks or government agencies. Jamaica Customs Agency, for example, has recommended carrying-out all customs related payments through the e-payment system developed by the UNCTAD Automated System for Customs Data (ASYCUDA) Programme.

d)    Single Window for Trade

An Electronic Single Window for Trade also plays an essential role in speeding up contactless border procedures, making available automated processing of trade declarations. Some systems deploy blockchain technology for electronic certificates such as rules of origin or SPS. As detailed in a recent WTO report, others employ artificial intelligence and big data to develop algorithms that assist different authorities in undertaking risk management of specific consignments.

According to the OECD, many economies across Europe, Central Asia, North America, Asia-Pacific, Latin America and the Caribbean already have Single Windows for Trade in place along with other digital mechanisms, limiting physical interaction (see Figure 1). After the COVID-19 outbreak, these countries have increased their use by making available more targeted user manuals for both border officers and traders. 

Developing countries are progressively implementing this measure as well. Rwanda has urged stakeholders and the general public to use the Automated System for Customs Data (ASYCUDA) and the online services available in the Rwanda Electronic Single Window. Members of the SADC are exploring the automation of the submission and approval of trade documents through single windows to reduce interactions between border officials and trader's representatives.

Notwithstanding, single-window is the measure with the lowest implementation rate according to the WTO TFA database. The issue is that while customs authorities often employ computer systems to process declarations, other agencies are lagging behind in the modernization process.

e)    Online transparency

Timely and accurate information is the bedrock of countries’ response to COVID-19 as informed traders can make sound decisions. The WTO TFA requires members to publish trade-related information on the Internet, also known as trade portals. Governments can upload information on recent trade measures adopted in the wake of the COVID-19 crisis. This online facility is particularly crucial for Small-Medium Sized Enterprises (SMEs).

The WTO reports that 90 countries have implemented transparency measures so far, including Enquiry Points. Countries are privileging new digital means of providing information through apps, special online advisers and others. Xiamen Customs is holding online meetings with importers, answering questions, and guiding traders in filling declaration forms. Kenya published information on COVID-19 trade-related emergency measures on the InfoTradeKenya Portal, which was set up with technical assistance from UNCTAD. 

f)    Virtual inspections and administrative procedures

Technology can even assist procedures that traditionally require physical contact, such as inspections. Countries have set out alternative procedures enabling compliance verification amid COVID-19 lockdowns. In Brazil, conformity assessment procedures are conducted through remote inspection by videoconference and the electronic transmission of data.

Administrative procedures can also resume deploying IT tools. India allows video conferencing for personal hearings under the Customs Act, complemented with submissions of documents through emails, adopting a digital way of working during the COVID-19 outbreak.

Is There a Silver Lining to the COVID-19 Cloud?

Tech-oriented trade facilitation measures have become a major ally of developing countries in the implementation of social distancing policies while maintaining the supply of essential goods. Hence, G20 trade ministers have encouragedthe use of electronic means for customs processing.

Developing countries have also embarked on a one-way journey towards digital trade. Harnessing digitalization of trade procedures has a positive impact on increasing regulatory compliance, reducing illicit practices, and reaching more inclusive participation of SMEs. To reap the full benefits, developing countries may want to consider the following recommendations:

Go beyond crisis-management

The tech-savvy reaction of border agencies must go beyond a short-term response to the pandemic. Indeed, the digital trend should draw out the path towards economic resilience for managing a future crisis. As a lesson learned, interoperability among trading partners at the regional and international level must be further fostered to ensure a coherent crisis-response and to multiply the benefits from e-services across the regions.

Include businesses 

Recovery plans and any future crisis-responses must involve economic operators in the identification of priorities for trade facilitation reforms. This is particularly relevant for regional blocks as the pandemic has highlighted potential reliance on regional supply chains.

Governments must also ensure that transparency and e-services are at the reach of SMEs, which often lack the requisite workforce to cope with cumbersome procedures. The OECD affirms that measures such as automation of border-processes, or consultations with traders have the most substantial differentiated impact on SMEs compared to larger firms.

Bridge the digital divide

The pandemic has stressed the benefits of digital trade facilitation, but also the economic and social inequalities in access, use and impact of Information and Communications Technology (ICT). The digitalization of trade procedures in developing countries is limited by their infrastructure capacity to speed up the processing, such as the lack of broadband infrastructure or the gap in broadband uptake. Even if developing countries have access to ICTs, they still need to get over several hurdles, including skills gaps and the high costs of online access.

Rely on development partners

International cooperation in trade facilitation will remain essential to keep trade flowing. Continued aid for trade will be particularly important to assist developing countries to implement trade facilitation measures needed in the crisis, as underscored by the OECD.

Technical assistance programmes such as ASYCUDA enable customs, border agencies and traders to electronically submit and exchange data to expedite trade procedures; thereby, reducing to a great extent the need for face-to-face interaction.

Conclusion

Leveraging digital trade facilitation plays a pivotal role in maintaining trade flows during and after the pandemic, ensuring access to essential supplies and mitigating the negative economic impact of trade disrputions. As highlighted by UNCTAD, concrete trade facilitation measures help to facilitate transport and trade and to protect the population from COVID-19 at the same time.

Nonetheless, automation will not reveal its full advantages if digitalization does not come along with cooperation between the public and private sector in coordination with regional as well as international partners. At the national level, trade facilitation committees could serve as a focal point to coordinate pandemic recovery plans and sow the seeds for further cooperation with regional and international partners.