The landlocked developing countries (LLDCs) are among the poorest countries in the world. 10% of the total population of the developing world lives in landlocked countries. Between 1990 and 2001, 40% of this population was living below 1 dollar a day. There are 31 LLDCs of which 16 are also LDC, and 20 of the 50 lower middle income countries are LLDCs. The Average GDP per capita is 941$ in 2005. Globalization did not bring the expected growth to these group of countries nor has it provided incentives for more dynamic trade relations, despite the efforts undertaken with a view to participate more actively in the regional and world commercial exchange.

The lack of territorial access to the sea, the remoteness from world markets, the lack of infrastructure, the geographical isolation have a direct consequence in high transit and transport costs that has to be incurred into by LLDC.   However, the “transportations costs only explain one part of the real impact of being landlocked, delays and even more importantly low degree of reliability and predictability of services create massive disincentives to invest as well as higher total logistics costs” [note 1]. The challenges faced by the LLDC due to the geographical disadvantage have to be addressed in order to help these countries integrate into the world trade system.

A recent study by the World Bank concludes “that landlocked countries trade less vis-à-vis coastal countries (on average 30% less than coastal countries), landlocked countries experience weaker growth than maritime countries (being landlocked reduces average growth by about 1.5 percentage points) and on average landlocked countries had longer recourse to IMF than coastal countries. The reasons behind these conclusions are basically the high transaction costs, the lack of transit agreements and the lack of regional transport infrastructure.”

The cost of moving the goods across international borders is the same as the cost of internal transportation for more than 1600 km [note 2]. The costs of transport are up to 50% higher in landlocked countries in comparison to coastal countries and in some cases the number increased while the trade volume is 60% lower. A recent study estimates that the doubling of transport costs reduces trade volumes by 45%.

The higher transit and transports costs dramatically influence the capacity of LLDCs to participate in international trade. For instance, export values for all developing countries grew at respective average rates of 3.2% and 8.7% during 1980-90 and 1990-94, the corresponding figures for LLDCs were only 2.9% and 0.4%. The share of world exports of LLDCs was 0.70% where for all developing countries it was 35.92% in 2005. LLDCs exports are hardly diversified, composed of bulky, often low value commodities. In the great majority of countries, three products account for more than 50% of total exports in LLDC WTO Member States in terms of value based on HS 6 digit classification.  LLDCs have not been able to compete efficiently in the international trade market and unless the challenges faced by LLDCs are taken into account by the international community, the situation may get worst.

On the other hand, foreign direct investment received by LLDCs was 6,447 million dollars in 2005 while the transit developing countries of the LLDCs benefited of 141,336 million dollars and the developing countries 320,670. These differences are mainly due to lack of efficient transport systems and of infrastructure that leave LLDCs as an attractive place for FDIs. However, investments are important for the development and the strengthening of the productive capacities and to help LLDCs r the situation where they are stuck for so many decades.

After giving an overview of the situation of LLDCs, I would like now to mention some of the problems faced by LLDCs regarding transit and then to emphasize how trade facilitation and specifically the negotiations in WTO can contribute to a better environment to promote trade in these countries.

Some of the problems often suffered by LLDCs are the s udden and frequent changes of measures regarding transit, delays in the fulfillment of formalities required to transit, absence of a preferential and simplified custom and inspection treatment for perishable goods in transit.   Furthermore, there are repetitive controls through the process of transit, abusive and even illegitimate use of inspection and control powers, lack of transparency and predictability regarding formalities related to the driver and the means of transport, lack of a regional data base listing authorized transport companies operating in the area, lack of communication and coordination among units involved in transit procedures (customs, inspection and control units, etc) of neighboring countries, lack of infrastructure in both landlocked and transit countries, lack of corridors and other means of communication between the countries. Furthermore, the lack of transit agreement or the lack of the implementation of these agreements are very common among the LLDCs. There have been estimates that one dlay in transport equals approximately 0.8% of customs tariffs. I do not want to explain in detail because these and other problems are commonly suffered by all LLDCs.

As it is well known, Trade Facilitation is basically about rationalization, simplification, harmonization and automation. Rationalization of the measures leaving out the procedures that are not necessary. Simplification of the procedures and that the remaining controls are easy to comply with, always taking into account effectiveness. Harmonization of documents and procedures should be align with international standards to bring clarity, consistency and certainty to traders, and, lastly, automation, the use of technology that can save up to 90% of transaction costs [note 3]. Trade Facilitation is considered as a situation where everybody wins, a positive sum game.

Trade Facilitation not only helps the LLDCs but also their transit countries and the international community of traders as a whole. Speed and low cost transactions are convenient for all traders. A border crossing between a landlocked country and a transit country that works efficiently not only speeds up the process for the LLDCs to get faster to the seacoast but also helps both countries in the trade among them. It is obviously in the interest of everyone. More predictability and certainty in the business transactions for traders, having harmonized procedures and documents, save time and money to any trader, anywhere. The development of infrastructure, roads, transit corridors, ports brings along the development of different things as gas stations, food shops, maintenance among others generating employment and leaving money to people of the transit countries.

Many rounds have been dedicated to lowering tariffs in the WTO.   However, sometimes the logistics costs are even higher than the tariffs itself for traders. Having mentioned this, the negotiations of Trade Facilitation in the WTO is a good opportunity for countries to lower the transaction costs of trade.   The negotiations started back in 2004.   The mandate for the negotiation is the clarification and improvement of Articles V, VIII and X dealing with transit of goods, reducing the level of fees and formalities in relation with exportation and importation and ensuring the publication and administration of trade regulations. Furthermore, it was agreed that the results of the negotiations shall take fully into account the principle of special and differential treatment for developing and least-developed countries.

The landlocked countries realized that the negotiations in trade facilitation become an opportunity that we have to take advantage from, specially taking into account that article V “Freedom of Transit” is a part of the mandate [note 4]. Hence, some LLDCs presented proposals in different stages of the negotiations regarding Freedom of Transit. The proposals basically deal   with the following issues: i) the clarification of terms used in that article, ii) improved transparency of transit requirements, procedures and charges, iii) the harmonization of transit policies; iv) the simplification and standardization of documentation, data requirements and procedures applied to goods and means of transport in transit; v) non-discrimination between means of transport, carriers and types of consignment in relation to transit procedures; vi) issues related to guarantees required from transit operators vii) freedom of transit on the most convenient routes; viii) the use of ICT and the implementation of efficient customs control systems, and issues related to the coordination and cooperation among WTO member countries [note 5],  ix) to avoid restrictive measures in transit.  

In case these measures are part of a Future Trade Facilitation Agreement, this would be a good input for reducing the costs of transit and enhancing the predictability and certainty in transit. Many of the problems I have mentioned earlier, like delays, sudden change of formalities, lack of cooperation, repetitive controls, the management of the   perishable goods among others can be improved through the implementation of these measures.

But not only article V is relevant for landlocked countries. All the measures dealing with expediting the process of border crossing will invariably lower the cost of the movement of goods. In this regard, the proposals about:  Simplify procedures for Authorized Traders, Harmonizing and simplifying trade documents and more generally the use of international standards, Acceptance of Copies, Single Window, Risk management including post-clearance audit, Pre-Arrival Processing, and Separation of Release from Clearance have the objective of alleviating the long process and then lowering the cost. As I have stated before these measures if implemented can save up to 90% of the cost regarding the transaction at the border. The implementation measure will not make a big change but imbedded in a reform process make a difference.

Based upon what I have mentioned above, the negotiation in Trade Facilitation is a good opportunity for countries to modernize their customs and make them more competitive. It is a way to push ourselves to this end. Specially taking into account that technical assistance and capacity building will be provided in the framework of the Special and Differential Treatment. It is an opportunity that our countries have to take an advantage and therefore participate actively in these negotiations.

Of course, there are other agreements like the Revised Kyoto Convention or the Transit International Routier (TIR) that deal with Trade Facilitation measures. However, a WTO Agreement has the specificity that is binding and therefore countries are obliged to comply with them. If Landlocked Countries alone comply with the measure, this would not make such a difference, the landlocked countries and the transit countries have to comply with them in order to lower the costs of trading. A WTO Agreement would be in force for all the members of the organization. This is not the case with other conventions, we can not force our transit countries to subscribe the Revised Kyoto convention or the TIR but they will have to implement a future Trade Facilitation Agreement in the context of the WTO.

Having said this, and despite the fact that Trade Facilitation reform represent a win-win situation there is a risk that the ambition will be lower during the negotiations. Nevertheless, being able to negotiate a Trade Facilitation agreement is a big step towards harmonizing documents and procedures and gives certainty and predictability to the process. Moreover, the measures regarding transit would give a plus to landlocked countries integrating into the trading system.

Notwithstanding, one thing that we do not have to forget is the following, Trade Facilitation is necessary to reduce obstacles and constraints to trade, as well as the cost and time of commercial transactions, but this alone would not work efficiently without the necessary infrastructure and it is in this sense that Aid for Trade could help us, but I do not want to go deeper with this point since the next speakers will get to the issue.

Last, but not least, I think one aspect is really important to understand. The problems of landlocked developing countries can not be resolve through improvement of trade facilitation and infrastructure only.   The problems are much deeper and broader.   Landlocked countries are among the poorest countries in the world, they need to be able to attract FDI as a way to create employment and boost the economy in the country. They have to be able to diversify the production to avoid dependence on a few products. Moreover, it is necessary to strengthen the productive capacities and improve the quality of the products in compliance with international standards, to be able to compete effectively with other countries and participate actively in international trade. Furthermore, the production of high value products or exports of IT technology and services where landlockedness is less important, should receive more attention. All these have to be taken into account in the Aid For Trade Initiative and by the international community.

Well, I do not want to tire you out with my presentation, so please allow to express my gratitude to AITIC and to the Office of the High Representative for LDC, LLDCs and   SIDS for organizing this important event and to all of you for your attention.

Note 1: The cost of being landlocked: Logistic Costs and Supply Chain Reliability”, Arvis, Raballand, Marteau) (return to text)

Note 2: Transit and the Special Case of Landlocked Countries. Jean Francois Arvis (return to text)

Note 3: Trade Facilitation – everyone wins! Baroness Symons. (return to text)

Note 4:

• Trade Facilitation: Improvement of certain elements contained in GATT article V. Communication from Bolivia, Mongolia and Paraguay, Kyrgiz Republic, Japan, Republic of Moldova (TN/TF/W/ 28)
• Trade Facilitation: Improvement of elements related to transit Paraguay, Rwanda, and Switzerland (TN/TF/W/ 39)
• Trade Facilitation: Improvement of elements related to transit Mongolia, Paraguay, Rwanda, and Switzerland (TN/TF/W/ 119)
• Transit Armenia, the European Communities, the Kyrgyz Republic, Mongolia, the Former Yugoslav Republic of Macedonia, and the Republic of Moldova (TN/TF/W/ 113)
• Transit – Compilation of textual proposals in TN/TF/W/113 and TN/TF/W/119 Delegations of Armenia, the European Communities, the  Former Yugoslav Republic of Macedonia, the Kyrgyz Republic, Mongolia, Paraguay, the Republic of Moldova, Rwanda, and Switzerland
• Transit – Consolidation of textual proposals in TN/TF/W/113 and TN/TF/W/119 Delegations of the Former Yugoslav Republic of Macedonia, the Republic of Moldova, Rwanda, Switzerland, and Swaziland
• Proposal on a free and transparent transit regime in Road transportation Delegations of Turkey, Georgia and Paraguay (return to text)

Note 5: Effective participation of the LLDCs in the multilateral tradying system. Unctad (return to text)