Policymakers
View GuideRegional Trade Agreements
What do small businesses matter for RTA negotiations? Small businesses are the backbone of economies by accounting for most businesses and employment worldwide.
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Trade Facilitation
What is the Trade Facilitation Agreement? From the 2013 Bali Ministerial Conference and after almost ten years of subsequent negotiation, the WTO Trade Facilitation Agreement (TFA) emerged, recognizing the need for improvement in trade processes. Ratified at the beginning of 2017, the TFA is an important step to facilitate border procedures. Recent evidence from an ex-post analysis undertaken by the United Nations Economic and Social Commission for East Asia and the Pacific (UNESCAP) suggests that implementation of the WTO TFA to date (as it is a gradual process in most developing economies) has contributed to reduce trade costs by 1-4% on average. Why does the TFA matter for MSMEs? Although the changes proposed by the TFA benefit all traders, smaller traders, with fewer resources, were identified as benefitting more. Section I of the agreement lists all the various areas and processes that should be aligned and modernized (see the guide on cross-border paperless trade), with changes focused principally on two areas, communication and border procedures. The ITC has highlighted certain articles of the TFA as especially relevant for MSME trade. They include articles on trade procedure information dissemination to SMEs; authorized operators and criteria that will not restrict SME participation (see Getting Down to Business or the guide on authorized economic operators); SME support for single windows (see guide on single windows and national portals); reduced fees and charges for SMEs and expedited shipments; and national committees on trade facilitation and SMEs (see guide on national committees on trade facilitation). For more details, see Making the WTO Trade Facilitation Agreement Work for SMEs. Where can policymakers access more resources? There are many resources for policymakers related to implementation of the TFA. Below are just a few, more can be found in the policymaker resource library. ITC not only provides research and capacity building information on their dedicated webpage to the trade facilitation programme, they also offer a policymaker e-learning course on the WTO trade facilitation agreement and training manual on SMEs and the WTO Trade Facilitation Agreement. OECD trade facilitation page contains useful links to research, video explanations and tools with information on implementation of the agreement and related challenges. World Customs Organization (WCO) resources on trade facilitation include a guide on national committees on trade facilitation and information sheets on specific topics such as advance rulings, appeals in customs matters, single window, risk management/post clearance control and simplified procedure/authorized persons, all of which are accessible here. The WCO also has produced many guides and handbooks related to trade facilitation available through the WCO Tools. World Trade Organization (WTO) resources include the trade facilitation webpage, which contains information on the agreement itself as well as links to videos and publications. Additional resources linked on the page include: The dedicated website of the Trade facilitation Agreement Facility which includes information on the agreement itself, resources and case studies for each TFA provision, numerous general resources such from the WTO’s TFA Facility webpage, as well as links to e-learning courses for policymakers provided by the WTO, IDB, ITC, UNESCAP and others. The trade facilitation agreement database with charts on the state of play of the TFA and the status of the implementation of commitments by WTO Members. Where can policymakers access good practices or national examples? ITC, UNCECE and UNCTAD guide titled Getting Down to Business, Making the Most of the WTO Trade Facilitation Agreement includes information on best practices and other useful information on implementation. OECD trade facilitation indicators simulator and compare your country tool provide governments with a basis to prioritize trade facilitation actions and to identify strengths and weaknesses in trade facilitation. UNCTAD similarly offers a Reform Tracker for monitoring of trade facilitation reforms.
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Competition Policy
What is competition policy? Competition policy comprises the full range of measures that may be used to promote competitive market structures and behaviour by enterprises, ...
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Government Procurement
What is government procurement? Government procurement (GP) refers generally to the purchase, lease or rental of goods, services, and construction services by governmental bodies...
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Business Identification and the Legal Entity Identifier
What is a legal entity identifier (LEI)? An LEI is a 20-character, alphanumeric code that provides a clear and unique identification to businesses and other entities participating in financial transactions (for a detailed description of the code itself, please see the Global Legal Entity Identifier Foundation website). It contains information on business ownership structures that regulators require to assess financial risks and promote market integrity. LEIs are part of global standards that rely on high data quality for enhancing transparency in marketplaces. More information on what an LEI is can be found at the Global Legal Entity Identifier Foundation’s website and at LEI Worldwide. Following the 2008 financial crisis, there was an acknowledgement by regulators of the difficulty in identifying the parties to a transaction across markets, products, and regions (see the Financial Stability Board’s article on the LEI). The LEI became a regulatory response to this issue, allowing for the incorporation of key information for legal entities in a financial transaction (including digital) on “who is who” and “who owns whom.” Although the LEI was initially adopted for use in trade of financial derivatives, it has a host of other applications, including for loan issuance and business identification. For more information on the history of the LEI, see the Financial Stability Board’s website, along with SWIFT and this McKinsey report. Why does an LEI matter for MSMEs and trade? Although an LEI is not a legal requirement, there are several benefits for small businesses. For one, the LEI reduces the cost of onboarding clients, which are sometimes prohibitively high for bringing in new MSME clients. For trade finance, LEIs can speed up access to finance through better identification and can enable faster processing of letters of credit. LEIs also help with KYC (Know Your Customer) requirements, which are financial services guidelines requiring that identity is verified. Working with others that have an LEI number can also provide MSMEs with security in knowing about suppliers and partners and doing business overseas. Finally, LEIs can help MSMEs to comply with international regulations, secure their brand identity, and enhance their compliance reporting requirements. More information can be found in LEI Worldwide. How can policymakers help? Governments and policymakers have a role to play in encouraging the adoption of the LEI, namely by raising awareness that this tool exists and has particular uses. Not only is it important to understand that an identity solution such as the LEI has been developed, it is also important to raise awareness of the ways it can benefit MSMEs by reducing their transaction costs and increasing their access to financial markets. Where can policymakers learn more about policy frameworks and guidelines? Why a Trusted Identity is the First Step to Financial Inclusion for SMEs: This publication underscores the role that trusted digital identities can play for increasing financial inclusion for small businesses. Access this page at the GLEIF website. The LEI in Digital Certificates: The Global Legal Entity Identifier Foundation provides a variety of resources that policymakers and regulatory authorities could use to embed LEIs into certificates and seals, when they are issued in a business context. Visit the GLEIF website. Thematic Review on Implementation of the Legal Entity Identifier: This publication presents a peer review on cross-country and cross-sector LEI implementation progress conducted by the Financial Stability Board (FSB). Visit the FSB website. Where can policymakers access best practices and national examples? Recommendation on the Use of Legal Entity Identifier (LEI) in EU countries: This recommendation outlines information items required under EU regulations to obtain a pre-LEI code for reporting purposes. Visit the European Banking Authority (EBA) for more. The LEI: The Key to Unlocking Financial Inclusion in Developing Countries: This resource identifies ways in which financial institutions in developing countries can increase financial inclusion by providing capacity to small businesses to adopt LEIs. It provides Africa-specific examples. Access this resource at the GLEIF website. How Legal Entity Identifiers Will Transform Small Business in Asia: This resource provides insights on the role that LEIs could have to help small businesses to increase their access to finance and participation in supply chains. Visit the Asian Development Bank (ADB) website.
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Sanitary and Phytosanitary Measures and Technical Barriers to Trade
What are sanitary and phytosanitary (SPS) measures? SPS measures consist of laws, decrees, regulations, requirements, and procedures that countries adopt to protect human, animal, or plant life and health against certain risks.
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Express Consignments and Low-value Shipments
What are express consignments and low-value shipments? With the advent of e-commerce in the digital economy, the Universal Postal Union (UPU) has recognized the increasing “parcelization” of trade. In fact, over 80% of cross-border goods bought online are small packets weighing up to 2 kilograms, and the majority of those packages (roughly 70%) are delivered through the postal system. This has changed the needs of customs processing as more and more shipments are sent by individual or small sellers with different capacities. Why does it matter for MSMEs? MSMEs may not have the expertise to comply with customs requirements, or may be deterred from entering trade altogether given the paperwork and requirements to ship commercial packages abroad. Making tax/duty information readily available and easy to understand in order to calculate expected costs is a first step in the process. What can policymakers do? Some governments have introduced new approaches to deal with low value shipments. For example, Australia applies a goods and services tax – known as GST – which takes the form of a broad-based tax of 10% applied to sales of most goods, services and other items consumed domestically. Canada has developed a generic harmonized system for household imports, which has been proposed as a model for developing a standard application programming interface with standard classification headings for harmonizing identification codes for low value shipments. Other group of countries have decided to apply a flat import rate at a reasonable level that replaces all duties and taxes. On the basis of these approaches, the Global Express Association (GEA) has conceptualized three broad options that policymakers can consider for collecting taxes and duties on low-value shipments. For more information, see the GEA’s Proposal on Tax/Duty Collection on Imported Low Value Shipments. Where can policymakers access more resources? The Universal Postal Union has a number of resources, including a mobile phone application for submitting electronic advance data (EAD) for customs declarations, along with guidelines and guides, recommendations, and standards. Where can policymakers access good practices or national examples? Australia’s GST system applies to goods imported into the economy as well as domestic production. An explanation of how Australia’s GST system works can be found here and an explanation of importing goods with GST is available here, along with a presentation on Australia’s e-commerce experience. Canada’s generic harmonized system for household imports is described in the GEA’s a proposal on tax/duty collection on imported low value shipments. There is also a presentation on Canada’s low-value shipments policy. The Enhanced Integrated Framework (EIF) and UPU, in conjunction with the United Nations Conference on Trade and Development (UNCTAD) have launched a project in Vanuatu to facilitate the efficient post–customs clearance of postal packages through the exchange of pre-arrival/pre-departure information. An additional 23 least developed countries (LDCs) in which the national interfaces between UPU’s Customs Declaration System (CDS) and UNCTAD’s ASYCUDA (a computerized customs management system) can be established quickly have also been identified. For more information, visit the EIF’s Trade for Development News. New Zealand, similar to Australia, also has a GST system in place. More information on GST for overseas business in New Zealand is available here. UPU publishes both case studies and best practices, such as Easy Export to develop a simplified and easy export system for MSMEs. Originally created for Brazil, Easy Export is now being applied in other economies as well, including Tunisia and Morocco.
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National Committees on Trade Facilitation
What are National Committees on Trade Facilitation (NCTFs)? National Committees on Trade Facilitation (NCTFs), also sometimes...
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Trade remedies
What are trade remedies? Trade remedies are border measures applied by governments on imports of a product where the total imports have surged (safeguards) or the imports are dumped...
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Helping MSMEs to Become Sustainable
Why is it important for MSMEs to become sustainable? Global crises such as pandemics and natural disasters take a toll on everyday life and economic activity. Micro-, small- and medium-sized enterprises (MSMEs) along with self-employed people and entrepreneurs are hit the hardest by adversity because of their limited resources and access to finance, skills and information to cope with supply chain disruptions and business downturns. Amid COVID-19, for example, the International Trade Centre (ITC) SME Competitiveness Outlook 2020 found that MSMEs were more adversely impacted than large firms according to business survey results obtained from across 123 countries. The disproportionate effects global crises have on MSMEs have led international policy fora to take action to help MSMEs transition to a sustainable economy. For instance, country members of the Group of Twenty (G20) have adopted a non-binding policy toolkit for promoting born green via digital MSMEs and entrepreneurship in global supply chains. By providing guidelines on inclusive policies and initiatives that are supportive of resilient entrepreneurial ecosystems, the policy toolkit aims to assist policymakers in supporting MSMEs and new entrepreneurs to embrace the green and digital transformation to drive economic resilience efforts amid future crises. The toolkit comprises five pillars outlining action areas policymakers can take to support the sustainable and digital transformation of MSMEs. A common denominator across these pillars is the role standards, in particular voluntary sustainability standards (VSS), can have in the adoption of sustainable business models by MSMEs. The following sections of this guide describe brief facts about VSS and their relevance for MSME trade and sustainability transition, so policymakers can learn more about action areas and resources to provide support. What are voluntary sustainability standards (VSS)? According to the United Nations Forum on Sustainability Standards (UNFSS), VSS are standards that set various sustainability metrics for producers, traders, manufactures, retailers or service providers, including: respect for human rights; worker health and safety; environmental conversation; community relations; land use and planning; and others. Like standards, VSS are the result of consensus among industry experts on technical guidelines and best practices for businesses to manage their processes, operations and stakeholder relations. As emphasized by the United Nations Conference on Trade and Development (UNCTAD), VSS are mostly designed by non-governmental organizations or private firms and convey a set of standards for products, processes and production methods to mainstream economic, social and environmental dimensions of sustainability. When discussing VSS, the terms “standards”, “certifications” and “labels” may be used interchangeable. But it is important to approach the right term when designing, marketing and monitoring VSS. For more information, UNFSS’s Voluntary Sustainability Standards provides more analytical aspects of VSS-related terms that may be involved in policy-making processes. Which types of VSS exist? VSS can come in different types according to the sectors, subject matters, production processes and governance mechanisms they focus on. VSS are mostly governed by non-state actors that include companies, industry associations and non-for-profit organizations. These design well-known standards such as GlobalGap, a farm assurance program, or the Fairtrade Standards that certify producers and traders for meeting a range of economic, environmental and social criteria in their business practices. Public agencies such as the United States Department of Agriculture (USDA) also develop standards, such as to certify whether products are organic. Other standards are the result of multi-stakeholder initiatives, including the Forest Stewardship Council (FSC) and the Roundtable on Sustainable Palm Oil (RSPO). The United Nations Conference on Trade and Development (UNCTAD) provides a summary on VSS types on its Framework for the Voluntary Sustainability Standards Assessment Toolkit. Why do VSS matter for businesses to trade and contribute to sustainable development? With more than 500 VSS in existence, public and private sector stakeholders are placing increasing attention to sustainability practices that enable businesses and supply chain actors to engage in international trade and foster sustainable development. UNCTAD and UNFSS have analysed a range of channels through which businesses adopting VSS can seize market access opportunities by adopting sustainability practices in their business operations and supply chain relations. For example, businesses that invest in environmental harm reduction technologies and improve living wages for workers obtain sustainability certifications that enable them to charge price premiums in more lucrative markets. Linkages like this demonstrate the potential effect VSS can have for businesses to engage in trade and contribute to sustainable development. Further examples and analyses have been documented in UNCTAD’s Better Trade for Sustainable Development and UNFSS’s Voluntary Sustainability Standards, Trade and Sustainable Development. How can policymakers support small businesses to adopt VSS? While adopting VSS and obtaining their relevant certifications offers potential benefits in terms of trade and sustainable development, it often represents challenges for small businesses. Depending on the nature of VSS and related certification schemes, small businesses can face significant compliance challenges, skills shortages and limited resources that make the certification process costly. These challenges are compounded for small businesses from developing countries which lack adequate institutions, technical assistance and policy regulations in support of business sustainability certification. As a starting point for identifying policy areas where small businesses need support, ITC’s SME Competitiveness Outlook 2016 has outlined a five-point action plan aimed to help VSS work for small businesses to participate more in trade. The action plan includes: a) Facilitating access to information; b) Enabling firms to comply with technical standards; c) Supporting technical infrastructure; d) Strengthening domestic governance; and e) Leveraging international mechanisms on trade facilitation. Where can I access resources on policy frameworks, guidelines and tools? FOLU’s Knowledge Hub: The Food and Land Use Coalition (FOLU) integrates research and analysis on food and land use transformation from multiple organizations, which policymakers can use to design policies for supporting business transitions into sustainability systems. Visit this FOLU website. ILO’s Course on SME Productivity for Policymakers: The International Labour Office (ILO) offers this training course to enhance policy analysis skills required for designing policies aimed at improving productivity and working conditions in small businesses. Visit this ILO website. ISEAL’s Resources on Sustainability for Policymakers: The INSEAL Alliance is a movement of sustainability standards and assists governments in developing sustainable trade policies and support programs for businesses to engage in sustainability systems. Visit this ISEAL website. ITC’s Linking Voluntary Standards to Development Goals: The International Trade Centre (ITC) has developed a report that can help policymakers identify the role VSS can play in advancing progress in national development objectives, such as those related to the Sustainable Development Goals (SDGs). Link to this ITC report. UNCTAD’s Framework for the Voluntary Sustainability Standards Assessment Toolkit: The United Nations Conference on Trade and Development (UNCTAD) offers this toolkit to assist policymaking processes aiming to map out motivations, challenges and outcomes related to the adoption and use of VSS. Visit this UNCTAD website. UNFSS’s Food-Related Voluntary Sustainability Standards: The United Nations Forum on Sustainability Standards (UNFSS) developed this policy guide in coordination with other agencies to provide policy approaches and frameworks for mainstreaming VSS into national development strategies and regulatory compliance. Visit this UNFSS website. WTO’s Environmental Database: The World Trade Organization (WTO) provides a database that contains all environment-related notifications, measures and policies that members notify to the WTO. Visit this WTO website. WTO’s E-learning Course on Trade and Environment: The WTO offers a course that explains WTO discussions on trade and environment and how WTO rules intersect with environmental policies. Visit this WTO website. Where can I access good practices and national examples? APEC Compendium of Best Practices: The Asia-Pacific Economic Cooperation (APEC) has compiled global best practices for facilitating VSS as a market development and trade tool aligned with the Sustainable Development Goals. Visit this APEC website. Caribbean Community (CARICOM) Export Potential to the European Union: UNCTAD has conducted a feasibility study on the potential VSS can have for enhancing CARICOM aquaculture and agriculture exports to the European Union. Visit this UNCTAD website. Governmental Use of Voluntary Standards: ISEAL Alliance has documented case studies of good practice collaborations governments around the world have achieved to use voluntary standards for delivering on public policy objectives. Visit this ISEAL Alliance website.
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Rules of Origin
What are rules of origin? Rules of origin (ROOs) are a set of laws, regulations, and administrative procedures that countries...
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Trade Finance
What is trade finance? There are many definitions of trade finance, which vary by organization and purpose. According to a trade finance paper issued by the Bank for International Settlement’s Committee on the Global Financial System, trade finance refers to bank products that help businesses manage their international payments and associated risks when undertaking cross-border trade transactions. Trade finance products are typically of a short-term nature, but longer-term options are available in the market. One of the most common and standardised trade finance instruments is a letter of credit, which enables a bank to pay an exporter on behalf of an importer once the delivery of the goods is confirmed through required documentation. For more information on the different types of trade finance and how to access it, see the International Trade Centre’s (ITC) How to Access Trade Finance, the International Chamber of Commerce (ICC) Academy’s What is Export Finance, and Trade Finance Explained, an SME Guide for Importers and Exporters, co-authored by Trade Finance Global, the ITC, the Federation of Small Businesses (FSB), the Institute of Export & International Trade (IOE&IT), the British Exporters Association (BExA), the Forum of Private Business (FPB), and the International Finance Corporation (IFC). Why does trade finance matter for small business to engage in trade? Estimates suggest that 80-90% of global trade relies on some form of trade and supply chain finance. Financing trade matters because of the various roles that international trade plays in sustaining livelihoods, creating employment, and improving development conditions worldwide, especially in developing countries. Trade finance covers a wide range of financial products and can aid companies in increasing the volume of transactions, fulfilling large contracts, and scaling operations internationally. Yet there is a global trade finance gap of USD 1.7 trillion as of 2020, a 15% increase from two years earlier. Firms face a variety of obstacles in obtaining access to trade finance. For example, many companies do not have the necessary working capital to self-finance exports in those instances where payment might only be received after the goods arrive at the purchaser. They may also be unable to pay up-front for imported goods that are being shipped from abroad. Another concerning factor is the high rejection rates of trade finance requests observed among some firm groups, with small businesses and women-owned firms reporting 40% and 70% of their applications being totally or partially rejected. Because of the time between purchase and delivery and the many possibilities for disruption that can occur due to transportation mishaps, purchaser demand, or economic and political events, international trade has many risks that can be alleviated through trade finance. What are different types of trade finance payment terms? A letter of credit (LC): Letters of credit are defined by Trade Finance Global as “financial, legally binding instruments, issued by banks or specialist trade finance institutions. An LC guarantees that the seller will be paid on behalf of the buyer, if the terms specified in the LC are fulfilled.” For more detailed information, see Trade Finance Global’s guide on Letters of Credit. A Bank payment obligation (BPO): This is similar to a letter of credit and obliges a bank to pay if appropriate documents, in this case digital, are presented. According to the United Nations Economic Commission for Europe (UNECE), a ” BPO is an irrevocable undertaking given by one bank to another that payment will be made on a specified date after successful electronic matching of data according to industry-wide rules set by the International Chamber of Commerce Banking Commission (ICC).” For more information, see the UNECE website. Documentary collection: This mostly involves interaction between banks. In the case of a documentary collection, the seller/exporter) will request payment by presenting its shipping and collection documents to their remitting bank.” These documents are then forwarded to the buyer/importer’s bank and the exporter’s bank will be credited by the importers. Unlike a letter of credit, no payment guarantee is made, no document verification is made, and no credit or country risks are assumed by the bank. Payment is solely based on the available funds of the buyer. Bill of exchange or promissory note: These are documents between two transacting parties that confirm a financial transaction has been agreed upon. Open account transactions: These are arrangements for buyers to pay sellers within a certain amount of time (typically 30-90 days) with no additional formalities. This type of payment is very beneficial to buyers but can leave sellers open to risk of non-payment. Where can policymakers access other resources on policy guidelines and frameworks? The International Finance Corporation’s (IFC) Global Trade Finance Program: This offers partial or full guarantees that cover payment risk on banks in emerging markets for trade related transactions. Visit the IFC website. The International Monetary Fund’s (IMF) Towards a Framework for Reporting Trade Finance: This resource updates a previous policy paper that aimed to address the measurement of trade finance in macroeconomic statistics. Visit the IMF website. The Organisation for Economic Co-operation and Development’s (OECD) Trade Finance for SMEs in the Digital Era: This resource explores policy approaches that can support the ability of small businesses to benefit from digital advancements to have greater access to trade finance. Visit the OECD website. The Wolfsberg Group, International Chamber of Commerce, and Bankers Association of Finance and Trade (BAFT) Trade Finance Principles: These consist of standards for designing trade finance products and operations that mitigate financial crime risks in the context of open account trade transactions. Access this resource. World Trade Organization – International Finance Corporation (WTO-IFC) Trade Finance and the Compliance Challenge: This describes the global business and regulatory environment of trade finance and showcases capacity building programs where countries can participate. Access this resource. Where can policymakers access good practices and national examples? The Asian Development Bank’s (ADB) Effective Practices in Trade Finance Examinations: This resource presents experiences from bank regulators and commercial banks to provide guidance for examiners of commercial banks’ trade finance businesses. Visit the ADB website. The African Development Bank’s (AfDB) Trade Finance in Africa – Overcoming Challenges: This resource assesses trade finance developments in Africa and provides policy recommendations for reducing barriers that prevent small business access to trade finance. Visit the AfDB website. The Inter-American Development Bank’s (IDB) Trade Finance Facilitation Program (TFFP): This program promotes access of financial intermediaries to trade finance in Latin America, with the aim of expanding and diversifying funding sources available to importers and exporters. Visit the IDB website. The IFC’s Priorities in Financial Institutions: This resource is about the IFC’s work with local intermediaries to support MSME access to finance. Visit the IFC website. Informal Working Group on MSMEs: Drawing from recommendations submitted by business associations, the Informal Working Group has prepared a consolidated document that includes the of topic trade finance.
