Putting supply chain at the heart of trade

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Deficiencies in the physical movement of goods are a greater deterrent to trade growth than institutional trade barriers, according to the  World Economic Forum’s Council on logistics and supply chain. The Forum, of course, is best known for its star-studded annual meeting at Davos.

The Council, which is chaired by Professor Alan McKinnon, has just released a report “Outlook on the Logistics & Supply Chain Industry 2012” which highlights a series of challenges including carbon emissions, risk and skills.

On trade facilitation it argues that the importance of logistics constraints is not sufficiently recognised by trade negotiators, partly because they lack an understanding of modern supply chain practices and partly because they do not adequately consult the businesses affected.

And it is recommending that the Forum launches an initiative not only to assess what has been done, but also to analyse a number of specific supply chains to identify “all of the major policies and regulatory requirements that impact on the supply chain; and to quantify the effect of these various factors on the final cost of the products concerned”.

This information would then be used to estimate the impact on economic welfare for a country or region with a view to targeting institutional action.

It also wants to see a set of principles, approaches and performance targets that could be embedded in trade agreements and to identify gaps in the coverage of what is currently on the table in the World Trade Organisation, as well as regional trade, negotiations.

If you are thinking: “About time too”, I would find it hard to disagree with you. This is an initiative that deserves to succeed.

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