TRADE FACILITATION AN EXPLORATORY RESEARCH OF SWEDISH TRADE WITH CHINA

Abstract

There is no single, commonly accepted definition of trade facilitation. In its broadest terms it may be defined as a measure, or set of measures, that aims to reduce the cost of international trade transactions or all steps that can be taken to smooth and facilitate the flow of trade. Further, the gains from trade facilitation may be defined as the trade related cost that can be avoided through trade facilitation measures. According to current statistics trade accounts for 30% of the world’s Gross Domestic Product (GDP) and is expected to reach 50% in 2020. One study has estimated the entire trade transaction cost at 7-10 % of the total value of world trade, where trade facilitation measures could reduce the costs by one quarter. Another study has estimated the transaction cost to 2-15% of the total transacted values. Further one study point at benefits from trade facilitation of USD 377 billion globally on annual basis. When the cost of trade exceeds the business societies’ profit margins, enterprises are obliged to withdraw from trade. Alternatively, the cost of trade is transferred to the final customer, which reduces business societies’ competitive advantage, and hence therefore creates incentives to withdraw from trade. Any efforts to reduce costs of trade are aligned with the concept of trade facilitation, and statutes of a prerequisite for increased global trade. The question is not if Swedish enterprises should implement trade facilitation measures, but how long they can afford not do it considering the harsh international competition in foreign trade. Sweden is, and has been for many years, one of the most trade dependent countries in the world, due to being a small economy with a relatively large business society. Modern China is equally trade dependent and was first opened to foreign trade and investments when Mr. Deng Xiaoping became chairman of the communist party in 1978. China is today the 5th largest economy in the world and the 8th largest trading nation, accountable for 5% of the world’s exports. Swedish trade with China has steadily increased in both substance and importance, during the past decade. In 2003, China became Sweden’s most important trading partner in Asia, accounting for 2.14% of Swedish total trade. In adopting trade facilitation measures the two nations may increase their competitive advantages and hence increase the trade even further.