Customs reform could be the new Latin sound
By Richard D. McCormick
New York, 23 October 2000 - When a U.S. orchestra visited South America recently, the musicians were surprised at the difficulty - and expense - of moving their instruments and equipment into and out of the country. In fact, some orchestras have declined to visit certain countries altogether.
But the people of Central and South America are missing out on more than music because of outdated customs regulations. They're missing a lot of growth in incomes - and new jobs - that would come from the freer flow of goods and services between countries.
Fortunately, governments in the region are recognizing this - and responding with a variety of trade liberalization measures. The Mercosur trading group has admitted Chile. Mexico is weaving a network of trade agreements with its Latin American neighbours, as well as with Europe.
Mexican President-elect Vicente Fox has even proposed the long-term goal of a European-style common market for the countries in the North American Free Trade Agreement. And discussions on the proposed Free Trade Area of the Americas (FTAA) are moving forward as we approach a Quebec City summit next April.
Moreover, and at perhaps the most practical level, several Latin American governments are considering introducing modern customs procedures that will stimulate trade and investment throughout the region.
For example, Mexican Customs, led by Administrator General Alvaro Quintana Elordruy, has asked the business community and foreign governments for guidance on "best practices" that can be included in the next Mexican customs plan.
Countries that take such steps are making important moves toward greater roles in the world marketplace - where investment decisions increasingly reflect a country's ability to guarantee a reliable, low-cost flow of raw materials and components into and out of a manufacturing facility.
More and more of the products sold throughout the world are assembled in one country from components manufactured in several others. For example, a leading U.S. computer manufacturer says that making a personal computer can require some 300 customs clearances.
Naturally, manufacturers are more likely to buy or manufacture those components in countries that make it easy to import and export.
Every administrative delay of a big company's product at the border hurts a small-or medium-size company inside the border - especially in developing countries. One multinational company has estimated that its annual costs related to inefficient customs transactions, including delays, are almost $250 million (U.S.).
For obvious reasons, that company - and every other company - is interested in reducing those kinds of costs. So manufacturing, and jobs, are increasingly going to gravitate to the countries that make it easy to get components and finished products into and out of the country.
To streamline their customs procedures and boost their economies, countries in the region need to:
- implement a set of voluntary customs-facilitation measures agreed to by the FTAA countries, including much-neede
d risk management procedures so that customs authorities can focus scarce resources on legitimate enforcement issues;
- introduce tools to better measure the time businesses need to pass goods through customs and comply with duties ; and
- adopt the ATA Carnet, the "merchandise passport" that makes it easy to take sample products, business exhibits, and even musical instruments to other countries.
Governments that do so need not fear a loss of customs revenues. In fact, a number of smaller countries in the industrialized world have found that modernizing their customs procedures and facilitating trade actually improved their revenue collection and enforcement. They're processing more trade, more efficiently.
In short, the easier transfer of components, products and services between countries will help bring economic growth, new jobs and better living conditions to people throughout the hemisphere. Even Latin American artists and musicians would find it easier and less expensive to tour outside their home countries.
And that should be music to everyone's ears.
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