Trade does not merely imply the sales contract between the parties to supply goods and services. Such a contract is normally followed by the transfer of goods from the seller’s premises to the buyer's doorsteps. Also, it involves making payments, arranging transportation, and insurance, and getting clearances from the ports and border agencies including customs. When trading parties are situated in distant countries, as normally happens in international trade, the movement of traded goods from the seller to the buyer takes a longer time and involves complex processes to ensure safe delivery within the stipulated period. For landlocked countries, additional time and costs are incurred as goods must be routed through the sea and land territory of neighbouring countries.

Trade facilitation is a key concept encompassing measures to reduce costs whilst moving goods across international boundaries. It includes multiple interventions, such as transit facilitation, border agency collaboration, and the harmonisation of documents and procedures between border control authorities of different jurisdictions. The improvement of transport infrastructure and enhancement of the efficiency of logistics services are critically important for reducing transaction costs. The discourse on trade facilitation amongst Global Agreement on Tariffs and Trade (GATT) member countries began in the 1980s, but no concrete outcomes emerged until the issue entered World Trade Organisation (WTO) forums, the successor of GATT created in 1995. The first WTO Ministerial Conference, held in Singapore in 1996, raised four issues for strengthening the multilateral trading system: trade and investment facilitation, competition policy, government procurement and trade facilitation. It took almost a decade to bring these issues into formal discussions and negotiations. The trade facilitation agreement underwent several rounds of negotiations in Geneva, particularly after 2005, and was finally adopted at the Bali Ministerial Conference in 2013.

Nepal, as a landlocked country, has been facing challenges of high trade costs which have reduced the competitiveness of its products in the international market. The development of dry ports or inland clearance depots (ICDs) was considered to be a viable option to reduce delivery costs of the goods, as such facilities are the extension of the seaport and support the transhipment of cargo under simplified processes. Hence, a transit and trade facilitation project was implemented in Nepal in the late 1990s with the financial support of the World Bank. This project was successful in developing three ICDs - one each in Birgunj, Biratnagar and Bhairahawa, customs automation with the introduction of ASYCUDA, and review of the existing transit and trade procedures and documentation to reduce time and procedural hassles in the delivery of goods. Of the three ICDs, the railway-connected one in Birgunj is spread over an area of 38 hectares and can provide a wide range of logistics services for international trade. With the added facilities of an integrated customs check-post (ICP) in the adjacent location, the facility in Birgunj is well-equipped to facilitate multi-modal transport and transit services.

Improvement of trade logistics and related services is considered highly important not only from the perspective of international trade but also from the viewpoint of improving the efficiency of domestic trade and supply chain management.

The WTO Trade Facilitation Agreement (TFA) has defined several basic characteristics of the facilitation measures. These include streamlining transit transport, digitalisation of the documents and processes, use of the cross-border single window, authorised economic operators, harmonisation of the documents and procedures, and border agency collaboration, among others. While the least developed countries (LDCs) are struggling to implement the provisions outlined in the WTO agreements, multilateral talks are focusing on greening trade facilitation instruments in the context of climate change and minimising carbon emissions. Such initiatives demand additional resources and skills to strengthen the least developed and developing countries, enabling them to secure a fair share of the advantages of carbon sequestration and its trading along with simplified transit and transport arrangements.

A primary task in reducing the carbon footprint lies in the adoption of digital technology and internet services that can replace the heavy load of paperwork with online IT-enabled services. The cross-border single window is being widely used at the bilateral and regional levels as an initiative to reduce paperwork and get swift clearances of cargo. ASEAN and APEC in the Asia and Pacific region, EU in Europe, and ECOWAS in Africa are some of the regional trading blocs that are promoting the use of cross-border single windows.

Second, countries may use multi-modal transport systems, focusing on the use of less polluting modes of transport like the electrical vehicle as a mode of surface transport, steamers and small vessels for inland waterways, and pipelines for liquid cargo transportation.

Third, investment in physical infrastructures like inland clearance depots, container freight stations, warehouses and free trade zones is essential to improve logistics services in the country. These facilities may be powered by clean and green energy, sourced from hydropower and solar photovoltaic cells. Nepal possesses immense potential to power such facilities with energy generated from hydropower plants.

Fourth, there is immense potential to reduce the carbon footprint in transit transport operations through the simplification and harmonisation of documents and procedures and their application in a paperless environment. Such an initiative would significantly reduce transaction costs, enhance competitiveness, and establish a green transit transport system to the benefit of participating countries. The provisions laid down in the bilateral transit treaty between Nepal and India regarding the application of electronic cargo tracking systems and the use of inland water transport via the Ganges are built on these premises.

Fifth, countries should be encouraged to pursue the provisions made in various international instruments that create pathways for reducing trade costs. Besides the WTO Trade Facilitation Agreement, other relevant instruments include the Revised Kyoto Convention-1999, TIR Convention-1975, and the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific (FA-PT)-2015. Nepal is a party to the first two instruments. As a landlocked country, Nepal should join the remaining two instruments and persuade the neighbouring countries to implement them. Establishing a web of transit transport networks at the regional level would help reduce trade costs and contribute to achieving regional economic integration objectives.

Some other steps in greening the trade facilitation components include the use of electrical traction railway and battery-operated transport vehicles, massive plantation programmes along the transport and economic corridors, and relocating the manufacturing facilities near the borders.

Conclusion:

Greening the trade facilitation processes requires producing clean energy on a massive scale which can be generated from hydropower, solar and wind energy in Nepal. The focus should be given to developing mini and micro hydel plants in remote and isolated settlements in the hinterlands. Sub-regional and regional approaches should be pursued to reduce the logistics costs and greening the larger supply chains.

The major export commodity in Nepal is derived from agriculture. Increasing the production of crops through the use and application of organic farming will be best suited for greening the production process, which eventually increases the export proceeds, and enriches the value of the supply chain. However, greening the supply chain of goods requires additional resources, skills, and efforts which are normally out of reach of poor countries. Hence, cooperation should take place at the bilateral and regional levels for fuller implementation of the provisions made in the international instruments. The developed countries and the multilateral financing institutions should demonstrate generosity and support the developing and least developed countries to establish a resilient, eco-friendly supply chain for a sustainable future.

(Ojha is a former secretary, Government of Nepal.)

(This opinion article was originally published in  January 2025 issue  of New Business Age Magazine.)