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Trade, security, and development : squaring the circle

The intense global effort to achieve a grand compromise on the Doha round of trade negotiations confirms a growing worldwide consensus: International trade is essential to development, and multilateral trade agreements, though difficult, have significant benefits for all involved.

Yet a growing host of anti-terror trade security measures adopted in the wake of Sept. 11, 2001, may undermine trade benefits unless we can find a better way to help countries secure trade flows from illicit use while fostering trade and development.

New security measures have proliferated in immigration, finance and trade. Some measures are voluntary, offering carrots for countries that comply: The Container Security Initiative provides fast-track entry through U.S. Customs for goods that travel through megaports with high-tech scanning equipment and tough security procedures. Others single out countries for special scrutiny, such as the international Financial Action Task Force's watchlist, which catalogs countries that have not instituted international anti-money laundering regulations. Still others bar trade altogether if compliance is not forthcoming: Any food producer or packager wanting to export to the U.S., for example, must now register with the U.S. Food and Drug Administration.

These measures, and dozens like them, are here to stay so long as terrorists can use legitimate trade and immigration channels as tools for mass destruction. Moreover, they are proliferating. No one concerned with trade and development can treat security as a side issue or as a diversion from "real development issues." Those who support trade-led development cannot ignore the huge effects that security measures will have on developing economies' prospects for profitable trade with the developed world.

Some countries claim new security measures are just a new form of protectionism. But trade security is as essential for the economic growth and safety of the developing world, not just the developed. Countries from Kenya to Indonesia to Turkey have felt the terrible costs of terrorism in lives lost and economies devastated. What we need is a paradigm shift in how we develop and fund trade security measures to ensure that they actually achieve the goals of economic development and security over the long term.

First, we should heed the lessons of Doha and acknowledge that developing security standards multilaterally, though difficult, has real benefits. Security requirements are now developed through a hodge-podge of unilateral dictates, bilateral trade agreements and multilateral standards. The repetition and confusion is costly and slow. Moreover, standards that are not universal can create security gaps, just as reinforcing a pipe in one spot puts more pressure on remaining weak areas. Patchy standards create significant costs for a few countries, while doing little to prevent terrorists from exploiting the holes. Developing and adopting security standards multilaterally would at least provide a minimum security blanket for the trading system.

Second, we need to find a new way of paying for trade security measures. Under the current paradigm, countries pay for their own increased security. Since they benefit from freer trade, asking them to "pay to play" seems fair. Yet the "pay to play" system will not improve security, and will hurt trade and development. The fact is, good compliance is expensive, and many willing countries simply cannot afford to do it, or will take decades to meet suggested targets. Already, developing countries wanting to facilitate trade must undertake myriad reforms, from passing new laws to building new roads, modernizing ports, training customs officials and cutting red tape. Each activity is costly and requires time and resources to accomplish.

Asking poor countries to pay for security, atop all their other trade facilitation needs, will inevitably lead to unimplemented mandates. The developed world is then left with a choice: we can pretend that half-baked implementation is good enough, and thus compromise on security. Or we can keep these countries out of the trading system (or handicap their chances within it), and let them slip into greater poverty. Waiting for poor states to secure themselves will add years to the accomplishment of minimal worldwide security. Meanwhile, the snowball effect works against us. States weakened by a lack of access to legitimate trade will become weaker and more impoverished, making security more difficult for them, and allowing illegitimate trade to flourish. The "pay to play" mentality will thus create even greater threats to our security over time.

It is in the developed world's interest to have a secure and efficient trading system. We also benefit from a reduction in weak states that can provide havens for criminals and terrorists. We must therefore step up to the plate and help fund the necessary measures. The WTO can kick in some technical assistance through its integrated framework for least developed countries. Development banks should also be willing to add security measures to their trade facilitation assistance.

Facilitating trade, and securing trade flows, are both crucial for development. It's high time we take this issue out of the realm of politics, and into the realm of technical know-how. To do that, we need a paradigm shift in how we think about - and how we fund - security, trade and development. It may well be costly. But the cost of failure could be catastrophic.

Imad Tinawi and Rachel Belton are trade and development experts with Booz Allen Hamilton in Washington

Beirut,10 18 2004
The Daily Star
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