GENEVA — Executives from major freight-forwarding companies, exporters and experts urged the 148 nations of the World Trade Organization to work toward lowering trade barriers to logistics services during recent talks here.
Logistics costs — primarily transportation and warehousing — can be a major competitive issue for exporting nations. In developed countries they average around 10 percent of the cost of goods, while in some less-developed nations the cost of shipping goods can equal the cost of making them.
“There’s a need to promote safe freight logistics services liberalization,” said Shong-Lee Su, a member of the Logistics Council of Taiwan.
Service providers were looking for the WTO talks to deliver free access to markets and nondiscriminatory treatment in access to ports and port services, said Peter Blankestijn, manager of maritime policies and regulatory affairs at P&O Nedlloyd, the world’s fourth-largest container shipping company.
The business leaders voiced their support for a deal during a WTO-sponsored experts’ session on freight logistics held at the agency’s Geneva headquarters.
Thomas Chan, Hong Kong’s deputy WTO representative, said in an interview that businesses in developing countries engaged in the export of goods such as textiles, apparel and footwear face logistics costs that range from 20 percent to 60 percent of total costs.
In the case of Hong Kong, he said, the costs tend to be at the lower end, around 20 percent. Chan stressed that while Hong Kong’s huge investments in infrastructure and shipping facilities are paying off, he added that this was only half the story.
“If in other markets, where our products end up, the logistics services are not efficient or sufficiently liberalized, our exporters incur costs,” he said. “So liberalization is globally a good thing.”
Executives at the meeting said reforming logistics rules would allow them more certainty in making investments in foreign countries. Every WTO member depends on a competent and efficient supply chain to get goods to export markets, Chan said.
“The more liberalization in the chain, the greater the benefits for all,” he said. “Not only logistics providers, but users as well. The latter actually derive greater benefits.”
That’s because, in theory, opening logistics businesses to more competition could drive down prices the same way that it does in the trade of goods.
Peter Faust, head of trade logistics at the U.N. Conference on Trade & Development, said shippers are looking at transport costs, but also at all costs of production, marketing and distribution. The objective was the optimization of total cost rather than components, Faust said. Lower transportation costs could help to offset higher wages for production workers, for instance.
A group of WTO members — Hong Kong, Australia, Liechtenstein, Mauritius, New Zealand, Nicaragua, Switzerland and Taiwan — recently offered a proposal on how to deal with logistics services liberalization. The European Union and the U.S. have also now joined in support of the proposal.
“Cost reductions or quality improvements in the supply chain benefit the exporter through increased competitiveness, as well as the importer [and] consumer through lower total prices paid,” the proposal said.
It asserted that governments should clear the way for free trade in logistics by opening the right of establishment to foreign operators in cargo-handling, container-handling, storage and warehousing, and transport agency services.
Taiwan’s Shong-Lee noted that holding inventory was the biggest component of logistics costs, representing 53.3 percent of average costs. It’s followed by transportation, which accounts for 33.5 percent of costs, administration at 8.8 percent and warehousing at 4.1 percent.
In 2002, logistics costs accounted for 12.2 percent of Taiwan’s GDP, and in the U.S. and Japan were around 10 percent and 12 percent, respectively, he said.