WTO members don't need to haggle over new round of tariff reductions and other such knotty issues at 9th Ministerial Conference in Bali, Indonesia in December 2013 in their mega-marathon quest for a new world trade deal.

They also need not discuss endlessly the prospects of global economic recovery. They should just look inwards in the spirit of know thyself. To be precise, they should simply pursue internal reforms especially in the entire area of supply chain. Economic upturn and robust global trade would automatically follow.

For the sake of formal talks, let WTO Secretariat draft a comprehensive agenda for soliciting voluntary and multilateral commitments to logistics reforms. The agenda should cover the entire logistics sector right from warehousing to IT-driven fourth party logistics. Since the 4th Ministerial conference at Doha in 2001, the sector has figured in talks in limited format as logistics services or as auxillary services to all modes of transport within the framework of General Agreement on Trade in Services (GATS).

While mulling over logistics reforms, the participants at Bali conclave should just reflect over what appears to be unbelievable findings of a recent study. It shows that improvement in logistics by each country can put world economy in a high trajectory.

The study released last month by World Economic Forum (WEF) concluded: “Reducing supply chain barriers to trade could increase GDP up to six times more than removing tariffs. They have been under managed by both countries and companies.”

Conducted in association with Bain & Company and the World Bank, the Study adds: “Reducing supply chain barriers to trade could increase GDP by nearly 5% and trade by 15%”.

The Study captioned ‘ Enabling Trade Valuing Growth Opportunities' articulates: “If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure and related services – even halfway to the world's best practices, global GDP could increase by US$ 2.6 trillion (4.7%) and exports by US$ 1.6 trillion (14.5%). For comparison, completely eliminating tariffs could increase global GDP by US$ 0.4 trillion (0.7%) and exports by US$ 1.1 trillion (10.1%). The estimates of the impact of barrier reduction are conservative; they reflect improvements in only two of four major supply chain categories.”

This is not for the first time a global study has plugged for logistics reforms. There have also been country or region-specific studies that make a compelling case for logistics reforms. These have acquired added importance with the expansion of broadband-driven information technology enabled services.

A China-centric logistics study released by Asian Development Bank in October 2012, for instance, notes: “The PRC's 2010 logistics cost–GDP ratio is almost twice that of countries in Europe or the US. This provides a general indication that the PRC must strive to improve its logistics efficiency, but there are also extenuating factors.”

The study captioned ‘the Transport Efficiency through Logistics Development

Policy Study' notes: “The PRC's logistics industry needs the government to address the identified deficiencies in market integrity, tax policy, and logistics park development, and to eliminate administrative barriers and create regional policies that favor local logistics enterprises. The challenges can be divided into infrastructure, market regulation, transport and logistics practices, and policy framework.”

According to the study, different governments adopt different approaches to logistics development. The approach may range from hands-off stance of the US Government to active Government intervention such as Germany's Freight Transport and Logistics Planning policy and Japan's Quadrennial Policy Framework for Integrated Logistics.

This should drive home the point at Bali conclave that high logistics cost countries should put in place appropriate integrated policies and regulations to bring about sea-change in the logistics.

An Indian Government-funded study released last year showed how the total volume of goods transported can be increased and how the cost of transportation can be reduced dramatically by changing the transport from the present mode to the optimal one, the multi-modal system of transport.

The study captioned ‘Total Transport Systems Study', observes: “There is a discernible gap between the way in which the traffic is actually moving today.”

Conducted by public sector company Rites, the Study observes: “For the business sector, logistics cost has become a critical factor in determining the ultimate market competitiveness of a product, thanks to intense competition triggered by the forces of globalization, easy permeability of technical know-how and wide range of choice for the users.”

The World Bank has been highlighting the virtues of logistics reforms regularly since 2007 through its Logistics Performance Index (LPI) report that it releases every two years.

As put by latest LPI report titled ‘Connecting to Compete 2012: Trade Logistics in the Global Economy', “Supply chains—only as strong as their weakest links— are becoming more and more complex, often spanning many countries while remaining critical to national competitiveness. Comprehensive reforms and long-term commitments from policymakers and private stakeholders will be essential.”

The latest report tracks logistics performance in 155 countries. It should help policy makers and other stakeholders in multi-dimensional logistics business to appreciate the supply chain challenges both in domestic and international trade.

Noting that logistics has crucial role to play in ensuring global food security, the report says: “an unreliable supply chain can cause domestic price shocks when supply chain disruptions cause local supply shortages.”

A study commissioned by India's National Manufacturing Competitiveness Council (NMCC) in 2011 observed: “It is high time for a country like India to have a comprehensive ?Logistic Policy? at the national level.”

Captioned ‘Methodology for measuring the logistics cost for major manufacturing exports and assessing its impact on their competitiveness', the study suggested that Parliament shall enact a bill on Logistics Services Regulation Act as part of the above policy, apart from recommending a slew of other initiatives to improve logistics to improve competitiveness of Indian exports.

Recounting exporters' numerous logistics woes, the study observed: “Apart from the delays in the congestion, the shippers face problems in obtaining the containers on time, the interest cost incurred due to the delays in the availing the benefits of various governmental schemes for exports promotion, demand of bribes for ‘speedy' work, detention time...”

The problem with countries like India is that they have put in place policies, regulations and schemes for different components of supply chain without creating an overarching framework for logistics sector as a whole.

India, for instance, encourages multi-modal transport, logistics parks/hubs, food storage warehousing, cold storages, dedicated freight corridors, container freight stations and special projects to improve rail and road connectivity with sea ports.

It has, however, a lot to do improve coordination between customs and export promotion authorities and between the States/provinces to transform India into a single domestic market free from city and State check-posts that levy local taxes.

Taking India as an example, WTO Secretariat should urge all emerging economies to first prepare a comprehensive blue-print for logistics reforms for respective countries.

Let each country present a country paper on logistics reforms at Bali conference. This should be starting point for securing country-specific commitments to improve external trade-related logistics.

As put by Scott Davis Chairman and Chief Executive Officer, UPS, USA in the foreword to WEF study, “ governments need to prioritize investments and ensure collaboration across countries, benefitting consumers through lower costs and more efficient global supply chains.”

He adds: “Reducing these trade barriers, such as customs clearance delays, lack of standardized procedures and poor infrastructure, will not be easy to achieve. However, by recognizing that we are now a global market and focusing on the “whole of the supply chain”, we can collectively create a more stable global economy.”