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TRADE IN THE LAND-LOCKED STATES INFLUENCED BY INTERNATIONAL COMMERCIAL LAW

INTRODUCTION

Countries that are much more open to foreign trade tend to grow faster, innovate, increase productivity, and deliver more wealth and resources to their population. International trade allows countries to expand their markets and obtain access to goods and services which would otherwise be unavailable domestically. Engagement in international trade benefits developing countries in a variety of ways. They could benefit from resource allocation based on comparative advantage, the use of economies of scale and greater capacity utilization, technological advancements, gains in domestic savings and foreign direct investment, and increased employment.

The expanding complexity of business has significant implications for the world’s poor, who are routinely walled from global, regional, and also local markets in disproportionate numbers. Poverty is often concentrated in areas with limited access to vibrant economic centers. Businesses and communities in these locations miss out on opportunities to create competent, competitive workforces since they aren’t connected to global supply chains and can’t expand their products and talents as easily.

DEFINITION OF LANDLOCKED COUNTRIES

A land that is surrounded by land on all sides is called a landlocked country. Being such a landlocked country was historically seen to be disadvantageous. It prevents the country from profiting from its industries and inhibits trading opportunities. It is also possible for a landlocked country to be surrounded by another landlocked country, which is known as a doubly landlocked country. In the world, there are two such countries: Liechtenstein in central Europe and Uzbekistan in Central Asia.

Landlocked countries (LLC) are defined only by their geographic location. These are countries that do not have direct access to the sea. They are almost entirely reliant on neighboring transit countries for their export earnings and face high transaction costs, owing to high transportation costs, insufficient infrastructure, bottlenecks associated with import and export necessities, along with inefficient customs and transit procedures. This reliance makes it more difficult for them to integrate into the global economy, reducing export competitiveness and foreign investment inflows. Furthermore, it has been clear in recent decades that the sea’s resources will serve an ever-increasing presence in the international economic picture.

Whereas the sea was originally thought to be just a provider of animal and plant products, it is now expected to provide a range of mineral and hydrocarbon riches to meet the requirements of a growing population. While harvesting particular minerals may not be viable for many countries at this time, there appears to be no doubt that mineral harvests will then be significant in the future. As a result, LLCs require full access to and from the sea, not just for importing and exporting commodities and preserving worldwide competition, but also for access to the sea’s resources. Almost every publication on public international law and development has a section on LLCs and their plights, confirming the importance of a coherent system assuring access.

The majority of landlocked developing countries (LLDCs) confront geographical constraints. They are still on the outskirts of big markets. They have lower per capita income than their transit neighbors, and they are typically reliant on the markets, infrastructure, and institutions of their transit neighbors.

The United Nations’ Almaty Programme of Action, published in 2003, recognized that landlocked developing countries had unique demands in terms of lowering trade costs and supporting growth. The initiative and its implementation, which included help from foreign agencies like the World Bank, have been heavily mainly used to connect LLDCs to markets and promote infrastructure that is supplemented by “soft” investment, particularly in commerce, transportation, and transit measures.1

PARTICIPATION IN THE INTERNATIONAL TRADE LAWS

To accomplish so, they crafted treaties and created economic relationships as well as transportation resources. The majority of their business is conducted overland by truck or rail. Even though some landlocked countries (for example, Hungary, Austria, and Slovakia) are on major rivers and can move commodities by ships and barges, others are not.

Outside of Europe, unfortunately, most landlocked countries are impoverished because the absence of access to a seaport (or seaports) raises the cost of shipping and receiving essential goods.

The structural transition of LLDCs has been progressing steadily since 2003. LLDC countries are more likely to be vulnerable than their coastal counterparts due to a lack of diversification in export composition. Talking about real income and exports per capita, resource-rich LLDCs outpaced their resource-scarce counterparts after 2000. Yet, most of that expansion was fuelled by a decade-long increase in commodity prices. Landlocked countries’ trade costs are still significantly higher than those of nations. They obstruct the evolution of LLDC economies significantly.
However, numerous beneficial advances have occurred during the implementation of the Action Plan.

During this time, investment in access infrastructure has indeed been prioritized. For example, the World Bank Group has increased its proportion of projects delivered to the Almaty goals.1

Additionally, raised public awareness of trade facilitation problems led to significant reductions in import and export lag times on most routes. Time spent in ports or at borders has decreased — sometimes substantially, as the case of East Africa demonstrates.

Indicators of facilitation and logistics, like the LPI or the Doing Business, demonstrate that, while LLDCs’ performance lags below that of their transit counterparts, they are gradually catching up. LLDCs have also made significant progress in other aspects of connection, such as internet and communications technology development (ICT).

CHALLENGES LAND-LOCKED COUNTRIES FACE

Access to the water is a big stumbling block to growth. Developing countries, which face a slew of fundamental issues, are disproportionately affected. Being at the center of a continent, on the other hand, opens up a slew of possibilities. Despite its landlocked location, Rwanda plans to get to be a regional infrastructure and service hub.

In 2015, a third of the nations with relatively low human development according to the Human Development Index were landlocked. These were the nations with the shortest life expectancies, lowest levels of education, and lowest per-capita income. Furthermore, landlocked countries’ economies grow at a slower rate than countries with sea access. According to Mackellar et al. (2000), being landlocked diminishes a country’s average yearly growth by 1.5 percent.

As a result, landlocked emerging countries pay a tremendous premium for not having their own seaport. Their trade depends on other countries’ ports. The greater the transaction costs, the worse the transportation links are. Furthermore, many transit nations levy fines and tolls, raising costs even more.2

Delays are caused by poor infrastructure, and border delays are another important worry. 75 percent of all delays are caused by customs, tax, as well as other bureaucratic procedures. Such delays have a particularly negative impact on the trading of perishable items such as farm commodities. Importing and exporting products takes an average of 42 days and 37 days in landlocked underdeveloped countries. Coastal developing countries only require half as much time as the rest of the world.

Because landlocked countries rely heavily on their neighbors for transportation, it is critical that the latter be politically stable and well-run. Alternative marine routes must be identified in the event of conflict or instability. This can be quite expensive, especially if a new road infrastructure or railway is required.

The COVID-19 pandemic has impeded the involvement of LLDCs in global trade, according to recent research from the WTO Secretariat. The report, which was submitted to the UN Office of the High Representative for Least Developed Countries, Landlocked Developing Countries, and Small Island Developing States (UN-OHRLLS), assesses progress on the multilateral trade actions recommended by the Vienna Programme of Action for LLDCs for the period 2014-2024.2

A report also analyses WTO members’ notifications on COVID-19 and includes information from the Sustainable Development Goals (SDG) trade monitor webpage, which was introduced in October 2020. The Vienna Programme of Action for LLDCs for the Years 2014-2024 opens in a separate window, which recommends actions to be taken by LLDCs, transit countries, and development partners to boost the economic development of LLDCs, is used to measure progress.

The COVID-19 epidemic has aggravated LLDCs’ already precarious situation, according to the research. Government-imposed trade restrictions in reaction to the crisis have resulted in higher trading fees, delays for traded goods, and extra technological trade obstacles.

The COVID-19 epidemic has aggravated LLDCs’ already precarious situation, according to the research. Government-imposed trade restrictions in reaction to the crisis have resulted in higher trading fees, delays for traded goods, and extra technological trade obstacles.

SOLUTIONS AND STEPS TO BE TAKEN

In some areas, progress has been slower. Adoption of regional cooperation programs to facilitate commodities movement, or restructuring of the services sector, such as trucking, are examples. Numerous bilateral, regional, and even multilateral agreements involve LLDCs. Many transit agreements, on the other hand, are frequently written haphazardly and do not necessarily indicate how governments will execute and administer them. There are several overlaps and conflicts as well. Some agreements, such as bilateral treaties, are protectionist in nature, making it difficult to establish high-quality services.

Policymakers and development practitioners must maintain focus in key areas over the next decade in order to minimize trade costs and enhance growth.

  1. For infrastructure, LLDCs should implement a vignette toll system to enable far more efficient infrastructure cost recovery plus road maintenance.
  2. One possible option for the railway system is to link railway infrastructure initiatives with those of the extractive industry, requiring mining corporations to generate cash for infrastructure construction and upkeep. LLDCs would benefit from larger economies of scale as a result of this.
  3. Scheduled maintenance is extremely recommended to avoid increased repair costs if repairs are postponed.
  4. It’s critical to look at new ways to raise money to expand and maintain existing transportation infrastructures, such as cross-border investment or deals concessions. In general, LLDCs should invest just when traffic is predicted to reach economies of scale that will support operational costs.

With regards to the facilitation of Trade, despite tremendous advances in trade facilitation, there are still many obstacles to overcome, particularly in better integrating border administration and facilitating procedures outside of customs (there will be an intervention of control agencies). The Bali Trade Facilitation Agreement aids LLDCs that rely on third-country transit to reach ports. However, because its major focus is restricted to the customs department, the use of an IT system, and information access, it only provides a partial answer. Some features of the governance structure are described in the Bali TF Agreement, including the creation of a new Trade Facilitation Committee and potential subsidiary institutions, but much of it remains to be formalized. The value-conscious of this FTA package would be determined by how quickly the deal is ratified.

Finally, a push is long necessary for two related sectors, both of which are regional and cross-border in nature: trucking reform and transit regime implementation. Trucking is still the primary form of freight transportation in most LLDCs, so a system comparable to the International Road Transport (TIR) system, wherein customs regulation is carried out in a globally coordinated manner, would be beneficial to many LLDCs. Some transit changes have been attempted, including measures to regulate the cross-border mobility of transportation vehicles, but they have only had little success. The new initiatives should concentrate on strengthening the transit system, changing transportation market regulation, maximizing multimodal and railroad potential, and investigating air cargo transportation.

To properly discuss implementation impediments and increase the effectiveness of transport systems, more decisive action is required, based on TIR or European transit standards. These should include the following:

Removing market distortions in international transportation and encouraging quality and compliance incentives (such approaches can be supplemented with capacity building);
Implementation of a particular worldwide transit document (“carnet”) for an area, eliminating the need for re-submission at each border;
Creating a comprehensive regional IT system that enables the commencement, tracking, and termination of transit operations across borders (Central America just deployed such a system, the TIM); and
Putting in place a shared guarantee mechanism, the specifics of which would be determined by the regional financial services architecture.

Despite the obstacles that landlocked developing countries encounter, their inland location offers some advantages. They have the potential to become regional manufacturing, infrastructure, and service hubs. Rwanda is one country that has taken use of its strategic location to attract foreign investment. Rwanda has is now one of Africa’s fastest-growing economies, has made significant progress in addressing the ravages of the 1994 genocide. It is envisioned by the government as an infrastructure and service center for Southern and Eastern Africa. It has attracted a number of investors who have established – or will establish – assembly plants for automobiles (Volkswagen), computers (Positivo), and mobile phones (A-Link Technologies).

Airfreight may be a viable option for reducing transit country dependency. Diamonds, for example, are Botswana’s primary export. Air travel, not ships, railways, or automobiles, is necessary for diamond trading. Botswana is a wealthy country in Sub-Saharan Africa. The fact that it has solid governance has undoubtedly aided it.

Bureaucratic barriers should be removed to encourage trade and reduce business costs. Regional economic organizations like the Common Market for Eastern and Southern Africa (COMESA) have adopted steps to eliminate transit delays and administrative red tape. Despite the approval of the COMESA Protocol on Transit Trade and Transit Facilities, there is still more work to be done.

CONCLUSION

With the adoption of trade liberalization policies in developing land-locked countries around the world, concerns about international trade and economic growth have taken on greater significance. Globalization is vital for international trade and its effect on macroeconomic progress. Economists and policymakers from rich and developing economies are divided into two factions when it comes to the matter of international trade on economic growth.

International trade, according to one group of academics, has resulted in undesirable changes in the economic and financial prospects of emerging countries. Thus, according to them, the benefits of trade have primarily benefited the world’s wealthier countries.

A landlocked country needs accessibility to a seaport because most of the world’s trade flows by sea. The ministerial level is in charge of this. Treaties must be made for the free transit of products not remaining in the country to the harbor. It’s likely that certain areas of the seaport will be designated as a Free Trade Zone, thereby making that area part of the landlocked nation’s seaport territory.

All of this is contingent on positive relations between the two countries. If relations between the two countries get tense, the country possessing the port might block access to it, making life difficult for the country seeking to export goods to the market.

References:

  1. https://www.worldbank.org/en/topic/trade/publication/landlocked-countries
  2. https://www.wto.org/english/news_e/news21_e/devel_26apr21_e.htm

This article is written by Tingjin Marak, a BA/LLB student at Ajeenkya DY Patil University Pune.

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