Removing specific non-tariff barriers throughout the end-to-end value chain of medical devices could potentially generate up to $1.5 billion in economic growth per year for Mexico, the lion’s share of which would come from trade with the US.
This is the finding of a new joint study by the World Economic Forum, Bain & Company and the Mexican government. The study is part of the World Economic Forum’s Enabling Trade initiative, the primary objective of which is to ensure growth in trade and momentum for the global implementation of the 2013 Bali Trade Facilitation Agreement.
By focusing on high-potential industries and analysing the quality conditions of the corresponding regulatory and customs processes, infrastructure and market access, companies close to the tipping point of competitiveness could increase their share in this sector’s global production by 10% to 20% and also achieve up to 9% of cost savings. Vietnam was also selected for a similar light-touch analysis, which found that by addressing numerous challenges in procedures, documentation and automation, the country could deliver trade savings of 2-3%, making it significantly more competitive.
Ildefonso Guajardo Villarreal, Secretary of Economy of Mexico, said: “Mexico’s government has made a strong commitment to boosting the country’s competitiveness in global trade, and the Ministry of Economy recognizes that trade facilitation is a key element in achieving this objective. The end-to-end value chain analysis proposed by the World Economic Forum has proved to be useful methodology, not only to identify trade barriers, but also to highlight the importance of coordination among public-sector institutions. It is now evident that Mexico’s success in stimulating trade largely depends on harmonized efforts to overcome obstacles in a number of critical areas.”
To accelerate its trade facilitation efforts and launch initiatives that will benefit the global manufacturing environment and the nation and people of Mexico, some of the recommendations outlined in the report include:
Market access: Make sure small and medium-sized companies are aware of foreign opportunities by creating a portal that integrates all the support programmes (financing, intellectual property protection, market data, etc.) from the different government institutions. In the domestic market, drive consistency across public health institutions when it comes to the criteria for products to access the basic formulary and, where possible, look for a demand-driven (rather than a budget cycle-driven) timeline on public tenders.
Border administration: Standardize the interpretation of rules by customs offices with a bold move towards more automated processes that eliminate inconsistency.
Infrastructure: Reduce damages and delays at highway checkpoints by increasing the use of non-intrusive inspection technologies and ensuring strong coordination among enforcement agencies to limit the number of stops and frequency of inspections.
Operating environment: Conduct analyses to understand the root causes of inefficiency in complex regulatory processes and develop an action plan to optimize end-to-end processes. Complement this with an interface such as the Single Window to facilitate simultaneous processing, reduce delays, minimize errors and increase visibility.
“The ultimate objective is to propose specific actions to mitigate or remove some existing trade barriers horizontally across the value chain and get them included in the agenda of the Mexican Government to unlock Mexico’s trade potential in the short term”, said Rodrigo Rubio, a Bain partner and co-author of the report. “We are hopeful that the collaborative work that was done by public and private partners shows a way to identify and address issues that, if solved, could strengthen Mexico’s position as an even more attractive market for national and international players.”
More importantly, these recommendations could be replicated in other countries including Brazil, Argentina and Chile, reinvigorating growth there.