A comment on logistics and related services in the context of the GATS negotiations

1. In an earlier “Concept Paper” on e-commerce and logistics, the Hong Kong Coalition of Service Industries highlighted the potential for Hong Kong to develop into an information technology based trading hub, through integrating e-commerce and logistics. In the paper we made a case for turning Hong Kong into a leading logistic hub of global scale, an e-commerce based logistics centre serving not just Hong Kong and China but the world. Such a centre will revolutionise the way Hong Kong’s external trade is conducted. Hong Kong will be a centre for direct B2B trade via the Internet, which will facilitate just-in-time management as well as smooth, seamless transport and distribution of traded commodities. This will reduce stock wastage, transport and processing to a minimum, thus enhancing efficiency of the trade process.
2. In championing logistics we are not promoting a particular service sector. Instead, we see logistic hub as a strategic progression of Hong Kong from its current role of a trading centre. It is a response to the challenge of an increasingly competitive global trading environment.
3. The development of Hong Kong as a logistics hub will be facilitated by trade liberalisation, e-commerce development, and closer economic integration with Mainland China. As an “efficiency business”, logistics represents the convergence of the higher value added elements of the production and distribution chain. Hong Kong can progress from a leading trading centre to become the premier service provider for international trade.
4. We welcome the government study on logistics coordinated by the Port and Maritime Board, as well as the WTO paper on logistics and related industries prepared by the Trade and Industry Department. In relation to the WTO paper, our overall comment is that it is well written but from the traditional, bottom up viewpoint (probably in regard to the audience it addresses.) Our view is that the determinant factors in modern logistics are its Time Critical and Time Definite elements out of which the other services flow and are adapted. This ought to be the approach adopted by a paper for the logistics industry.
5. Other specific comments include the following:

• Para 2 - logistics also comprises supply chain management. Although separate in concept historically there is significant inter-relationship and overlap and there is a trend (noted in the para) to outsource both to service providers and advisers.
• Para 3 - in the US estimates of the costs are around/just below 10%, for China by comparison the estimate is 30%.
• Para 3 - the driver in logistics is to deliver the perfect order, i.e. reduce errors and costs but it is more than just transport planning but touches into intermodal services, storage etc.
• Para 4 - the nub of the question is where are the ends of the chain. i.e. the ultimate supplier of raw materials into the manufacture at one end to the ultimate customer at the other. There is a need for a classification of “Logistics and Supply Chain Management” with existing categories as sub-headings.
• Para 6 - one might add (unless clearly understood to be included within (a) to (j) in the list): packaging, integration, production completion – if supply chain management is included one could also add maintenance. Having completed the list one needs a matrix, the items listed being the left vertical column and “Time Critical” and “Time Definite” being the horizontal column.

6. There is much more to do and a lot to be negotiated. Hong Kong could very well be making a substantial contribution to the negotiations, as we have a great interest in a successful outcome which would see significant trade liberalisation.
7. As a step forward we suggest that there should be better coordination between government and the private sector in understanding and formulating negotiating strategies for logistics and related industries. Perhaps a small working group should be formed comprising negotiators and industry representatives to continue to monitor the development of the negotiations.