Sean Woolfrey, tralac Researcher, asks whether we will see a WTO Trade Facilitation Agreement in 2013

Late last month, World Trade Organisation (WTO) Director General Pascal Lamy met with Trade Ministers at the World Economic Forum in Davos, Switzerland in order to discuss ways to ensure substantial results at the 9th WTO Ministerial Conference to be held in Bali, Indonesia in December this year. The Ministers agreed that the Bali agenda should focus on the issues of trade facilitation, agriculture and certain topics of special interest to least developed countries (LDCs). An Agreement on Trade Facilitation is considered by Lamy and others to represent ‘low hanging fruit’ due to the relatively uncontroversial nature of the issue and the consensus on the benefits it would generate. Trade facilitation talks are therefore likely to be central to determining a successful outcome in Bali.

Trade facilitation was put on the WTO agenda at the Singapore Ministerial in 1996, becoming known – along with investment, competition and government procurement – as one of the ‘Singapore Issues’. Trade facilitation is also the only one of the ‘Singapore Issues’ to have been retained during the Doha Round. Following several years of exploratory work, formal trade facilitation negotiations were launched in July 2004, with the modalities for these negotiations outlined in Annex D of the so-called ‘July Package’. The negotiations focus on drafting the most appropriate rules from both a technical point of view and from the perspective of economic development and the prevailing circumstances in developing countries. In particular, the negotiations “aim to clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit”. The negotiations also aim to enhance “technical assistance and support for capacity building” and develop “provisions for effective cooperation between customs or any other appropriate authorities on trade facilitation and customs compliance issues”. Furthermore, the outcomes of the negotiations are expected to “take fully into account the principle of special and differential treatment for developing and least-developed countries” and such countries are not expected “to undertake investments in infrastructure projects beyond their means”.

Many developing country WTO Members were initially opposed to the inclusion of trade facilitation on the Doha agenda, especially if this was not accompanied by efforts to address outstanding issues from the Uruguay Round. Some developing countries questioned the developmental impact of new commitments on trade facilitation, while many were concerned that they did not possess sufficient capacity to implement such commitments and that adequate technical assistance to address implementation challenges would not be forthcoming. Developing countries have repeatedly stressed the importance of special and differential treatment and technical assistance provisions for a successful outcome to the negotiations. Focusing on these two elements, developing countries have become active participants at the trade facilitation negotiations, submitting numerous proposals. Among other things, developing country WTO Members have proposed technical assistance for ‘difficult to implement’ commitments, additional transition periods and the possibility to select which commitments to implement.

Despite the initial scepticism of developing countries towards the inclusion of trade facilitation on the Doha agenda, there is currently widespread agreement that developing countries stand to benefit from trade facilitation reforms and that a multilateral WTO Trade Facilitation Agreement can play a positive role in promoting such reforms. It has been pointed out, for instance, that inefficiencies relating to administrative procedures and operations tend to be common in developing countries and LDCs, and that these inefficiencies are often more costly than tariff barriers to the domestic economy. Recognising these factors, developing countries have realised that the potential gains from trade facilitation reforms are very high, and that the goals of the trade facilitation negotiations do not conflict with their pursuit of economic development.

Trade facilitation reforms such as the simplification and harmonisation of customs procedures or the improvement of border infrastructure and management systems would increase developing countries’ capacity to trade, and would assist traders in these countries to compete with or integrate into global supply chains. Such reforms would also increase customs efficiency, improve revenue collection, reduce corruption, promote foreign investment and lower the various transactions costs involved in getting goods to market. In terms of the value of such gains, World Bank research suggests that for every dollar spent on such reforms in developing countries, there is a return of up to 70 dollars in economic benefits. Lamy, meanwhile, maintains that cutting red tape by half could stimulate the global economy to the tune of 1 trillion dollars, roughly the same amount that would be generated by removing all remaining tariffs.

Lamy further believes that such an outcome could be achieved through the conclusion of a Trade Facilitation Agreement. This agreement would represent a ‘win-win’ for all, by enhancing developing countries’ capacity to trade, strengthening the WTO’s development mandate and promoting global economic growth. Furthermore, the conclusion of an agreement in this area could breathe much-needed life back into WTO negotiating processes.

Despite apparent consensus on the desirability of such an agreement, it is difficult to assess the prospects for the conclusion of a Trade Facilitation Agreement by the end of 2013. Unlike in some other areas of the Doha negotiations, significant progress has been made in the trade facilitation negotiations in recent years. In 2011, for instance, the chair of the trade facilitation negotiations was the only chair to submit a new, full draft by an Easter deadline for such submissions. The draft suggested that there were few obstacles in the way of a deal, and prompted much speculation that an agreement on trade facilitation could soon be achieved.

However, while the outlines of a Trade Facilitation Agreement are already clear, some technical differences remain on the specific provisions. For example, developing countries want credible commitments on technical assistance and support for capacity building. While these are certainly not insurmountable challenges, a potentially more significant obstacle to the conclusion of an agreement is the insistence on the part of emerging economies such as India and Brazil that trade facilitation not be de-linked from other aspects of the Doha Round. These countries doubt whether trade facilitation can really be a ‘self-balancing pillar’ within the Doha negotiations and do not want to ‘give away’ trade facilitation without getting something in return. Given the challenges that other areas of the negotiations have faced, finding another form of low-hanging fruit with which to balance trade facilitation may prove difficult.

The upshot of all of this is that, despite consensus on both the desirability and the basic content of a Trade Facilitation Agreement, the particular dynamics of WTO negotiations – and of interstate bargaining generally – mean that it is likely to prove quite a task to conclude such an agreement by the end of the year. Nevertheless, given the WTO’s desperate need to reassert its relevance as a forum for trade negotiations, and the lack of alternative low hanging fruit, a concerted effort to realise a Trade Facilitation Agreement may prove an investment worth making.

Tell us what you think.

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Sources:

“A Down Payment on Development: Conclude a WTO Trade Facilitation Deal”. Available online at: http://www.gbdinc.org/PDFs/Trade%20Facilitation%20Op%20Ed%20-%20A%20Down%20Payment%20on%20Development.pdf

Lamy, P. 2013. A trade facilitation deal could give a $1 trillion boost to world economy. Speech to the Chittagong Chamber of Commerce in Bangladesh on 1 February 2013. Available online at: http://www.wto.org/english/news_e/sppl_e/sppl265_e.htm

“The launching of negotiations on trade facilitation”. Available online at: http://www.wto.org/english/tratop_e/tradfa_e/tradfa_negoti_e.htm

UNCTAD. 2011. Reflections on a Future Trade Facilitation Agreement: Implementation of WTO Obligations. A Comparison of Existing WTO Provisions. Available online at: http://unctad.org/en/Docs/dtltlb20102_en.pdf

“WTO Chief urges India to show flexibility in trade facilitation stance”. Available online at: http://www.cuts-citee.org/pdf/press_release-WTO_Chief_urges_India_to_show_flexibility_in_trade_facilitation_stance.pdf

“WTO to deliver results in Bali”. Available online at: http://www.admin.ch/aktuell/00089/index.html?lang=fr&msg-id=47576