Discussions
The WTO Trade Facilitation Agreement – the central issue and the multilateral implication
Willemien Viljoen, tralac Researcher, comments on the recent failure by WTO members to reach agreement on the adoption of the protocol on the Trade Facilitation Agreement
In December 2013 the member states of the World Trade Organization (WTO) concluded negotiations on a Trade Facilitation Agreement (TFA) at the ninth Ministerial Conference in Bali. The main provisions of this Agreement relate to improving the efficiency of customs procedures, customs compliance as well as technical assistance and capacity building initiatives for developing and least-developed countries (LDCs). The deadline for the adoption of the Protocol of Amendment to insert the Trade Facilitation Agreement into Annex 1A of the WTO Agreement was set at 31 July 2014. Following this, the Agreement would enter into force once two-thirds of the WTO members have completed their domestic ratification process.
The TFA forms part of the wider package, adopted at the Ministerial Conference, which includes, amongst others, issues related to the public stockholding for food security purposes, improved market access for cotton products from LDCs, operationalization of the waiver for preferential treatment of services and service suppliers of LDCs and the establishment of a monitoring mechanism for the implementation of Special and Differential Treatment provisions in all WTO Agreements and Ministerial and General Council Decisions.
The conclusion of the Bali Package was almost derailed by a lack of movement on a proposal made by the G-33 group of developing countries to renegotiate parts of the WTO Agreement on Agriculture, but was saved by the adoption of a Peace Clause. The main sticking point concerned the provisions in terms of which food security programmes of developing countries will be treated as WTO-inconsistent agricultural subsidies. An interim solution which would see members refraining from challenging measures utilised by developing countries for food security public stockholding programmes through the WTO Dispute Settlement Mechanism for four years resolved the deadlock and the Bali Package was concluded. This issue has emerged again and at the centre of the deadlock is India’s refusal to support the TFA without a permanent solution to the matter of agricultural subsidies for food security purposes, under the Agreement on Agriculture. The 31 July 2014 deadline for the adoption of the Protocol of Amendment was consequently missed.
India’s National Food Security Programme makes provision for government to purchase wheat and rice from local farmers at administered prices that are higher than market prices. The fact that the difference between the administered price and market price is seen as a trade-distorting subsidy is amplified by the fact that the administered prices need to be compared to the average prices in 1986-88, in accordance with the Agreement on Agriculture. This translates to a very high margin of subsidisation.
The WTO Director-General, Roberto Azevêdo proposed a month-to-month work programme to India that would ensure that the food programme issue be permanently resolved by the end of December 2014. India’s counter offer reverted back to the original G-33 proposal that would allow for agricultural subsidies by developing countries for food security reasons to fall outside the ambit of trade-distorting subsidies or would adjust the current 1986-88 basis for comparisons to current market prices. This proposal did not find favour prior to the Bali negotiations and are still not popular with developed countries. The United States (US) argues that the food programme constitutes a trade-distorting subsidy which exceeds the allowable limit (10 percent of the value of production), and affords the government of India the opportunity to dump any subsidised surplus stock on international markets. These distinctly different views on the complex and intertwined issues of the importance of agriculture and agricultural subsidies in developing countries for food security reasons, sustainable development and poverty alleviation have resulted in the loss of the opportunity to create a multilateral solution to vital trade facilitation issues.
This lack of consensus among the WTO member states raises numerous questions and speculation regarding the future of the WTO and the multilateral trading system:
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Given the three pillars of the WTO (disputes, monitoring and negotiations) does this development signal the final nail in the coffin for the negotiations pillar of the WTO? What will the future be for the multilateral trading system if the focus of the WTO shifts purely to dispute settlement and monitoring the implementation of existing agreements?
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Some WTO members, including the US and European Union have discussed the possibility of moving ahead with the Trade Facilitation Agreement without the participation of India. Is this practically feasible given the opportunity for India to free ride on the back of simplified and efficient customs procedures in other WTO countries? This means that India’s exports to other WTO countries will benefit from the provisions under the TFA without India being obliged to afford imports from other WTO countries the same benefits within their borders.
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The TFA Facility was launched on 22 July 2014 to support increased technical assistance and capacity building for developing and least-developed countries to address trade facilitation issues under the Agreement. Although some countries have pledged funding, the operationalization of the Facility ceased with the stalemate in the implementation of the Agreement. Approximately 14 countries have already notified the need for assistance in various projects to the WTO which has now left these programmes without funding. Effectively multilateral solutions to address trade facilitation issues have now been sent back to the starting line drawn in 2008.
Sources:
WTO (www.wto.org)
The Times of India (http://timesofindia.indiatimes.com/Business/India-Business/Rich-nations-resist-Indias-deal-plan/articleshow/39448895.cms)