The WTO Breakthrough on the Bali Package: the trade facilitation value chain and African integration
Gerhard Erasmus, tralac Associate, discusses the implications of the breakthrough on the WTO Trade Facilitation Agreement for African countries
It took some time to resolve the difficulties which prevented agreement on the implementation of the “Bali Package”, adopted by the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia on 3 – 7 December 2013. This has been the first multilateral trade agreement of the WTO; which came into existence in January 1995. The package forms part of the Doha Development Round (which started in 2001) and is aimed at lowering global trade barriers and costs. Since July this year there has been an impasse in the implementation of this important set of decisions. This has had, in the words of the WTO Director-General Roberto Azevêdo, a paralyzing effect on negotiations “across the board”.*
African governments have also expressed concerns about the Bali Package; in particular how the Trade Facilitation Agreement would become binding; without other issues on the Doha Development Agenda being addressed. However, the actual impasse related to the political link between the Decision on Public Stockholding for Food Security Purposes and the Trade Facilitation Agreement.
At the end of November this impasse was resolved; resulting in a breakthrough in the functioning of the multilateral trading system. It signifies the WTO’s ability to generate agreement among the 160 Member States. This event will put the negotiating agenda “back on track”, according to Director-General Azevêdo.* If this optimism is to be justified a concerted multilateral effort will be needed. African nations have to be part of this endeavour; not only because they are WTO members but in order to promote their own development, regional as well as global integration.
The WTO Members came together at the end of November in a Special General Council meeting and took three very important decisions: First, they clarified the Bali Decision on Public Stockholding for Food Security Purposes. The peace clause agreed in Bali will remain in force until a permanent solution is found to this issue. This was a key issue for India.
Second, the Members agreed that work on the WTO’s post-Bali agenda will resume with regard to the Bali Ministerial Decisions on agriculture and cotton, the monitoring mechanism, and the LDC decisions on duty-free-quota-free access, the services waiver, and rules of origin. This development could be viewed as agreeing on the work programme on the remaining Doha development Agenda (DDA) issues, with a new target date of July 2015. Agriculture, services and industrial goods will presumably be back on the table.
Third, the Protocol of Amendment which formally inserts the Trade Facilitation Agreement into the WTO rulebook, was adopted. This clears the way for the Trade Facilitation Agreement to enter into force and to be implemented. The WTO Member States will now ratify the Agreement in terms of their domestic procedures.
It is estimated that the implementation of the Trade Facilitation Agreement could reduce trade costs by up to 15% in developing countries. This is particularly important for Africa where the cost of customs procedures tends to be around 30% higher than the global average; according to the United Nations Economic Commission for Africa.**
The Trade Facilitation Agreement holds the promise that specific support will be provided to help developing countries achieve the capacity to implement the necessary domestic reforms. For countries with weak customs infrastructures this Agreement can mean new and additional technical assistance and funding. At WTO level this is to be channelled through the creation of a new initiative, the Trade Facilitation Agreement Facility. This Facility has to provide assistance to LDCs and developing countries to develop projects and access the necessary funds to improve their border procedures, with all the benefits that that can bring. According to the WTO Director-General, this Facility is already in place and has become operational when the WTO Members took the decision on the Trade Facilitation Agreement.
This brings one to another dimension of the challenge facing African Governments with regard to prioritizing trade facilitation issues: to address them as part of their national development plans as well as their regional trade and integration agendas. Trade facilitation/governance and related services issues, not tariff negotiations, are Africa’s most pressing challenge in terms of regional integration and trade promotion.
In many ways trade facilitation in Africa is about long-standing issues of trade governance such as transparency, predictability, administrative efficiency, and a value chain of effective procedures, inter-agency cooperation, remedies, and getting rid of red tape and duplication. It would be wrong to view the Trade Facilitation Agreement as a new burden imposed on African nations as part of a particular multilateral consensus. The inability to effectively implement existing regional trade arrangements bears testimony to our long-standing failure to effectively deal with national and regional trade facilitation/governance challenges. And it is part of the explanation for why the rules-based nature of African trade agreements is a perennial issue. Dispute settlement is, for example, not pursued to enforce obligations; because the implementation of regional trade agreements is decentralized down to inefficient und under-capacitated domestic spheres of national government. Complaints about loss of sovereign “policy space” are repeatedly voiced. Regional secretariats are, as a rule, platforms to articulate national concerns; not regional compliance agendas.
It is true that the language of international law has now become part of the trade facilitation vocabulary and that customs procedures are being prioritized under the Trade Facilitation Agreement. Obligations have to be implemented within agreed timeframes; but with the qualification that for developing nations and LDCs this is made conditional on the availability of funds and assistance. This is why the Trade Facilitation Agreement Facility is a unique legal arrangement.
However, in the bigger context trade facilitation is in fact a more fundamental concern for Africa than suggested by the debate which we now hear around the implementation of the Trade Facilitation Agreement. It has been the neglected dimension of regional integration. And it has now become central to Africa’s regional integration and BIAT (Boosting Intra African Trade) agendas. This is inevitable, given their new emphasis on industrialization, infrastructural development, and being competitive under the conditions imposed by global and regional value chains. Unless we can avoid the costs of inefficiency we will remain uncompetitive.
The key lies in a realistic trade facilitation, services, and governance agenda. It is for these reasons that we need a fresh approach when it comes to preparing for the Continental FTA negotiations or dealing with the “built-in agenda” of the Tripartite FTA. The “developmental integration” goal will otherwise remain an elusive one. The old and tested top-down emphasis on tariff schedules has run its course.
For Africa the adoption of the WTO Trade Facilitation Agreement comes at an opportune time. It offers the opportunity to focus more sharply on the related governance challenges and to mainstream trade facilitation into local integration agendas. The first opportunities to do so will come when the Continental FTA is launched next year and the Tripartite FTA built-in agenda has to be completed.
* Said in his address to the African Union Conference of Ministers of Trade on 4 December in Addis Ababa, Ethiopia. Available at: http://www.tralac.org/news/article/6743-azevedo-africa-set-to-benefit-from-wto-breakthrough-on-bali.html
** These figures were mentioned by the Director General during his recent speech in Addis Ababa.