Making a case for the ratification and implementation of the WTO Trade Facilitation Agreement
In recent times, exporters, importers and manufacturers have decried the high cost of doing businesses at Ghana’s ports and borders. The delays and its attendant cost have placed huge burden on businesses.
The World Trade Organisation (WTO) including other international organisations have also recognised these difficulties and so at the 2013 Bali Ministerial Conference, an agreement on Trade Facilitation which contains provisions for faster movement, discharge and clearance of goods, in addition to transit goods was concluded. Trade facilitation is a concept geared towards the simplification of import and export procedures with the overarching aim of reducing trade transaction costs. It also emphasizes transparency of procedures, harmonization and modernization of international trade procedures.
The agreement also sets out measures for effective collaboration between customs and other key stakeholders on trade facilitation and customs compliance issues. Provisions for capacity building and technical assistance for least developed and developing countries was also included in the agreement. The pdf Trade Facilitation Agreement (TFA) (150 KB) amendment protocol was adopted by the WTO in 2014, consequently paving the way for member countries to ratify the agreement through their domestic legislative procedures.
The Trade Facilitation Agreement is very important to businesses because it can have a major impact on bringing down trade transaction costs. There are high transaction costs with respect to international trade in developing countries and these inhibit exporters and importers from integrating their businesses in the international markets. Ghanaian traders are better able to benefit from this agreement when ratified and implemented. Though Ghana has shown signs of commitment to the agreement by establishing a National Trade Facilitation Committee, it is yet to ratify the Agreement or send a notification on a category of the Agreement to the WTO. Whiles the agreement is yet to be ratified, traders have given positive remarks about Ghana’s implementation of a single window system, an aspect of the Trade Facilitation Agreement.
The relevance of trade facilitation has long been captured in the 1994 General Agreement on Tariff and Trade of the WTO thus in articles V, VIII and X. However, considering the increases in technology and the dynamics in international trade after the GATT, there was the need to enact an agreement that addresses trade facilitation issues in modern times. The scope of trade facilitation measures the GATT addresses is very limited. Beside the limited facilitation issues the GATT addresses, these articles are scattered in the text even though they are very important to business growth and the international trade process. These made it difficult to address trade facilitation issues, more so when it came to light that a trade facilitation agreement could reduce business costs by between $350 billion and $1 trillion, according to WTO (WTO, 2013), and could increase world trade by between $33 billion and $100 billion in global exports per year and $67 billion in global GDP (World Bank, OECD, 2011).
The new WTO Agreement on Trade Facilitation comprises three sections: Section I, deals with trade facilitation measures and obligations; and Section II, focuses on flexibility arrangements for developing and least developed countries (otherwise known as ‘special and differential treatment’) and Section III emphasizes institutional arrangements and final provisions.
This is the only time since the WTO was established that the capacity of a country to implement an agreement is clearly linked to the agreement, what is called special and differential treatment. The agreement also underscores the need to provide financial and technical support to developing and least developed countries in the implementation of the agreement. As a result, countries are required to categorize their commitments into A,B and C. Category A meaning fully compliant measures; Category B signifying partially compliant measures requiring transition period to nationally upgrade the measures and Category C representing measures requiring financial and technical assistance.
Following the repeal of about nine (9) Customs Acts some of which include the Customs Excise and Preventive Service (Management) Act, 1993 (P.N.D.C.L. 330), Customs, Excise and Preventive Service (Management) (Amendment) ACT, 1996 (Act 511), Customs and Excise (Duties and other Taxes) Act, 1996 (Act 512) and Customs House Agents (Licensing) Act, 1978 (S.M.C.D 188), a new Customs Act, 2015 (Act 891) was introduced as a replacement.Clearly,the new Customs Act 891 draws its strength from the WTO Trade Facilitation Agreement. It highlights issues such as Advance Ruling, post-audit clearance, risk management, provision of information which are key articles in the Trade Facilitation Agreement.
Though the Act compares favourably with the Trade Facilitation Agreement, there are several portions of the Agreement that the Act ignores. The Act does not highlight or capture some of the articles such as Establishment and Publication of Average Release Time, customs cooperation, Electronic Payment though it specifies that other than cash other means under the laws of Ghana could be permitted, i.e. Customs Act 891, Article 73(1).The strength of the Act also lies in its ability to address domestic issues such as Auctioned goods and free zones.
As at July 2016, 89 WTO members have ratified the TFA and have submitted mostly their Category A commitments. Once two-thirds of the 164 WTO members submit their ratification notice to the WTO, the agreement becomes enforceable irrespective of whether Ghana ratifies or not. Among the West African countries that have ratified the agreement include Niger, Togo, Côte d'Ivoire, and Mali.
Why the Agreement will benefit Ghana
Ghana’s exports are mostly time sensitive products. Statistics on trade with Ghana’s main trading partner, EU, shows that export of agricultural products i.e. food (including fish) and raw materials constitute 60.5% of the overall total export to the EU in 2014. As such, speeding the export process will help companies deliver on time to their foreign partners.It will also save companies in Ghana the cost of prolong refrigeration as a result of delays at our ports. Indeed, the WTO indicated in its 2015 World Trade Report that by speeding up the clearance of goods across borders, trade facilitation could prove a boon for trade in perishable goods.
Majority of Ghana’s top 10 non-traditional exports, as shown in the figure, are agricultural product of which some are time sensitive. As Ghana’s export of non-traditional products continue to peak with the passage of time, we must speed up facilitation to the international market so as to derive the maximum benefits.
Over the years,Ghana has instituted reforms to encourage business and trading activities. However, it is limited by financial and technical resources as a result of competing demands from other sectors. This agreement provides the country the opportunity to categorize those items in Category C for which it can only implement if it receives financial and technical support. The resources that would have been channeled to these areas can then be used to develop other sectors of the economy.
The national single window which is in article 10 of the TFA and currently being implemented by the Ghana Revenue Authority and West Blue Consulting has so far yielded positive results. A research conducted in 2016 by the International Chamber of Commerce (ICC) and the World Trade Center (WTC) Accra with funding from BUSAC showed that it takes a maximum of 48 hours for importers to get their Customs Classification and Valuation Reports (CCVRs), something that took one to two weeks to get under the Destination Inspections Companies regime. The respondents (95%) also indicated that the various stakeholders at the ports are major source of delay in the system.
The delays at the ports create the opportunity for importers and exporters to make unsolicited payments. Indeed, the WTO World Trade Report 2015 corroborates this assessment by indicating that the incentives to engage in fraudulent practices at the border are greater when the time needed to complete trade procedures are longer. Since trade facilitation is expected to shorten the duration of these procedures, it creates important avenue for reducing the incidence of trade-related corruption.
The Boankra Inland Port and the Eastern Railway Line projects are part of Ghana’s Public-Private Partnership (PPP) pipeline projects by the Government of Ghana. The viability of this inland port and the railway line largely depend on usage by Ghana’s landlocked inland countries. As a result, ratifying the TFA will promote transit trade in Ghana since this is a major requirement of the Agreement. There will also be value for money on the 1.5 billion dollar Tema Port expansion project which is a joint venture between the Ghana Ports and Harbours Authority and three companies: Meridian Ports Services, APM Terminals and Bollore? Africa Logistics. Countries such as Ghana, Togo, Cote d’Ivoire, Benin and Senegal are presently competing for the same transit cargoes of Burkina Faso, Niger and Mali. Perhaps this is why Togo and Cote D’ivoire have ratified the agreement.
Ratifying the TFA will also serve as a sign of commitment to Ghana’s neighbouring landlocked countries that are currently patronizing the services of other ports such as Cote D’ivoire to Ghana’s disadvantage.
The agreement also provides the greatest opportunity to address the excessive delays in doing business across borders in the ECOWAS sub-region. Members should be bold to drag each other to ECOWAS or WTO in order that there will be improvement in flow of goods in the ECOWAS region.
Customs, Ministry of Trade and Industry, the private sector and all key stakeholders must work collaboratively to champion the implementation of the agreement once the Parliament of the Republic of Ghana ratifies the agreement. Implementation of the TFA should be done in tandem with active support to the private sector for Ghana to reap the benefit of the agreement.
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