Trade Facilitation

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Trade Facilitation

• WTO Doha Round South Asia
• Linking Civil Society with Trade Negotiations

Sanath Jayanetti Institute of Policy Studies
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Outline

• Background Definitions
• Identification of trade facilitation needs and
  priorities
• Costs and benefits of trade facilitation measures
• Historical evolution in the GATT/WTO
• Clarification of GATT Articles
• Special Differential Treatment
• Negotiating Positions

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Background Definitions

• Today we have,
• Ever higher volumes of trade due to
  globalization, FDI, MNCs looking for cheapest
  inputs for their finished products in different
  locations, plethora of FTAs
• Traders are demanding faster clearance for their
  goods and increased administrative efficiency
  Trade velocity modern supply chain management
  techniques have increased the usage of just-in
  time manufacturing, global production sharing
  and outsourcing

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Background Definitions (cont.)

• Trade Facilitation the plumbing
• Cutting red tape at the border
• Reducing all transactions costs associated with
  enforcement, regulation and administration of
  trade policies (trade and tariff policy also
  plays a major role in trade facilitation)
• Involves simplification, harmonization and
  rationalization of trade procedures
• Can be achieved through automation, applying
  modern risk analysis techniques, transport
  procedures, etc.

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Background Definitions (cont.)
Source Trade Facilitation from a Developing
Country Perspective, National Board of Trade,
Sweden, 2003
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Background Definitions (cont.)

• Organizations that deal with trade facilitation
• World Customs Organization (WCO)
• UN Agencies such as United Nations Conference on
  Trade Development (UNCTAD), United Nations
  Center for Trade Facilitation Electronic
  Business (UN/CEFACT), United Nations Economic
  Commission for Europe (UN/ECE), United Nations
  Commission on International Trade Law
  (UNCITRAL)
• IMF, WB
• World Trade Organization (WTO), etc.

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Identification of trade facilitation needs and
priorities

• Need for
• Transparency of methods and procedures
• Avoid delays of border crossings
• No corruption
• Packaging and labeling requirements
• Similar national standards
• Facilitating physical movement of consignments
  (more relevant for land-locked countries)
• Creation of more efficient payment and credit
  arrangements
• Liberalization of exchange control, relaxation of
  stringent requirements on formalities on
  payments, insurance and other financial
  requirements

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Identification of trade facilitation needs and
priorities (cont.)

• A key feature of SAARC economic cooperation.
  Already established,
• Group on Customs Cooperation
• Group on Harmonization of Standards and
  Measurements
• Framework Agreement on SAFTA (Jan 2004) has made
  provision for trade facilitation measures under
  Article 8 (Additional Measures). Some of measures
  are
• Harmonization of standards
• Simplification and harmonization of customs
  clearance procedure
• Harmonization of national customs classification
  based on HS coding system
• Customs cooperation to resolve dispute at customs
  entry points
• Transit facilities for efficient intra-SAARC
  trade, especially for landlocked contracting
  states etc.
• The political will to implement trade
  facilitation measures seem to be lacking in the
  region.

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Colombo Port Containers moving out
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Costs and benefits of trade facilitation measures

• Benefits
• Shortening of waiting time for goods in transit,
  customs release and clearance
• Reduction of trade transaction costs for traders,
  especially for SMEs
• Improved revenue collection and effectiveness of
  border controls
• A more transparent and efficient regulatory
  climate for investors
• Improvement of efficiency morale and integrity of
  customs agencies
• Improved relations between authorities involved
  in border control related activities and the
  business/trading community
• Better functioning of public agencies and a more
  reliable basis for implementation of government
  policy

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Costs and benefits of trade facilitation measures
(cont.)

• Costs
• Substantial initial investment, varies according
  to the level of reforms needed and existing
  infrastructure. But, considerable improvement can
  be made within the existing framework w/o
  incurring heavy capital investments through,
  inter-alia
• Synchronized business timings at borders
• Customs procedures simplification and
  standardization
• Harmonization of trade documents
• Joint customs operations
• Simplification of transit trade

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Costs and benefits of trade facilitation measures
South Asia (cont.)

• Article V
• Problems with transit facilities between
  Bangladesh, India and Nepal
• Article VIII
• Bangladesh - Average 12 days to clear a cargo
  load, can take up to 30days for imported goods to
  be released through customs Hidden cost ranges
  from Tk. 4,700 to Tk 86,800.
• India - Exporter needs to obtain 258 signatures,
  make 118 copies of documents and wait for long
  hours.
• Nepal - For customs clearance 83 types of
  documents have to be filled with 102 copies and
  113 signature The human resource requirements
  for completing the customs procedure is estimated
  to be 22 days.
• Pakistan - There is a long circuitous road to get
  consignment into the country.
• Sri Lanka - There are a number of charges on
  imports.
• Article X
• In general, No known inquiry points, no
  consultative mechanism and appeal process.
  Difficulty in accessing information.
• Source Wickramasinghe, Upali A multilateral
  Approach to Trade Facilitation in South Asia,
  SAWTEE

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Costs and benefits of trade facilitation measures
case study

• The flow of activities from clearing a shipment
  to returning the empty container Sri Lanka
• 1.Clearing the shipment at the port (late
  morning/afternoon)
• 2.Transportation of shipment to destination
  (afternoon)
• 3.De-stuffing at destination (afternoon)
• 4.Return of empty container and truck to trucking
  yard (by this time office hours have ended)
  extra charge after office hours
• 5.Overnight parking of the container and truck at
  trucking yard
• 6.Return of empty container to assigned area of
  the shipping line (following day morning)
• 7.Return of the truck to port to attend to
  another shipment (following day late
  morning/afternoon)
• Issues
• The empty container is not returned on the same
  day due to high rates charged for empty
  containers returned after office hours.
• Practical difficulties in making lodging a
  request
• Difficult to arrive at an accurate prediction of
  expected time of return of the empty container to
  the shipping line.
• Even if above difficulty was to overcome, there
  exists a high possibility that this time
  indication is known after office hours, which
  hinders lodging a request for after office
  return.
• Additional Cost on transportation due to double
  shuttling involved in above point 4 and 6.
• Delay in commencing a new clearance of a shipment
  in the following day

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Historical evolution of Trade Facilitation (TF)
in the GATT/WTO

• Relevant GATT Articles WTO Agreements include
• GATT Article V (Freedom of Transit)
• GATT Article VII (Valuation for Customs Purposes)
• GATT Article VIII (Fees and Formalities connected
  with importation and exportation)
• GATT Article IX (Marks of origin)
• GATT Article X ( Publication and Administration
  of Trade Regulations)

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Historical evolution of TF in the GATT/WTO (cont.)

• Agreement of Implementation of Article VII of
  GATT 1994 (Customs Valuation Agreement)
• Agreement on Import licensing Procedures
• Agreement on Pre-shipment Inspection
• Agreement on Rules of Origin
• Agreement on technical Barriers to Trade (TBT)
• Application of Sanitory and Phytosanitory
  Measures (SPS)
• GATS and TRIPS also include some trade
  facilitation measures. GATT Article XXIV (Customs
  Unions and Free Trade Areas) would also affect
  trade facilitation.

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Clarification of GATT Articles

• Article V freedom of transit of goods through
  the most convenient route, no unnecessary delays
  and restrictions, no levies (such as customs
  duties) only for services provided
• Article VIII fees charged for import and export
  must be limited to cost of services, minimize the
  incidence and complexity of import and export
  formalities, need for decreasing and simplifying
  import export documentation requirements
• Article X prompt publication of laws,
  regulations and decisions relating to import and
  export, laws relating to trade must be
  administered in uniform, impartial and reasonable
  manner and there must be provision for judicial
  review of administrative decisions

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Articles V, VIII X Core Principles

• Transparency
• Consistency and predictability
• Non-discrimination
• Simplification and avoidance of unnecessary
  restrictiveness, and
• Due process

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Historical evolution of TF in the GATT/WTO (cont.)

• Trade Facilitation (TF) was added to the WTO
  agenda in Dec 1996, Singapore Ministerial
  Declaration (para 21) directed the Council of
  Trade in Goods (CTG) to undertake exploratory
  and analytical work, drawing on the work of other
  relevant organizations, on the simplification of
  trade procedures in order to assess the scope for
  WTO rules in this area.
• ?Became one of the four Singapore issues

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Historical evolution of TF in the GATT/WTO (cont.)

• 1997-1999, CTG collected information. Several
  seminars were held. For the 1999 WTO Ministerial
  in Seattle, several members (EU, Japan and US)
  made official submissions to WTO to launch
  negotiations on TF as part of new WTO Round.
  Meeting was unable to agree on a new agenda for
  the Seattle Round.
• 2001 WTO Ministerial in Doha, attempts were made
  to include TF in the agenda for the new Round of
  negotiations. But no consensus.

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Historical evolution of TF in the GATT/WTO (cont.)

• Doha Ministerial Declaration states that In
  the period until the Fifth Sessions, the Council
  for Trade in Goods shall review and as
  appropriate, clarify and improve relevant aspects
  of Articles V, VIII and X of GATT 1994 and
  identify the trade facilitation needs and
  priorities of members, in particular developing
  and least-developed countries. We commit
  ourselves to ensuring adequate technical
  assistance and support for capacity building in
  this area.

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Historical evolution of TF in the GATT/WTO (cont.)

• Work program concentrated on three main areas
• GATT Articles V, VIII, and X
• TF needs and priorities of member countries
  Especially of developing and LDCs
• Technical Assistance and Capacity Building
• Developing countries were of the view that they
  prefer TF measures to be handled autonomously and
  the need to address the implications of binding
  rules and human and financial resources, as well
  as difference in level of developments.

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Historical evolution of TF in the GATT/WTO (cont.)

• Cancun Ministerial 2003, no declaration,
  Ministerial Statement.
• Doha Ministerial Declaration and the WTO General
  Council Decision of July 2004 (July Package)
  constitute the combined framework of current
  negotiations. (Doha Work Program, Decision
  Adopted by the General Council on 1 August 2004
  WT/L/579)
• In the July Package it was decided to start
  negotiation for an agreement in the area of TF
  and drop the other three Singapore issues from
  the Doha negotiations.

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Historical evolution of TF in the GATT/WTO (cont.)

• Modalities were given in Annex D of the July
  Package. Key issues are
• Clarification and improvement of relevant aspects
  of Articles V, VIII and X of the GATT 1994
  enhancement of technical assistance and support
  for capacity building effective cooperation
  between customs or any other appropriate
  authorities on trade facilitation and customs
  compliance issues (para 1)
• Special and differential treatment for developing
  and LDCs (para 2)
• LDC members commitments not mandatory (para 3)
• Identification of trade facilitation needs and
  priorities concerns related to cost implications
  of proposed measures (para 4)
• Technical assistance and support for capacity
  building (paras 5, 6 and 7)
• Working with and work of relevant international
  organizations (paras 8 and 9).
• Since the July Package three meetings have been
  held of the Negotiating Group of TF at the WTO.
  (Last one on 7,9 Feb 2005)

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Special Differential Treatment (SDT)

• Developing and LDCs institutional improvements
  would require, in addition to very high costs,
  sustained effort over a long period, and
  countries at different stages of development have
  different needs, priorities, and capacities to
  implement global rules.
• Under Doha Development Agenda the work program
  on SDT is set out in Para 44 of Ministerial
  Declaration.
• SDT under the July Package With regards to the
  level of development and needs of developing
  countries, SDT will be an important part of
  negotiations Proportionality to be achieved
  through lesser commitments by developing
  countries.

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Special Differential Treatment (SDT) cont.

• Almost the entirety of Annex D of the July
  Package Modalities for Negotiations on Trade
  Facilitation is on making use of the SDT
  provision for developing and LDC countries.
  Proper implementation is the key issue.
• The extent and timing of entering into
  commitments shall be related to the
  implementation capacities of developing and LDCs
• LDCs are required to undertake commitments
  subject to their limitations
• Address the cost implications for developing and
  LDCs of the proposed measures
• TA support to the developing and LDCs to be
  provided by developed countries
• If infrastructure support is not forthcoming
  implementation is not required
• Collaborative effort to be undertaken with IMF,
  OECD, UNCTAD,WCO and the WB.

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Negotiating Positions as at 02/05

• At the third meeting (since the July Package) of
  the WTO Negotiating Group on Trade Facilitation
  on 7 and 9 February
• Developing countries and their groupings raised
  the issue whether any agreement arising from the
  negotiations should be legally binding or instead
  be based on a system of incentives, and stressed
  that developing countries could only implement
  commitments  if they have the resources to do so,
  as agreed to in the text on trade facilitation.
• Developed countries submitted papers that gave
  specific proposals on new obligations that WTO
  members should undertake on various aspects of
  trade facilitation.  These proposals were met
  with great caution by several developing
  countries.
• Source TWN Report by Goh Chien Yen

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Negotiating Positions as at 02/05

• Some of the issues raised by the Core Group (19
  developing countries)
• what legal commitments if any will a new
  agreement entail."
• "it will have to be discussed, whether the
  components of an agreement on trade facilitation
  will lead to dispute resolution or rules based
  commitments of compelled reforms or a more
  general incentives based reform commitment
  process that recognizes the large resources and
  lengthy timeframe involved."
• "the specific task and challenge of this
  Negotiating Group is to make a concrete list of
  the specific components and criteria for
  promoting trade facilitation..., while keeping in
  mind that these negotiations are in the context
  of the Doha Development Round and are limited in
  scope to reviewing and clarifying GATT Articles
  V, VIII and X."

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Negotiating Positions as at 02/05

• African Group stated that
• Scope of negotiations is only limited to Articles
  V, VIII, X of GATT.
• SDT is a key principle in Annex D.
• As per para 3 of Annex D, it will "provide LDCs
  the basis for not undertaking commitments that
  are not compatible with their development,
  financial or trade needs or their administrative
  and institutional capabilities."
• On para 4, "In this regard, we believe the
  provision of externally-sourced resources to
  support such review and identification of TF
  needs and priorities is essential. Further, a
  study on the needs and priorities of African
  countries, including flexibilities and costs of
  adjustment, must be conducted."
• Provision of TA and capacity building is a must
  for African countries to implement the results of
  the negotiations.

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Negotiating Positions Proposals as at 02/05
Developed Member Country Proposal for
European Community and its member states Clarifications and improvements to GATT Article X (Publication and administration to Trade Regulations). (TN/TF/W/6)
South Korea Clarification of Article X of the GATT Publication and availability of Information and prior commenting period on core measures. (TN/TF/W/7)
Japan, Mongolia, and the separate customs territory of Taiwan, Penghu, Kinmen and Matsu Trade facilitation Proposals to clarify and improve GATT Article X. (TN/TF/W/8)
Communication from Canada Possible commitments on advance rulings (TN/TF/W/9)
Separate Customs territory of Taiwan, Penghu, Kinmen and Matsu Trade Facilitation Some possible measures to improve GATT Articles VIII and X. (TN/TF/W/10)
USA Introduction to proposals (TN/TF/W/11)
USA Advance binding rulings (TN/TF/W/12)
USA Transparency and Publication (TN/TF/W/13)
USA Fees (TN/TF/W/14)
USA Express Shipments (TN/TF/W/15)
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Negotiating Positions as at 02/05

• Members agree 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,"
• EC
• publish and make easily available all laws,
  procedures, and rules affecting imports, exports
  and goods in transit.
• Above information to be available in a simple
  accessible manner.
• When new rules are introduced members should
  notify WTO.
• Wants private sector be consulted before having
  new or amended rules (expansion of Article X).
• Members be obliged to provide legal right of
  appeal against customs and other agency rulings
  and decisions.

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Negotiating Positions as at 02/05

• USA, Canada
• Under Article X, members commit themselves to
  provide binding advance rulings on tariff
  classification when requested by traders to do
  so.
• USA
• internet publication of customs rules and
  procedures
• to "establish specific parameters for fees
  charged by Members under Article VIII GATT 1994
  and publish such fees on the internet and notify
  the WTO with a specified number of days in
  advance of implementation"  and
• the need to "provide specific expedited
  procedures for express shipments."

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Negotiating Positions as at 02/05

• Taiwan, Korea Japan
• To have an one-stop information center
• Korea
• Members should be provided with opportunities to
  make comments on the new rules and procedures
  introduced by members
• Sri Lanka
• Has made several statements in support agreeing
  to modalities of negotiations in Cancun based on
  the Annex G of the draft Ministerial Text. Cost
  and implementation of the proposals submitted so
  far is the main issue.

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Thank you