Trade Facilitation

I. Background

1.1 Trade can be a driving force of economic growth leading to poverty reduction and development. Increasing international trade has brought to the fore the ‘invisible’ costs of trade. This appears to be paradoxical, since traditional trade barriers, such as quantitative restrictions, tariff rate quotas and high tariffs are gradually disappearing. ‘Invisible’ costs are often a result of inefficient administration, and protracted and non-transparent bureaucratic procedures. Estimates of these costs vary. However, it is evident that in many cases they exceed the actual level of duties paid on the products concerned. It is therefore fundamental to improve this situation by developing systems that simplify and facilitate trade.

1.2 Trade facilitation (TF) is about the simplification and harmonisation of international trade procedures with respect to activities, practices and formalities involved in collecting, presenting, communicating and processing data and other requirements for cross-border movement of commodities. This relates to a wide range of activities such as import and export procedures, transport formalities, payments, insurance, and other financial requirements.

1.3 Many developing countries, which ‘opened up’ in the early 1990s, are looking forward to more trade for achieving higher economic growth. Enhancing TF is expected to benefit all actors: importers and exporters through savings of time and money, producers through cheaper availability of intermediate products, consumers through greater choice and lower prices, and administrations through increased availability of better statistics.

1.4 This growing realisation and the imperative to overcome the above-stated invisible costs has brought TF to the WTO. The Singapore Ministerial Declaration of 1996 directed the WTO Council for Trade in Goods “to undertake exploratory and analytical work, drawing on the work of other relevant organisations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area.”

II. Study Plan

The study of TF will cover five issues: a) Scope and definition of TF, b) WTO core principles and TF, c) Specific GATT 1994 provisions (Articles V, VIII and X) and TF, d) elements of technical assistance and capacity building, and e) dispute settlement aspects. In addition country-specific case studies will be undertaken to understand how TF measures could reduce transaction costs in doing cross-border business. A brief likely content of each of the five issues is given below.

2.1 Scope and Definition

Definition will include an analysis of both a broad and a narrow approach of defining TF. The WTO, UNCTAD and OECD have restricted the scope of their definitions to the movement of goods, and more specifically to customs procedures and technical regulations that can impair or delay cross-border trade. However, in recent years the term TF is being applied to an ever-growing number of activities. The World Bank takes a broader approach in its TF work programme, which primarily covers reforms in customs, regulatory frameworks, and standards.

This issue paper will cover the scope and definition of elements of a possible multilateral agreement on TF, taking into consideration the issues mentioned in the Doha Ministerial Declaration of the WTO.

2.2 WTO Core Principles and TF

In this issue paper, TF vis-à-vis the two WTO core principles, namely non-discrimination between countries (Most Favoured Nation Treatment) and non-discrimination within a country (National Treatment) will be examined. The successful implementation of the Doha Mandate on TF will arguably not conflict with the WTO’s core principles.

For this reason, this paper may discuss the appropriateness of a possible multilateral agreement on TF by considering the relevant issues in the light of the Preamble of the WTO Agreement. In so doing, it will look into the development dimensions of TF and also suggest special and differential (S&D) provisions that developing and least developed countries may require in order to implement a possible multilateral agreement. In this context therefore, S&D treatment could be taken as a central principle.

2.3 Specific GATT 1994 Provisions and TF

Specific elements connected with the simplification and harmonisation of trade procedures are already contained in GATT 1994, specifically in Articles V, VIII and X. As per the Doha Mandate, the WTO Council for Trade in Goods has been instructed to “review and as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 and identify the TF needs and priorities of Members, in particular developing and least-developed countries”.

This issue paper will analyse these GATT 1994 articles and elucidate what clarification and improvements are required vis-à-vis a possible multilateral agreement on TF. Moreover, it will look at their implications for developing and least-developed countries.

2.4 Technical Assistance and Capacity Building

Technical assistance and capacity building of developing countries, especially the least developed countries, are essential for TF. The following are some important issues to be examined: a) How can commitments on TF be complemented with appropriate technical assistance and its implementation? b) Is the WTO in a position to provide the technical assistance required to developing countries? Since many inter-governmental organisations such as UNCTAD, WCO, and the World Bank are also providing technical assistance in this area, what elements could a programme on technical assistance and capacity building given a possible multilateral agreement on TF include?

2.5 Dispute Settlement

This issue paper will look at possible ways of approaching dispute settlement in the eventuality of a multilateral agreement of TF. Two important issues which need to be examined are: a) If a party finds that his/her consignment took three days to get customs clearance in a country instead of two, will the country concerned be subject to a trade dispute? b) It has been proposed that there will be a cut-off clause (for the size of consignment) in relation to the dispute settlement on TF matters. What criteria need to be considered in order to set-up this cut-off point, taking into account the needs and ground realities of developing countries?

2.6 Country Case Studies

The case studies will test the following hypothesis: “Trade facilitation will reduce transaction costs of doing cross-border business”. In other words, the case studies will endeavour a cost-benefit analysis of TF. This will build on the contention that the fulfilment of obligations of a possible multilateral agreement on TF may impose a significant burden on developing countries. Furthermore, it would be useful to find out the opportunity cost of resources spent on TF measures.  

2.7 Researchers

The Trade Facilitation (TF) research group comprises of 13 international trade experts. Some of the issues covered by the experts are as follows-

  • Research Study on Trade Facilitation in Pakistan
  • Issue paper on Trade Facilitation- Scope & Definition, WTO Core principles and TF and Technical Assistance and Capacity Building.
  • Trade Facilitation- Scope and Definition
  • Argentina’s national experience with Trade Facilitation
  • Research paper on Trade Facilitation- Article V, VII and X
  • Cost of doing business in Nepal and Trade Facilitation
  • WTO Discussion on Trade Facilitations: Bangladesh’s perspective
  • What could be the possible elements for a programme on technical assistance and capacity building with reference to a possible multilateral agreement on trade facilitation
  • The real costs of implementing of trade facilitation and the attendant lowering of transaction costs: A cost-benefit analysis”- India Case Study

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