At the 9th WTO Ministerial Conference in Bali two months ago, 159 countries reached the first global trade deal since the creation of the multilateral trade organization in 1995. Though the deal is limited to “trade facilitation” (simplifying customs procedures), it was a significant step in the direction of reviving the Doha round of multilateral trade negotiations, which was floundering. The final agreement contains provisions for faster and more efficient customs procedures through effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It is estimated that the deal will result in an increase of $400 billion in annual output and reduce red tape at the border, especially among developing countries. Those who will benefit from the agreement include U.S. manufacturers, producers of perishable goods, freight forwarders, logistics providers and express carriers.
Rethinking the “Single Undertaking” Approach
The hallmark of the WTO (formerly the General Agreement on Tariffs and Trade) system’s success for nearly 60 years has been its consensus-based, all-or-nothing approach of seeking a single accord that must be approved by all 159 members. At the 2011 ministerial conference, negotiators were asked to explore “different negotiating approaches” to the Doha round, including the possibility of reaching “provisional or definitive agreements based on consensus earlier than the full conclusion of the single undertaking.” Lately, a more promising route to trade liberalization has been pursued through regional trading arrangements (TTIP and TPP), and there is some renewed interest in plurilateral agreements – deals struck by groups of countries who choose to move ahead with trade liberalization on certain goods or services, with others free to join when they are ready. (In late January, a group of WTO trade ministers at Davos announced their intention to launch a plurilateral agreement to eliminate tariffs and other restrictions on environmental goods.)
The most difficult issues in the stalled Doha round were agriculture, industrial tariffs and services, which are considered “interconnected,” according to WTO Director-General Roberto Azevedo. This interconnectedness makes it difficult to proceed along the lines of negotiating deals piecemeal.
This month, a meeting of the Trade Negotiations Committee over the WTO’s future negotiating agenda is scheduled to take place in Geneva. The key issue is whether WTO members should seek to preserve the “single undertaking” or continue the piecemeal approach taken at the December 2013 ministerial conference in Bali. The outcome of the negotiations could impact the success of the recent trade facilitation agreement reached in Bali.
The Trade-Facilitation Agreement
Exporters have long complained about the vast amount of “red tape” that still exists in moving goods across borders. Documentation requirements often lack transparency and are duplicated in many places, a problem often compounded by a lack of cooperation between exporters, logistics providers and official agencies. According to a report by the United Nations Conference on Trade and Development (UNCTAD), the average customs transaction involves 20 to 30 different parties, 40 documents, 200 data elements and the re-keying of 60 to 70 percent of all data multiple times. Notwithstanding advances in information technology and the lowering of tariffs across the globe, automatic data submission is still not available in most ports and the cost of complying with customs formalities has been reported to exceed the cost of duties to be paid on imports.
The WTO Trade Facilitation Agreement creates binding commitments to strengthen cooperation on customs matters; expedite the movement, release and clearance of goods; and assist developing countries in fully implementing the new rules. Moreover, exporters will benefit from improvements to customs efficiency and the collection of revenue, as well as measures to enhance transparency in customs practices and reduce documentation requirements and processing before goods arrive. The agreement would cut the cost of shipping goods around the world by more than 10 percent and raise global output by more than $400 billion a year.
According to the Organization for Economic Cooperation and Development (OECD), the measures that would make the biggest impact in terms of reducing costs at the border are:
- harmonization of documents
- streamlining of customs procedures (such as pre-arrival clearance)
- predictability in customs regulations (such as advance rulings on what tariffs apply to specific products or clear rules of procedure and availability of trade-related information).
Key disciplines addressed in the WTO trade facilitation agreement include the following:
- Publication of laws, regulations and procedures
- Internet publication of practical steps to import, export and transit goods
- Inquiry point for trade information
- Information on new laws and regulations before their implementation
- Provision of advance rulings
- Enhanced right of appeal
- Notification of detained goods
- Disciplines on fees and charges
- Penalty disciplines to prevent conflicts of interest
- Pre-arrival processing of goods
- Use of electronic payment
- Use of guarantees to allow rapid release
- Promoting risk management
- Creation of authorized operator schemes
- Procedures for expedited shipments
- Quick release of perishable goods
- Reduced documents and formalities
- Utilizing common customs standards
- Promoting use of single window
- Uniformity in border procedures and documents
- Temporary admission of goods
- Simplified transit procedures
- Customs cooperation
- Facilitate developing country implementation
At the first meeting of the Preparatory Committee on Trade Facilitation on January 31, 2014, WTO members unanimously elected Philippine Ambassador Esteban B. Conejos, Jr. as chairperson. This is the first important step toward implementing the Declaration on Trade Facilitation adopted by Ministers in Bali. The role of the committee will be to ensure the entry into force of the Trade Facilitation Agreement, prepare for its efficient operation, conduct its legal review and receive notifications of members’ commitments. It will also officially amend the Marrakesh Agreement establishing the WTO by inserting the new Trade Facilitation Agreement in Annex 1A.
Trade facilitation is a relatively new issue for the WTO. After more than nine years of negotiations, WTO members finally reached a consensus on a Trade Facilitation Agreement at the Bali Ministerial Conference in December 2013. The dramatic increase in the amount of goods traded worldwide in recent years and the advances in technology and computerization of business transactions have added a sense of urgency to the need to make customs procedures and processing more uniform, user-friendly and efficient. This month, members of the WTO Preparatory Committee on Trade Facilitation embark upon this task on behalf of exporters worldwide, while the larger Trade Negotiations Committee meets in Geneva to discuss the importance of preserving the “single undertaking.” As trade negotiators work to produce a “clearly defined work plan” on the remaining issues of the stalled Doha round, it is important to remember that in the real business environment of just-in-time production and delivery, exporters and importers need fast and predictable customs administrative procedures to release their goods, not more gridlock on unrelated issues.