WTO news: what’s been happening in the WTO

30 May 2002

Trade facilitation in the multilateral trade negotiations

International forum on trade facilitation 

Andrew Stoler Deputy Director-General, WTO

Good morning ladies and gentlemen. Thank you for that introduction, Secretary-General Ricupero. I am very pleased to have the opportunity to represent the WTO here today in this important meeting.

I have been asked to speak about “trade facilitation in the multilateral trade negotiations”. The negotiating part of this title may bear the risk of being misinterpreted as a report on trade facilitation negotiations, which are not (yet) under way. That said, in the framework of the new round of multilateral trade negotiations launched at the Doha Ministerial Conference, trade facilitation is one of the topics where Ministers agreed to start the negotiations after the next Ministerial. We are therefore preparing for future negotiations on this subject, and I welcome this opportunity to update you on progress made so far. In addition to outlining the current state-of-play, I would also like to delineate the roadmap ahead, in order to give you an idea of where we are heading.

Trade facilitation was added to the WTO's agenda at the first Ministerial Conference in December 1996 when the Council for Trade in Goods was mandated to “undertake exploratory and analytical work…on the simplification of trade procedures in order to assess the scope for WTO rules in this area”. A great deal of such exploratory and analytical has been undertaken in the course of the following five years, with the main objective to identify the principal obstacles encountered by traders in cross-border transactions and to develop possible ways to overcome those barriers.

Last November, we launched the Doha Development Agenda – the first multilateral trade negotiation since the creation of the WTO at the end of the Uruguay Round. This is the development round and trade facilitation is a very important piece of the development round puzzle. It is largely accepted that development is effectively promoted through the creation of an open market economy that allows optimal allocation of resources. Progressive trade liberalisation and rule making under the GATT and the GATS has proven the most effective way of establishing such open markets.

But open markets can only function properly if, among other things, procedures designed to facilitate the flow of trade are put in place and a country’s capacity to regulate economic activity on its territory is made effective.

Trade facilitation, notably customs reform, directly improves tax returns by enabling effective collection of import duties. Reforming customs procedures, notably through automation, harmonisation of information requirements, and risk-assessment methods, reduces levels of evasion, under declaration, fraud, and collusion with customs officials, and allows comprehensive, correct and prompt duty calculation and tax collection, with obvious benefits for the public purse. This is an important aspect to the development dimension of trade facilitation.

The Doha Ministerial introduced a new phase for WTO work on this issue, by providing for negotiations after the Fifth Ministerial in 2003, and by mandating the Council for Trade in Goods to embark on a comprehensive and challenging work programme.

The Doha agreement was preceded by intense discussions among Members on how to proceed with future work on trade facilitation. While there has always been broad agreement on the necessity to remove distorting red tape and on the overall benefits of embarking on such process, there are divergent views on how to go about that in the framework of the WTO.

Last autumn, a number of delegations already considered trade facilitation as being ripe for negotiations. They held the opinion that after more than four years of exploring and analysing the scope for WTO rules on this issue, it was time to move to the next stage and enter the negotiating phase. A group of Members advocating the negotiation of binding facilitation rules proposed what they called an integrated “two track approach”, centered around commitments on border and border-related procedures to expedite the movement, release and clearance of goods. Such rules were suggested to build upon existing WTO provisions

There are, at the same time, many developing country members, which, while supportive of the objectives of trade facilitation, objected to the idea of taking on new legal obligations in the WTO at this point in time. These Members are concerned that additional rules could exceed their implementation capacities and expose them to dispute settlement. Some also indicated a preference for trade facilitation work on the national, bilateral or regional level.

The text finally agreed on by Ministers in Doha constitutes a compromise, which tries to find a balance between the conflicting positions. Paragraph 27 reflects this compromise: “… that negotiations will take place after the Fifth Session of the Ministerial Conference…”. This commitment is however tempered by the clarification that such negotiations are to take place “on the basis of a decision to be taken, by explicit consensus, at that Session on the modalities of negotiations”. The underlying motif for future negotiators is identified as the recognition of “the case for further expediting the movement, release and clearance of goods, including goods in transit, and the need for enhanced technical assistance and capacity building in this area”.

In the time until the Fifth Ministerial, paragraph 27 sets out an extensive work programme. The Council for Trade in Goods is not only mandated to

“review and, as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994” , but also to

“identify the trade facilitation needs and priorities of members, in particular developing and least-developed countries”.

Very significantly, Ministers committed themselves “to ensuring adequate technical assistance and support for capacity building in this area”.

As you can see, we will have a lot to do in the coming months.

In a series of informal consultations in February and March, Members expressed divergent views on what they consider to be the appropriate forum for future discussions on trade facilitation, (that is, whether to have dedicated or regular sessions of the CTG in formal or informal mode) how many meetings were required, and of what duration. After intense discussions, delegations finally agreed on a trade facilitation work program for the remaining part of this year.

The work program provides for four formal meetings of the Goods Council of 1 1/2 days duration. A first one already took place last week (23 – 24 May). A second one is scheduled for July, followed by a third one in October and a final one in December. Following the July meeting, members will decide if additional time needs to be devoted to trade facilitation to ensure fulfilment of the Doha mandate.

With respect to substance of future work, Members agreed to deal with the following three topics as core agenda items:

(i) First: GATT Articles X, VIII and V. These articles deal with transparency, public information, formalities associated with importing and exporting and goods in transit. The idea is to have each of the first three meetings focus on one of these Articles, while at the same time allowing delegations to address questions related to the two respective other provisions; (The focus on these three Articles follows from their mentioning in the Doha mandate, reflecting members' shared conviction that future trade facilitation work should be geared to build on those three provisions.)

(ii) Secondly: Trade facilitation needs and priorities of Members, particularly of developing and least developed countries; Like the third topic, this will be a standing item in all meetings;

(iii) And finally, issues related to technical assistance and capacity building. The incorporation of this item in the CTG's trade facilitation work programme reflects the membership's shared conviction that technical assistance and support for capacity building are essential for an effective participation of the developing world in WTO trade facilitation work. (Clearly, the capacity of resource-constrained members to actively engage in the debate is a condition of further progress in our work.)

At last week's meeting, the discussion focussed on GATT Article X, as well as on the specific trade facilitation needs and priorities of Members, particularly of developing and least developed ones. Closely related to these two issues, the meeting further dealt with trade facilitation-related technical assistance and capacity building questions as a third agenda item.

Six delegations(1) and two observer organisations(2) had submitted communications in preparation for that meeting, most of them being proposals related to the review and possible clarification/improvement of GATT Article X. Among the most frequently proposed measures were (i) the installation of inquiry points, (ii) the introduction of an advance ruling system, and (iii) the establishment of effective appeal procedures. Several proposals also suggested the granting of a reasonable time-period between the adoption of a regulation and its entry into force. All communications highlighted the importance of trade facilitation for the reduction of trade transaction costs (especially for SME's) as well as for a country's economic development. The meeting also had before it a Secretariat background paper on GATT Article X which outlines Article X's main provisions from a legal perspective and takes a look at how they have been interpreted in the GATT and WTO jurisprudence so far. (Additional papers on Articles V and VIII have also been prepared and will be issued soon.)

After a brief introduction to these papers, Members engaged in comprehensive and constructive discussions, expressing general support for the advancing of trade facilitation work. While most delegations described trade facilitation as a win-win scenario with positive impacts on development, some also raised concerns with respect to cost implications, both in terms of human and financial resources. Reference was further made to different levels of development, and related different needs. A number of developing countries were also concerned about trade facilitation measures infringing upon their national sovereignty.

On the issue of technical assistance and capacity building, Members were in agreement on their utmost importance for the advancement of trade facilitation work. Coherence, coordination and thorough needs assessment were flagged as necessary elements of any successful assistance activity. Developing countries pointed at the many challenges they are facing in their endeavours to facilitate trade, and underlined the importance to have assistance programs reflect development objectives.

This leads me to another point regarding the relationship between development and trade facilitation I would like to make before I close. Simplification measures by customs and other agencies can make an important contribution to realizing development objectives by allowing significant reductions in administrative costs. Introduction of electronic customs clearance systems, risk assessment techniques (rather than inspection of individual consignments), and pre-arrival processing and post-release audit all reduce time, resources and levels of error. As trade flows increase greater than public resources, trade facilitation measures of this type are necessary. By way of example, Chile, at the March 1998 WTO Symposium estimated savings of US$ 1 million each month through automation and a greater use of risk assessment. So, while some countries are concerned over the start up costs involved in introducing e.g. computerisation and associated training in use of risk assessment and so on, the experience of Chile and others showed that costs are recovered over time through greater operating efficiency and increased tax collection. This makes it well worth doing.

So, this is where we stand now. Good first steps have been taken, we are on schedule, and in agreeing on our work programme for this year, we made solid progress. This of course does not mean that we don't still have an enormous amount of work ahead of us – but I am confident, that we will achieve our goals. Where we come out on the negotiating modalities issue at the Cancun Ministerial will be a critical factor in the conduct of the post-Cancun negotiations. What we do over the next 15 months and – in particular – the comfort levels of our developing country participants, will be the key.

Thank you.

(1) The European Communities, Japan, Korea, Canada, the United States and New Zealand. With the exception of New Zealand, whose paper outlined their current trade facilitation-related technical assistance activities, all other communications proposed measures to clarify and improve GATT Article X. back to text

(2) The World Customs Organization and the OECD. In their communication, the WCO examined the compatibility of WCO principles with GATT Article X, and the Article's reflection in both the various WCO instruments and national customs legislations. The paper further analysed whether some of the proposed measures to strengthen Article X are already embodied in those instruments. The OECD introduced their survey of trade facilitation provisions in regional trade agreements, and discussed their relationship with the WTO. A second paper highlighted business benefits of trade facilitation. back to text