TRADE FACILITATION Cutting red tape at the border

Making trade flow more easily, without the hindrance of bureaucratic procedures — trade facilitation — brings the WTO right to the customs’ gate.

back to top

The problem  

Traders from both developing and developed countries have long pointed to the vast amount of red tape that still exists in moving goods across borders. Documentation requirements often lack transparency and are vastly duplicative in many places, a problem often compounded by a lack of cooperation between traders and official agencies. Despite advances in information technology, automatic data submission is still not commonplace.

UNCTAD estimates that the average customs transaction involves 20–30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60–70% of all data at least once. With the lowering of tariffs across the globe, the cost of complying with customs formalities has been reported to exceed in many instances the cost of duties to be paid. In the modern business environment of just-in-time production and delivery, traders need fast and predictable release of goods. An APEC study estimated that trade facilitation programmes would generate gains of about 0.26% of real GDP to APEC, almost double the expected gains from tariff liberalization, and that the savings in import prices would be between 1–2% of import prices for developing countries in the region.

Analysts point out that the reason why many small and medium size enterprises — which as a whole account in many economies for up to 60% of GDP creation — are not active players in international trade, has more to do with red tape rather than tariff barriers. The administrative barriers for enterprises that do not regularly ship large quantities are often simply too high to make foreign markets appear attractive.

For developing-country economies, inefficiencies in areas such as customs and transport can be roadblocks to the integration into the global economy and may severely impair export competitiveness or inflow of foreign direct investment. This is one of the reasons why developing-country exporters are increasingly interested in removing administrative barriers, particularly in other developing countries, which today account for 40% of their trade in manufactured goods.


back to top

WTO provisions  

The WTO has always dealt with issues related to the facilitation of trade, and WTO rules include a variety of provisions that aim to enhance transparency and set minimum procedural standards. Among them are GATT Articles 5, 8 and 10 — which deal with freedom of transit for goods, fees and formalities connected with importation and exportation, and publication and administration of trade regulations.

But the WTO legal framework lacks specific provisions in some areas, particularly on customs procedures and documentation, and transparency. The spectacular increase in the amount of goods traded worldwide in the last few years and the advances in technology and the computerization of business transactions have added a sense of urgency to the need to make the rules more uniform, user-friendly and efficient.


back to top

The mandate and the negotiations  

As a separate topic, trade facilitation is a relatively new issue for the WTO. It was added to the organization’s agenda only about seven years ago, when the Singapore Ministerial Conference in December 1996 directed the Goods Council “to undertake exploratory and analytical work … on the simplification of trade procedures in order to assess the scope for WTO rules in this area”. (Because the mandate came from the Singapore meeting, trade facilitation is sometimes described as one of four “Singapore issues”.)

At the Fourth Ministerial Conference in Doha, in November 2001, Ministers agreed that negotiations on trade facilitation would take place after the Fifth Ministerial Conference in Cancún. This mandate was renewed on 1 August 2004 when the General Council decided by explicit consensus to commence negotiations on the basis of modalities agreed by Members. These modalities established the basis for the work plan adopted at the first meeting of the Negotiating Group on 15 November 2004 under the chairmanship of ambassador Muhamad Noor Yacob, of Malaysia.

According to paragraph 1 of the Modalities, the negotiations shall aim to clarify and improve relevant aspects of Articles 5 (Freedom of Transit), Article 8 (Fees and Formalities connected with Importation and Exportation) and Article 10 (Publication and Administration of Trade Regulations) of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit. Negotiations shall also aim at enhancing technical assistance and support for capacity building in this area. The negotiations shall further aim at provisions for effective cooperation between customs or any other appropriate authorities on trade facilitation and customs compliance issues.

The Negotiating Group, at its first meeting, agreed to invite the IMF, OECD, UNCTAD, World Customs Organization and the World Bank to attend on an ad hoc basis.

Since 15 November 2004 to October 2005, the Negotiating Group has met 7 times. Members have submitted around 50 contributions to the work of the Group concerning many different aspects of the negotiations such as Publication and Administration of Trade Regulations, Advance Rulings, Express Shipments, Border Agency Cooperation, Release of Goods, Consular Fees, Cargo in Transit, Technical Assistance and Capacity Building, Risk Assessment and Management, Pre-Arrival Examination, Post-Clearance Audit, etc.

The World Customs Organization and the World Bank have also made written contributions to the negotiations, and the WTO Secretariat has produced 7 technical or compilation papers.

In Hong Kong, Ministers will assess progress in the negotiations.