INFORMATION CENTRE

Trade facilitation

Trade facilitation has become an important subject in the Doha Round negotiations. The saving from streamlining procedures could be 2%–15% of the value of the goods traded, according to estimates by the Organisation for Economic Cooperation and Development (OECD). The World Bank says that for every dollar of assistance provided to support trade facilitation reform in developing countries, there is a return of up to US$ 70 in economic benefits.

Currently, there are high levels of bureaucracy and unnecessary costs, due to:

  • vast amounts of “red tape”
  • document requirements that lack transparency and involve duplication
  • lack of cooperation between traders and customs agencies
  • lack of automatic data submission.

At some border crossings, cargo can take up to 30 days to be cleared. The introduction of simpler procedures and greater transparency could help to significantly improve trade flows.

According to some estimates, the average customs transaction involves 20-30 parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60-70 per cent of all data at least once. With the lowering of tariffs, the cost of complying with customs formalities exceeds in many instances the cost of duties to be paid.

The OECD estimates that up to 7 per cent of the US$ 12,000 billion value of international trade each year is swallowed up by the cost of documentation.

The objective of the WTO's trade facilitation negotiations is to clarify and improve three articles of the General Agreement on Tariffs and Trade (GATT) concerning:

  • the transit of goods
  • fees and formalities (documentation and procedures)
  • the transparency of laws and regulations.

The aim is to ease border procedures and to facilitate the movement, release and clearance of goods.

A successful conclusion to the negotiations would:

  • allow governments to apply and conduct border controls more efficiently
  • allow traders to move their goods across borders more quickly and easily
  • reduce transaction costs and hence reduce prices for consumers and producers
  • reduce transit costs in landlocked countries
  • reduce bureaucracy and corruption
  • facilitate trade for small and medium-sized businesses burdened with excessive bureaucracy and red tape
  • add to members' GDP by making trade less costly.

An APEC (Asia-Pacific Economic Co-operation) study estimated that trade facilitation programmes would generate gains of about 0.26 per cent of GDP for the 21 APEC countries. Savings in import costs would be between 1-2 per cent of such costs for developing countries in the APEC region.

According to the World Bank, increased efficiency at ports and airports could increase global trade in manufacturing by up to US$ 377 billion a year and triple the benefits for consumers from tariff reductions. The gains would be from streamlining customs, reducing bribery and corruption, better infrastructure and more efficient cross-border services, and speeding up business through use of the Internet.

Doha Round negotiations
WTO members have made proposals on how to clarify and improve the three GATT articles.  These proposals have been negotiated and refined over the past few years. 

The proposals include:

  • use of the Internet for publishing information that is useful to traders and in general improving the availability of information - according to the OECD, improvements in information availability would save 1.8 per cent of transaction costs
  • establishing advance rulings on tariff classification and applicable duties to expedite customs clearance - according to a study by the OECD, advance rulings would achieve the single biggest reductions in trade costs (up to 3.7 per cent)
  • introducing pre-arrival clearance - to allow goods to be released immediately upon arrival 
  • expediting and simplifying the release and clearance of goods
  • enhancing transparency in customs rulings and administrative procedures
  • developing a uniform administration of trade regulations
  • streamlining fees and charges and establishing more discipline in their application - for example, prohibition of the collection of unpublished fees and charges, reduction/minimization of the number and diversity of fees and charges, and prohibition of consular fees - according to the OECD, this could cut 1.7 per cent of total costs
  • improving coordination among border agencies - according to the OECD, this cooperation would have a significant cost reduction potential, of up to 2.4 per cent
  • creating a single window – to submit data only once to one agency
  • establishing discipline for transit formalities and documentation requirements.

To assist developing country members to implement the results of the negotiations, the draft text for a new trade facilitation agreement contains provisions for “special and differential treatment”. These provisions would allow developing countries to delay the implementation of each provision of the text according to their needs.

The current draft text reflects the views of all WTO members, incorporating their ideas for improving the situation. It is called “the draft consolidated negotiating text” (TN/TF/W/165) (currently in its 12th revision).  Since this text was first drafted, members have been working to refine the text and reduce the number of brackets (indicating areas where members are not in agreement).

All WTO members have been actively involved in the negotiations since everybody is aware of the importance of trade facilitation in light of the increase in trade around the world.

Several coalitions have been formed by members that have common goals. These coalitions are particularly useful for countries that have a small presence  at the WTO. The most active coalitions are the African group, least-developed countries (LDCs) and the Africa, Caribbean and Pacific (ACP) group. 

In order to help developing countries negotiate more effectively, the WTO Secretariat conducted a technical assistance programme that helped each participating country to identify its particular needs and priorities in the trade facilitation negotiations. This programme was implemented in cooperation with the International Monetary Fund, OECD, the United Nations Conference on Trade and Development, the World Customs Organization and the World Bank, as well as the national governments of many WTO members.

The WTO Secretariat also oversees a technical assistance programme that brings technical experts from the capitals of African and LDC countries to participate in some of the trade facilitation negotiation meetings.  Once the trade facilitation negotiations have been concluded, the WTO Secretariat will implement technical assistance programmes to help members understand and meet their obligations under this new agreement.