WTO: 2014 NEWS ITEMS

ECONOMIC RESEARCH : WORKING PAPER — ERSD-2014-06

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WTO working papers represent research in progress. They represent the personal opinions of individual staff members and/or external contributors, and are not meant to represent the position or opinions of the WTO or its members, nor the official position of any staff members. Any errors are the fault of the authors


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The trade facilitation deal has been hailed as a breakthrough because of its huge potential commercial value. This comes from significant savings, for example in the time and money importers and exporters spend on customs clearance and other procedures, for governments operating the streamlined procedures, and ultimately for consumers and others. The deal will also benefit shipments to and from landlocked countries through their neighbours. And it was the first “multilateral” agreement — ie, among all WTO members — to be reached since 1997, when the WTO was only two years old.

But, the working paper says, the novelty was more than that. Agreement on the content was possible because the deal allowed developing and least-developed countries to tailor how they would implement it, the paper says. This was a break from the tradition of giving them little more than extra time to implement the deal and some easier conditions.

This agreement allows developing and least-developed countries to choose which parts to implement immediately, which to delay (until an announced date), and which to delay because the countries need technical assistance.

The negotiations themselves were also novel because they included the full membership in a way that had never been tried before — in the months before Bali, a draft text was negotiated, sometimes into the early hours, word by word, largely by the entire membership. The more traditional way was to build up an agreement from smaller groups representing coalitions and key interested countries, sometimes called “concentric circles”. For trade facilitation, “delegations remained in the driving seat throughout the entire process,” the paper says.

 

Implementation no longer an afterthought

“The long and winding road: how WTO members finally reached a trade facilitation agreement,” is written by Nora Neufeld, a counsellor in the Trade Policy Review Division who was the talks’ Secretary throughout the negotiations. Although the author is a member of the WTO Secretariat, the views expressed are hers alone and do not represent an official view, as is the case with all WTO working papers.

The paper traces the trade facilitation negotiations which lasted over nine years before WTO members finally reached agreement at the Bali Ministerial Conference in December 2013, as part of a wider “Bali Package”.

The final agreement includes provisions for faster and more efficient customs procedures and for effective cooperation between various agencies. It also contains far-reaching provisions for technical assistance to help developing and least-developed countries build up their capacity to implement the deal.

A newly established Preparatory Committee is now preparing for the agreement’s entry into force and its efficient operation.

Ms Neufeld writes: “There are several aspects of the [trade facilitation] negotiating history that invite further reflection. Some of them defied conventional ways of doing things and challenged traditional thinking on how to approach a multilateral negotiating exercise.

“This already became clear when members launched the process since they did so under terms that explored new avenues. Implementation was no longer an afterthought but an upfront consideration — indeed, it was integral to the entire undertaking.

“Rather than continuing the traditional practice of largely equating S&D treatment [special and differential, ie, special treatment for developing and least-developed countries] with transition periods and granting flexibilities on the basis of a country’s association to either the developing or least-developed group, the [trade facilitation] mandate called for an individual, country-by-country and measure-by-measure approach. It explicitly eschewed a one-size-fits-all model.

“For the first time, it was also recognized that improving the way that trade takes place can be at least as important as reforming explicit trade barriers. In other words, emphasis was placed on reforming the ‘hardware’ of trade — procedural and process frictions — as opposed to the ‘software’ side — the overarching trade policies.”

 

New negotiating method

“New ground was also broken in the way the negotiations were conducted,” Ms Neufeld continues. “Going against conventional wisdom, the trade facilitation negotiations were predominately carried out in an open-ended, inclusive setting — and this despite an increase in WTO membership, even during the course of the decade-long discussions.

“Novel philosophies were also applied to the way the negotiations were led. Delegations remained in the driving seat throughout the entire process.

“Work was carried out in a bottom-up, member-driven manner with the chair functioning primarily as a facilitator, there to broker a compromise based on delegations’ wishes.

“The success of the trade facilitation undertaking makes it likely that it will serve as a benchmark for other negotiating exercises. It will be difficult, for instance, to define [special and differential] treatment [for developing and least-developed countries] in future WTO agreements without at least considering the [trade facilitation] model. The inclusive, de-centralized way of conducting the talks is also likely to set new standards in the trade negotiating business.

“In doing so, the new Trade Facilitation Agreement is going to have an impact not only on the Trade Facilitation universe but the WTO and the multilateral trading system as a whole.”

The paper is available here.

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