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.

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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.

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.

In all countries, trade facilitation will not only benefit importers and exporters, but also consumers, who currently face higher prices due to red tape in their own import administration. Despite many advances, traders are currently still confronted with severe obstacles in moving goods across borders, as voiced repeatedly by the trading community.


WTO provisions back to top

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. There are also several provisions in agreements such as Import Licensing, Technical Barriers to Trade, Sanitary and Phytosanitary Measures, Customs Valuation, Rules of Origin and Preshipment Inspection.

But the WTO legal framework lacks specific provisions in some areas, particularly on customs procedures and documentation, and transparency.


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The Singapore mandate

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”.)

A lot of “exploratory and analytical work” has been done since, with members engaging very constructively in the debate. Delegations agree that simplifying trade procedures can result in considerable savings in time, money and human resources that would benefit each and every economy. Members are also in agreement on the developing countries’ need for substantial and comprehensive technical assistance to strengthen their administrative capacities and support their national reform efforts.


The Doha mandate back to top

At the Fourth Ministerial Conference in Doha, in November 2001, Ministers agreed that negotiations on trade facilitation will take place after the Fifth Ministerial Conference in Cancún, on the basis of a decision to be taken, by explicit consensus, in Cancún on “modalities” of the negotiations. The exact wording in the declaration was discussed at length and reflects widely different sensitivities among WTO member governments about the prospect of negotiations.

In the meantime, ministers said in Doha, the Goods Council should carry out a specific work programme:

  • to review, and as appropriate, clarify and improve GATT Articles 5, 8 and 10
  • to identify members’ trade facilitation needs and priorities, particularly those of developing and least-developed countries.

Ministers further committed themselves to providing adequate technical assistance and support for capacity building in this area.


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Since then …

Negotiations? Many delegations consider trade facilitation as a subject ready for negotiation in the WTO. They believe that after more than six years of exploring and analyzing the scope for WTO rules on this issue, it is now time to move to the next stage and enter the negotiating phase.

A group of members advocates negotiating new binding trade facilitation rules, centred around commitments on border and border-related procedures to expedite the movement, release and clearance of goods, including goods in transit. These rules would build upon existing WTO provisions (in particular GATT Articles 5, 8 and 10) and WTO principles such as transparency, due process, simplification and non-discrimination. Advocates of new rules would also make an upfront commitment for more developed members to provide comprehensive technical assistance and capacity building for developing countries.

Many developing countries broadly support the objectives, and agree that it is important to work in this area. But many say they are not ready to make new legal commitments. They are concerned that new rules will stretch their limited resources and expose them to dispute settlement proceedings. Several delegations have also questioned whether there is a need for new binding rules. Some said this should be handled nationally, bilaterally or regionally.

In Cancún, ministers have to decide whether there is an “explicit consensus” on modalities that would allow negotiations to go ahead, leading to new WTO rules on trade facilitiation.

Work programme The ministers’ instructions to the Goods Council have been translated into a day-to-day work programme, and carried out in the course of six formal sessions between 22 March 2002 and 13 June 2003.

Other material:
> Trade facilitation
> Doha declaration