Cutting red tape at the border

The issue of trade facilitation brings the WTO right to the customs’ gate. 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 programs 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 — who 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 who 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 by the trading community at the 1998 WTO Trade Facilitation Symposium, where private-industry representatives gave an overview of the wide range of problems they encounter in their daily trade transactions.

While the WTO has been always been dealing with issues related to the facilitation of trade and WTO rules comprise a variety of provisions that aim to enhance transparency and set minimum procedural standards (such as GATT Articles V, VIII and X or several provisions in agreements like the ones on import licensing, TBT, SPS and others), the WTO legal framework sometimes lacks specific provisions, particularly with respect to customs procedures and documentation and transparency issues. As a separate topic, trade facilitation is a relatively new issue for the WTO. It was added to its agenda less than five years ago, when the Singapore Ministerial directed the Council for Trade in Goods “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 lot of such 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 importance of such assistance has recently been underlined by donors and recipients at a WTO Trade Facilitation Workshop held in May 2001, calling for the development of a more cooperative and coordinated approach in the future.

Many delegations consider trade facilitation as being ripe for negotiations in the WTO. They believe that after more than four 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 advocating the negotiation of new binding trade facilitation rules proposed a two track approach, centered around commitments on border and border-related procedures to expedite the movement, release and clearance of goods. Such rules are suggested to build upon existing WTO provisions (in particular GATT Articles V, VIII and X) and principles such as transparency and due process, simplification, efficiency and non-discrimination. The proposal further provides for the development and implementation of a comprehensive technical assistance program in parallel to negotiations.

On the other hand, there are many developing country members, which, while generally supportive of the objectives of trade facilitation, do not want to take on new legal commitments in the WTO at this point in time. They are concerned that additional rules will exceed their implementation capacities and expose them to dispute settlement. Several delegations also voiced scepticism as to whether there is the need for new binding rules. Some further indicated a preference for trade facilitation work on the national, bilateral or regional level.