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.
> Director-Generals message
> Built-in Agenda
> The WTO agreements and developing countries
> Least-developed countries
> Agriculture (1)
> Agriculture (2)
> Sanitary and phytosanitary (SPS) measures
> Intellectual property (TRIPS)
> Textiles and clothing
> Information technology products
> Trade and environment
> Trade and investment
> Trade and competition policy
> Transparency in government procurement
> Trade and labour standards
> Disputes (1)
> Disputes (2)
> Electronic commerce
> Members and accessions
> Some facts and figures
> Glossary of terms
> Other ministerial meetings
UNCTAD estimates that the average customs transaction involves 2030 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 6070% 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 programs would generate gains of about 0.26 percent of real GDP to APEC, almost double the expected gains from tariff liberalization, and that the savings in import prices would be between 12% 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. Trade facilitation will not only benefit importers and consumers who face higher prices caused by the red tape in their own import administration, but exporters as well. Developing country exporters are increasingly interested in removing administrative barriers in other developing countries, which today account for 40% of their trade in manufactured goods.
WTO rules comprise a variety of provisions that aim to enhance transparency and set minimum procedural standards in aspects of trade administration, such as Articles VIII and X of the GATT 1994, and the Agreements on Import Licensing, Technical Barriers to Trade, or SPS. Yet the WTO has no specific provisions on customs and border-crossing procedures, except in the Agreement on Customs Valuation. Article VIII of the GATT 1994 merely recognizes the need for minimizing the incidence and complexity of import and export formalities and related documentation requirements.
Trade facilitation was added to the WTO agenda at the Singapore Ministerial Conference in 1996, when Ministers requested the Council for Trade in Goods to undertake a work programme to assess the scope for WTO rules concerning the simplification of trade procedures.
In the Goods Council, delegations agree that simplification of trade procedures can result in considerable savings in time, money and human resources that would benefit each and every economy. Some delegations have emphasized that automation and the use of information technology would not only cut down on paperwork but also increase the efficiency of customs administrations. One member reported that its introduction of an automated customs clearance system had reduced clearance times for sea cargo from an average of 26.1 hours to 5.6 hours, and for air cargo from 2.3 to 0.7 hours. Another member reported that allowing importers to fill in customs papers electronically had reduced the completion time of all information requirements to within 1530 minutes.
A number of delegations favour a WTO agreement on trade facilitation aimed at reducing administrative barriers on import and export transactions in order to expedite the passage and release of goods. They say such an agreement would back up customs reform and modernization efforts of members and ensure that the same principles are applied all over the world. The EC, US, Korea and Switzerland have in fact proposed the launching, in Seattle, of negotiations towards such an agreement.
While agreeing on the benefits of trade facilitation, a number of other delegations question the need for a binding WTO agreement in this area subject to dispute-settlement rules. They say that such an agreement will add further to implementation burdens of developing countries, which lack resources to modernize customs facilities. Instead, they have called for a comprehensive technical assistance programme in trade facilitation, and encourage ongoing work in this area in various WTO bodies such as the completion of the harmonisation negotiations in rules of origin and in other international organizations, such as the World Customs Organization.