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Trade Facilitation Draft Text Holds Promise for Developing Countries (Bridges Weekly)Wednesday, January 20, 2010 > 13:42:38
Import duties and non-tariff barriers to trade – import bans, labelling requirements, and the like – are much less of an obstacle to the flow of international trade than they were a generation ago. Today, a different problem has come into focus, especially among developing nations: the numerous regulatory and logistical challenges to bringing goods to market overseas.
Last month, in a short press release from the WTO secretariat, the organisation announced that its Negotiating Group on Trade Facilitation – the committee charged with hammering out regulations to facilitate the movement of goods across national borders – had agreed upon a ‘draft consolidated text’ to guide the group’s negotiations in 2010. The announcement drew little attention in the press, but it marks an important step for the talks, which, if concluded, could bring significant gains to the economies of the developing world.
Broadly speaking, the trade facilitation committee has been tasked with slicing through the red tape that causes the movement of goods to slow at international borders. In WTO terms, the group has been mandated to “review and as appropriate, clarify and improve” relevant sections of three articles of the General Agreement on Tariffs and Trade (1994): Article V (facilitating transit and trade), Article VII (limiting border fees and formalities), and Article X (making trade regulations transparent).
Updating and streamlining government regulations on these fronts could significantly boost exports from the developing world. According to the World Bank’s ‘Doing Business’ rankings, it takes an average of more than seven weeks for exporters in Venezuela, Zimbabwe and the Central African Republic to ship their goods overseas. The same process takes just five days in Denmark and Singapore. Meanwhile, producers in many developing countries often have to pay US$ 2,000 or more in fees for each 20-foot container they export. The price is generally much lower in most rich nations, with some exceptions.
Proponents of the trade facilitation talks say that new global trade rules to regulate government policies at the border would make developing countries more attractive to investors and could go a long way toward helping poorer nations play a more active role in the global economy. But certain critical pieces of the puzzle – in-country transportation, warehousing infrastructure, etc. – are beyond the jurisdiction of the WTO.
“The trade facilitation negotiations cover a relatively narrow, but still significant, link in the chain – the actions that governments take to control and administer the way in which goods move across their national borders,” Richard Eglin, director of the WTO’s Trade Policies Review Division, wrote in a report for the World Economic Forum in 2008.
Given the obvious economic benefits to trade facilitation, engaging in talks on the issue may seem like a no-brainer for any trading nation - but the issue has encountered its share of controversy since it was initially tabled at the WTO’s first ministerial meeting, held in Singapore in 1996. From the outset, several developing countries fought the prospect of dedicated negotiations on trade facilitation. A new agreement on the matter could impose heavy administrative burdens on poorer countries, they argued, and additional legal obligations would make them more vulnerable to trade disputes.
But those concerns were ultimately assuaged and official talks commenced during the summer of 2004. But developing countries managed to secure three major concessions: any new regulations would be accompanied by generous technical and financial support; the WTO would help them participate fully in the talks; and they would not have to take on any new commitments until they had been provided with the assistance they needed to help them do so.
The ‘draft consolidated text’ (WTO document TN/TF/W/165) that was released in December reflects all of the proposals that delegations have put forward to date. This means that actually reading through the document’s 52 heavily bracketed pages is a challenge, but all of the elements of a final agreement are contained within it. Now, it only remains for negotiators to bring those elements into focus.
WTO Director-General Pascal Lamy – who fought hard for the trade facilitation talks to be included in the Doha Round agenda when he was the European Trade Commissioner – warmly welcomed the news of the new draft. “This provides us, for the first time, with a clear picture of what the new [trade facilitation] agreement will contain,” Lamy told a meeting of the full WTO membership last month. “Much still remains to be done in the next months…but we are clearly now on the home stretch.”
When the trade facilitation negotiations pick back up during the second week of February, negotiators will have their work cut out for them. While many of the bracketed sections “can probably be resolved pretty easily,” according to a WTO official, some issues could be more difficult to crack. The negotiations on Special and Differential Treatment for developing and least developed countries will also need particular attention in order to ensure that this area of the talks does not “lag behind,” the official added.
But overall, progress thus far has been good. Indeed, trade facilitation is widely seen as “the golden boy” of the Doha Round negotiations, the official said, as the seemingly win-win negotiations have moved steadily over the past few years, even as other areas of the Doha talks have stalled.