The importance of developing global digital trade rules has never been clearer. The COVID-19 pandemic has accelerated the digital transformation, bringing about a surge in online activities. E-commerce will be critical to the global economic recovery. The Joint Statement Initiative on E-commerce (JSI) is an opportunity for the WTO to respond to this urgent need.
There has been encouraging progress in the JSI since negotiations were launched in 2019. Despite the challenges presented by COVID-19, co-conveners Australia, Japan and Singapore have ensured that work continues in virtual and hybrid formats. The number of participants in the initiative has grown to 86 WTO Members, collectively accounting for over 90 per cent of global trade and representing all major geographical regions and levels of development.
Consolidated Negotiating Text
JSI participants have developed a consolidated negotiating text that captures progress so far and will form the basis of the next stage of negotiations. The consolidated text was circulated among participants on 7 December 2020.
The consolidated text is based on Members’ proposals. These proposals cover the following themes:
enabling electronic commerce;
openness and e-commerce;
trust and e-commerce;
market access; and
scope and general provisions.
We have been able to advance the negotiations, guided by the objective of achieving WTO-plus outcomes that deliver meaningful benefits for businesses and consumers. Highlights include the good progress made in small groups on issues such as e-signatures and authentication, paperless trading, customs duties on electronic transmissions, open government data, open internet access, consumer protection, spam and source code, among others. Proponents of services market access commitments have also developed a possible framework for negotiations on these issues.
Provisions that enable and promote the flow of data are key to a high standard and commercially meaningful outcome. Discussions on these issues are ongoing and will intensify from early 2021. Japan and Singapore hosted an information session on data flows and localisation rules in November 2020, involving negotiators and the private sector, to build better understanding and support for strong commitments.
WTO members participating in the negotiation of rules on e-commerce shared updates on the work done to streamline the negotiating text at a plenary meeting on 23 October. The co-conveners, Australia, Japan and Singapore, encouraged members to propose constructive solutions and show flexibility in an effort to deliver a consolidated negotiating text by December this year.
Facilitators of small group discussions reported on the work done in between plenary meetings to further streamline text proposals in the areas of spam, source code, open government data, trade facilitation in goods, services market access, electronic signatures and authentication, and online consumer protection.
Participants also re-engaged on topics that had been scheduled for consideration in the postponed March and April-May negotiating rounds, namely protection of personal information/data.
The co-conveners set common principles for the small groups to make their work more efficient and consistent, noting that transparency and inclusion should guide their work.
Ambassador George Mina (Australia), on behalf of the co-conveners, noted that reports from small groups are encouraging and that there is still some work that needs to be done. He said that the participating members are only two months away from the deadline for delivering a consolidated negotiating text and that the consolidated text should include “clean text” on e-signatures, authentication, spam and online consumer protection. To that end, he urged participants to engage with each other informally, not only in small groups but also bilaterally, and to show flexibility wherever possible.
The co-conveners set 16 November as a deadline for any new proposals to be submitted by participating members.
Ambassador Mina highlighted that COVID-19 has increased the urgency of developing global rules on digital trade and that these negotiations are seen as a key test for the WTO to respond to modern commercial realities.
WTO negotiations on trade-related aspects of electronic commerce were launched in Davos in January 2019 with the participation of 76 members. The number of participating members now stands at 86. Participating members seek to achieve a high-standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO members as possible. The e-commerce initiative was created on the margins of the WTO’s 11th Ministerial Conference in Buenos Aires.
Throughout their negotiations of the several e-commerce related topics, members have been encouraged by the co-conveners to consider the unique opportunities and challenges faced by members, including developing countries and least-developed countries, as well as by small businesses.
Ambassador Tan Hung Seng of Singapore, as a co-convener, encouraged members to propose constructive solutions as discussions intensify. He said that the initiative is well placed to swiftly develop something concrete that would benefit the global economy.
Ambassador Kazuyuki Yamazaki of Japan, as a co-convener, said that it was important to make as much progress as possible, and for the consolidated text to be comprehensive in reflecting issues proposed by members. He also urged members to take a holistic approach to the work of the initiative and address more challenging issues.
The co-conveners plan to hold ambassador level consultations to discuss and hear members’ views on the way forward between 28 and 30 October. The next plenary session will be on 5 November, during which an information session for members on data-related provisions will be hosted by Japan and Singapore.
India and South Africa circulated a communication to members of the World Trade Organization (WTO) General Council, arguing that the WTO moratorium on customs duties on electronic transmissions has “catastrophic” impacts on developing countries’ economic growth, jobs, and the attainment of the SDGs. In another communication, a group of WTO members highlighted “the overall benefits” of duty-free electronic transmissions.
The WTO e-commerce moratorium, which bans countries from imposing customs duties on electronic transmissions, dates back to 1998 when ministers at the Second Ministerial Conference adopted the Declaration on Global Electronic Commerce, calling for the establishment of a work programme on e-commerce, which was adopted later that year. Since then, at every Ministerial Conference, WTO members have agreed “to maintain the current practice of not imposing customs duties on electronic transmissions.”
The WTO Work Programme on Electronic Commerce defines “electronic commerce” as the “production, distribution, marketing, sale or delivery of goods and services by electronic means.” According to a recent WTO report, the enforcement of social distancing, lockdowns, and other measures to address the COVID‑19 pandemic resulted in an uptake in e-commerce, including online sales and streaming of videos and films.
In March 2020, India and South Africa circulated a communication, outlining the implications the moratorium has on developing countries, including: tariff revenue losses; impacts on industrialization; impacts on the use of digital technologies like 3D printing in manufacturing; as well as losses of other duties and charges. The countries argue that the moratorium is “equivalent to developing countries giving the digitally advanced countries duty-free access to [their] markets.”
According to a UN Conference on Trade and Development (UNCTAD) article, in 2017 alone, the potential tariff revenue loss to developing countries due to the moratorium was USD 10 billion. The article further notes that removal of the moratorium could provide policy space for developing countries to regulate imports of electronic transmissions and generate annual tariff revenue of up to 40 times greater than that in developed countries.
A communication from Australia, Canada, Chile, Colombia, Hong Kong, China, Iceland, the Republic of Korea, New Zealand, Norway, Singapore, Switzerland, Thailand, and Uruguay, circulated in June 2020, highlights a paper by the Organisation for Economic Co-operation and Development (OECD) titled, ‘Electronic Transmissions and International Trade: Shedding New Light on the Moratorium Debate.’ The members state that, according to the paper, “the overall benefits” of duty-free electronic transmissions “outweigh the potential forgone government revenues” due to the moratorium. The members recommend that these findings be considered in the current discussions on the extension of the moratorium.
A decision on whether or not the moratorium should continue will be taken at the 12th WTO Ministerial Conference (MC12). Originally scheduled for June 2020, the Conference has been tentatively postponed until June 2021.
A new information note published by the WTO Secretariat highlights how trade in goods and services has been affected by temporary border closures and travel restrictions linked to the COVID-19 pandemic.
It describes how the cross-border mobility of individuals plays an important role in both the cross-border provision and consumption of services and in manufacturing value chains.
The paper notes that sweeping travel barriers introduced in the early stages of the pandemic have given way to more fine-tuned policies aimed at allowing through “essential” foreign workers, or creating quarantine-free “travel bubbles” among partners. Nevertheless, mobility barriers have had a particularly heavy impact on tourism and education services, as well as on trade in goods, due to their effect on transport services and on information and transaction costs.
The paper notes that international cooperation has a potentially important role to play in minimizing the economic impact of mobility restrictions. For instance, exchanging information on lessons learnt about mobility restrictions and trade could help WTO members foster greater resilience in the face of future crises. Such an exercise could help with identifying options to implement travel measures that meet public health protection objectives while minimizing the negative effects on trade.
International trade and investment have always relied on the cross-border mobility of individuals.
To contain the spread of COVID-19, many WTO members imposed temporary border closures and travel restrictions. The severe restrictions on cross-border movement are not motivated by trade considerations but by public health reasons. Nevertheless, they have had a significant impact on trade. In several members, initial sweeping travel barriers have been replaced by more fine-tuned policies, aimed at allowing the movement of “essential” foreign workers, or creating “travel bubbles” permitting quarantine-free mobility among partners.
A significant amount of services trade requires physical proximity between producers and consumers. International mobility to consume or provide services abroad is one way to attain this proximity. Mobility is also important to the operations of services providers who establish a commercial presence in other countries, as well as to those who ordinarily provide services remotely across international borders.
Border measures and travel restrictions have had a particularly heavy impact on sectors such as tourism and education services. COVID-19 has triggered an unprecedented crisis for the tourism sector. In terms of travellers and revenue, international tourism in 2020 is expected to register its worst performance since 1950. In higher education, some institutions are facing a potential drop in international student enrolment of 50 to 75 per cent.
Mobility barriers also significantly affect trade in goods, through their impact on transport services and on information and transaction costs.
Restarting international mobility is unlikely to proceed in a linear fashion. Given the crossborder spill-overs resulting from measures affecting transnational mobility, a case can be made for supplementing domestic action with international cooperative efforts. WTO members may eventually wish to look into building greater preparedness and resilience for future crises, for example starting with information exchange about lessons learnt about mobility restrictions and trade. The exercise could help with identifying ways to implement travel measures that meet public health protection objectives while producing the least trade distortive effects.
The World Trade Organization’s Director General, Roberto Azevêdo announced his resignation effective 31 August of this year. His tenure will end three years into his second four year term which was otherwise due to expire in 2021.
Azevêdo’s departure annouoncement comes in a week where a bill to withdraw the United States from the organization was introduced in the US House of Representatives by the Democratic Chairs of the Transportation & Infrastructure, and Energy and Commerce Committees. This following the introduction of a Joint Resolution to the same effect in the US Senate by Republican Senator Josh Hawley of Missouri.
It comes as the organisation finds its dispute resolution function paralyzed by a US Appellate Body blockade, a potentially existential budget battle looms, its scheduled ministerial conference cancelled and even supportive members eyeing unilateral trade action in contravention of its principles.
At perhaps the most perilous time in its 25-year history, the WTO will be without a formally appointed leader, and the forthcoming selection process for his replacement hands the US yet another opportunity to exercise an effective veto over the organization’s future.
While not likely to be the straw that breaks its back, this unfortunately timed resignation is still a hefty new weight for an exhausted WTO camel whose knees were already trembling. As the kids would say, “It’s not great.”
While opinions on the Roberto Azevêdo’s performance vary, his departure couldn’t come at a worse time, and the process to replace him is both very long and just as susceptible to being held hostage by an ornery member as everything else in the organisation.
As a global champion of rules based trade, the WTO’s ‘DG’ has an important role to play in making the full throated case against the rising tide of export restrictions, protectionism and unilateralism unleashed by the US-China trade tensions and exacerbated by Covid-19. Now is no time for the system to be without its Knight in Shiny Armani.
As the head of the WTO secretariat, the director general was poised to play a key role in steering the organisation through what now seems a near inevitable battle over its budget at the end of the year. If the US once again blocked adoption of the WTO’s budget, it would have been up to him to try and forge a compromise, or make the difficult and controversial decisions required to keep the lights on, staff paid and fondue pot glowing in the face of an unapproved budget.
As the chair of the trade negotiations committee, the director general offers convening power, good offices, and a consensus building voice. With critical negotiations around fisheries subsidies, e-commerce, investment, and WTO reform all hanging in the balance, the absence of a Director-General only further decreases the likelihood of progress (perhaps from Hail Mary Pass to Igloo in Hell).
What happens now – Interim Director-General?
Upon Mr Azevêdo’s departure at the end of August, The rules now require the WTO General Council – a meeting of all WTO Members which serves as its highest decision making-body outside of a ministerial conference to appoint one of the four Deputy-Directors General as an interim director.
This presents a potential hurdle, as the WTO General Council makes decisions by consensus. Therefore, even a single member’s objection could prevent the appointment of an interim leader for the organisation.
The current deputies are Yonov Frederick Agah of Nigeria, Karl Brauner of Germany, Alan Wolff of the United States and Yi Xiaozhun of China. For obvious reasons, neither the US nor the Chinese DDGs are likely candidates for unanimous approval, and it is not impossible to envisage objections to Agah and Brauner as well – either personally or on general principle to sabotage the organisation further.
What happens next – A new Director-General?
Whether an interim DG is appointed or not, the WTO members will need to begin the process of selecting a new Director-General.
The procedure is lengthy and would ordinarily begin nine months before a DG’s term is set to expire. Once the process begins, WTO members have one month to nominate candidates, which must be their own nationals.
After this month is over, the candidates are expected to come to Geneva and meet with the WTO missions. The next seven months are to be spent weening the applicants down to a single final consensus candidate.
Is there politics?
Oh my god yes. While the Director-General has no legal authority to make or enforce the rules, WTO members are still intensely jealous of the position and allergic to any candidate they feel might impede their interests.
Arriving at a single consensus candidate requires a raft of compromises, trades and deals even at the best of times, which of course the current situation is not.
What happens if no consensus candidate can be found?
Theoretically, the rules do allow for a vote by the membership to select a Director-General. However, this procedure is both a measure of last-resort and intended primarily for a situation where the membership is split between two or more valid candidates and agrees by consensus on a vote to break the deadlock.
Were the US or some other member to block all candidates as a matter of principle, they would also likely oppose a vote. Even if a vote could then be forced regardless, it would only fuel the fires of those who argue the WTO has gone rogue.
So what does it all mean?
On its own, this resignation does not fundamentally change the state of play. The WTO is severely weakened, partially paralysed and increasingly in the crosshairs of the US, where concerns about it extend beyond the Trump administration and across party lines.
It does however rob the WTO of an experienced, consensus-approved leader at a time when both the organisation and the cause of rules-based trade desperately need one.
Still, though slim, there is hope the DG selection process might serve to revitalise the organisation. Long rumored candidacies like that of Kenya’s formidable Amina Mohamed, who chaired the 10th WTO Ministerial Conference to a successful conclusion and would be the organization’s first female and first African Director-General, offer a path to a more globally representative future.
The WTO Secretariat has published a new information note looking at how the COVID-19 pandemic has affected e-commerce, including the implications for cross-border trade. It notes the increased use of e-commerce as consumers adapt to lockdowns and social distancing measures and draws attention to several challenges, such as the need to bridge the digital divide within and across countries.
As well as highlighting the uptick in e-commerce during the COVID-19 crisis, the report looks at measures introduced by governments to facilitate e-commerce and some of the challenges facing these initiatives. Governments have worked to increase network capacity, encourage the provision of expanded data services at little or no cost, and lowered or scrapped transaction costs on digital payments and mobile money transfers. The report also looks at ongoing e-commerce discussions in the WTO and how continued implementation of the WTO’s Trade Facilitation Agreement could address some of the challenges brought to the fore by the COVID-19 pandemic.
The report argues that the experiences and lessons emerging from the COVID-19 crisis could be a further incentive for global cooperation in the area of e-commerce, which could help to facilitate cross-border movement of goods and services, narrow the digital divide, and level the playing field for small businesses.
This WTO study provides a comprehensive overview of trade and tariffs imposed on medical goods in general, many of which appear to be in severe shortage as a result of the current crisis. The purpose of this note is to provide factual information on how these goods are traded globally.
The heads of the World Customs Organization (WCO) and the World Trade Organization (WTO) issued a joint statement on 6 April pledging to work together to facilitate trade in essential goods such as medical supplies, food, and energy.
WCO Secretary General Dr. Kunio Mikuriya and WTO Director-General Roberto Azevêdo said the two organizations would work closely together to minimize disruption to cross-border trade in goods – in particular those essential to combat the COVID-19 pandemic – while safeguarding public health.
They also pledged to establish a coordinated approach to support initiatives that facilitate cross-border trade so that essential goods can quickly reach those most in need, including in least developed and land-locked countries. WCO and WTO members have already been invited to increase transparency by sharing information on new trade and trade-related measures introduced in response to the COVID-19 pandemic.
“As COVID-19 continues to spread globally and governments consider new measures to protect the health and well-being of their citizens, we urge Members to ensure that any new border action is targeted, proportionate, transparent and non-discriminatory,” they declared.
The text of the joint statement is below.
WCO-WTO Joint Statement on COVID-19 related trade measures
The COVID-19 pandemic, while above all a public health crisis, presents the world with unprecedented social and economic challenges. Emergency measures needed to curb the spread of the disease have unintended impacts on the world economy and trade, including the global supply chains that produce and distribute essential goods such as medical supplies, food, and energy.
To support the ongoing efforts to mitigate the social and economic effects of the pandemic, we, the Secretariats of the World Customs Organization (WCO) and the World Trade Organization (WTO), agree to work closely together to minimize disruption to cross-border trade in goods – in particular those essential to combat COVID-19 – while safeguarding public health. We commit to provide appropriatesupport to all relevant stakeholders.
Within our respective mandates, we have already invited Members to increase transparency by sharing information on new trade and trade-related measures introduced in response to the COVID-19 pandemic. To the extent appropriate, we are making such information publicly available through our respective websites.
We are also willing to establish a coordinated approach in support of initiatives that facilitate cross-border trade in goods, in particular those key to combat COVID-19. This would allow that essential goods can quickly reach those most in need, including in least developed and land-locked countries.
As COVID-19 continues to spread globally and governments consider new measures to protect the health and well-being of their citizens, we urge Members to ensure that any new border action is targeted, proportionate, transparent and non-discriminatory – as agreed by G20 leaders. We stress that these measures should be temporary, and we encourage Members to rescind them once they are no longer needed, especially if they restrict trade. We welcome initiatives to facilitate and simplify cross-border procedures and urge our Members to prioritize those for exporting and importing essential goods.
As the pandemic evolves, we will continue to further explore ways to coordinate the efforts of the two organizations in response to the COVID-19 pandemic aimed at keeping trade flows open for the safety of populations around the world and a strong recovery of the global economy.
Three years since the Trade Facilitation Agreement (TFA) entered into force on 22 February 2017, WTO members have continued to make steady progress in its implementation. Director-General Roberto Azevêdo, on the occasion of the TFA’s third anniversary, welcomed members’ efforts to ensure traders can reap the full benefits of the Agreement.
The TFA, the first multilateral deal concluded in the 25-year history of the WTO, contains members’ commitments to expedite the movement, release and clearance of goods across borders. As of the TFA’s third anniversary, 91% of the membership have already ratified the Agreement. It entered into force three years ago when the WTO obtained the two-thirds acceptance of the Agreement from its 164 members.
The Agreement is unique in that it allows developing countries and least-developed countries (LDCs) to set their own timetables for implementing the TFA depending on their capacities to do so. They can self-designate which provisions they will implement either immediately (Category A), after a transition period (Category B), or upon receiving assistance and support for capacity building (Category C).
As of 22 February 2020, over 90 per cent of developing countries and LDCs have notified which provisions they are able to implement after a transition period, and the ones for which they will need capacity-building support to achieve full implementation of the Agreement. Developed countries committed to immediately implement the Agreement when it entered into force.
Based on members’ notifications of commitments, 65 per cent of TFA provisions are being implemented today compared to the 59 per cent implementation rate recorded on the Agreement’s first anniversary. Broken down, the latest figure equates to a 100 per cent implementation rate for developed members and 64 per cent for developing members. As for least-developed countries, the improvement in the implementation rate is particularly notable at 31 per cent today versus the 2 per cent recorded a year after the Agreement entered into force. The implementation rate for each WTO member can be viewed here.
The Agreement has the potential, upon full implementation, to slash members’ trade costs by an average of 14.3 per cent, with developing countries and LDCs having the most to gain, according to a 2015 study carried out by WTO economists. It is also expected to reduce the time needed to import and export goods by 47 per cent and 91 per cent respectively over the current average.
To mark International Customs Day 2020 – focusing on the theme of ‘fostering Sustainability for People, Prosperity and the Planet’, the following article from the Spring 2018 edition of World Trade Matters by Jan Hoffmann, the Chief of the Trade Logistics Branch, Division on Technology and Logistics at UNCTAD, is relevant. The article discusses global trade facilitation reforms, the digitalisation of trade and measures towards ensuring long-term sustainability in the maritime industry.
Confronted with growing populism and a surge in protectionist measures recorded by the WTO, policy makers and enterprises are struggling to avoid a backlash in international trade. At UNCTAD’s Trade Logistics Branch, we support these endeavours by helping to make trade work better. Through trade facilitation reforms, the promotion of digitalisation, and ensuring the long-term sustainability of international transport, we aim at ensuring that the international movement of goods is not confronted with unnecessary obstacles and costs.
A multilateral agreement to facilitate international trade
Under the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO), developing countries commit to implement a number of very practical measures that make trade easier and more transparent. Countries are obliged to publish duties and procedures on the web, traders can transmit their declarations prior to the arrival of the goods, payments can be made electronically, and fees and charges must not become hidden taxes to generate income for the government. These are but some of the 37 concrete measures grouped into 12 Articles of the TFA. They are all useful and help make trade more efficient.
However, many of these measures involve an initial investment or reforms that require human and financial resources to start with, which developing countries many not have. The good news is that the TFA also includes a novel mechanism – the so called “Special and Differential Treatment” – that helps developing countries plan and acquire the necessary capacity prior to being fully committed to comply with all 12 Articles. Concretely, the mechanism puts the developing countries in the position – and obligation – to analyse and notify their own implementation capacity. At UNCTAD, we are working closely with the developing countries to enable them to do so. Our main counterpart in this endeavour are the National Trade Facilitation Committees (NTFCs) that each country must set up under the TFA. UNCTAD’s Empowerment Programme for NTFCs includes training and knowledge development for the members of the NTFC, combined with advisory services and the development of a Roadmap of TFA implementation.
By the same token, UNCTAD also supports developing countries in setting up Trade Information Portals. Under the TFA, members of the WTO are obliged to make relevant information on tariffs and trade procedures available on-line. UNCTAD’s Trade Information Portals not only help countries become compliant with this obligation, but in the process of analysing and publishing applicable trade procedures, a Trade Information Portal effectively helps countries identify the potential for the further simplification of procedures. Thanks to these new insights, NTFCs can then develop programmes and reforms that subsequently ensure the further simplification of procedures.
Technological progress will never be as slow as today
My favourite provision of the TFA is Article 10.1., as it provides for a dynamic dimension of the Agreement. According to this article, countries need to minimize “the incidence and complexity of import, export, and transit formalities”, continuously “review” requirements, keep “reducing the time and cost of compliance for traders and operators”, and always choose “the least trade restrictive measure”. As such, even if a country is compliant with all TFA provisions today, countries will need to continue monitoring if existing procedures are still appropriate in view of technological or regulatory developments.
As trade becomes increasingly digitalised, and new technologies which do not yet exist will be developed, it will be important that governments continuously revise and review the applicable rules and regulations.
Digitalisation comes in stages. First, we optimize existing procedures, making use of cargo tracking, the Internet of Things, blockchain et al. Second, new businesses are developed which could not exist without the new technologies; new platforms come into being and we see more “uberisation”. Finally, there is transformation and science fiction; still in our lifetime Artificial Intelligence will overtake human capabilities to manage international trade and its logistics.
But let us take one step at a time. At UNCTAD, we support developing countries through eTrade readiness assessments, the development and upgrade of technological solutions in Customs automation and Single Windows, and by providing a Forum for our members to analyse and discuss the challenges that come with digitalisation. We encourage the development of global standards that allow for interoperability among new systems. The challenge for policy makers it to encourage private sector investments in new technologies and solutions, while ensuring that no new monopolies emerge that might exclude smaller players.
And it has to be sustainable
While we aim at ensuring continued growth in international trade, there is a catch. The transport of this trade encompasses increasing externalities, such as pollution, green-house-gas emissions, and congestion.
Ports need to minimise social and environmental externalities. Many port cities are among the most polluted places to live, as ships burn heavy oil, and delivering trucks produce noise and cause traffic congestions. In addition, ports need to be resilient in the face of disruptions and damages caused by natural disasters and climate change impacts.
International transport, including shipping, needs to play a larger role in addressing global warming and contribute to mitigating the carbon emissions that are causing climate change. Shipping emits less carbon dioxide (CO2) per ton-mile than other modes of transport, but then due to its sheer volume it also produces many ton-miles. Would it be possible that the industry could be charged by its main regulatory body not per ship tonnage (as is currently the case), but per tonne of CO2 emission?
Currently, the International Maritime Organization is funded proportional to the tonnage registered under the members’ flags. Like this, Panama, Marshall Islands and Liberia pay for the largest share of the IMO budget – and in the end, this is passed on to the ship-owner, who in turn passes this on to the shipper, who will charge the consumer. This is a good established mechanism that could be expanded to also internalize the external costs of CO2 emissions.
Being the most globalized of all businesses, maritime transport should consider adopting a global regime that helps further internalize its environmental externalities – to ensure prosperity for all.
It is all about efficiency
Investing in trade facilitation reforms, making intelligent use of the latest technologies, and ensuring that externalities are internalized are all several sides of the same coin. Trade efficiency is necessary to promote an open international trading system. It requires a continuous effort by policy makers to continuously review current procedures, apply the most appropriate technological solutions, and support an efficient allocation of scarce resources.
Source: Jan Hoffman, UNCTAD – originally published in World Trade Matters, Spring Edition, 2018
In August of 2019, both the United States and Thailand announced their plans to test blockchain applications for tracking and managing shipments. The U.S. Customs and Border Protection (CBP) is planning to test a blockchain application against their current system to determine how distributed ledger technology (DLT) can improve its existing processes. Thailand, on the other hand, plans to use IBM’s blockchain-based logistics platform Tradelens to improve customs processes such as data sharing.
Originally developed in a joint venture between IBM and logistics giant Maersk, Tradelens seeks to streamline processes in the global shipping industry by making the flow of information occur in real-time. The blockchain platform is reported to currently process about half of the world’s shipping data.
These moves highlight countries’ increasing interest in employing blockchain technology in their customs and border operations. The Tradelens website says its ecosystem comprises over 100 different organizations including carriers, ports, terminal operators, third-party logistics firms, and freight forwarders. More specifically, a map on the Tradelens website suggests that about 60 ports and terminals worldwide are directly integrated with TradeLens.
Elsewhere, the Directorate-General for Taxation and Customs Union (TAXUD), which develops policies and operational systems for the European Customs Union, explored the applicability of blockchain in customs and taxation with a focus on utilizing blockchain as a notarization service.
The Union is looking into using blockchain to digitize ATA Carnet, an international customs document used in 87 countries for temporarily admitting goods duty-free. A pilot project conducted in collaboration with the International Chamber of Commerce World Chambers Federation (ICC WCF), was successfully tested in 2018.
The ICC WCF, a body of the ICC that helps facilitate mutually beneficial partnerships between ICC members, has been working with different customs authorities to develop solutions for converting ATA Carnets into electronic documents.
About 80 countries around the world have developed authorized economic operator (AEO) programs and signed a mutual recognition agreement (MRA), all in an effort to streamline cargo security. Under such arrangements, individual countries identify and approve trustworthy logistics operators that pose a low risk in security and share the approval information with participating countries.
This allows countries to piggyback on the security checks of other countries to make customs operations more efficient. However, a few problems have arisen with the program.
There are information leakage risks associated with the conventional way of sharing AEO data by email. While a sender’s email server may be encrypted, there is no guarantee that the receiver’s is as well, and vice versa.
Data sharing is not real-time, but monthly or at an agreed-upon interval. This limits the speed at which information on new or suspended AEOs can reach all participants.
To avoid the aforementioned problems as well as achieve additional time and cost savings on security procedures, customs administrations in Mexico, Peru and Costa Rica are working with the Inter-American Development Bank to develop a blockchain application called Cadena.
The move by governments around the world to employ blockchain to improve cross-border trade marks a step toward paperless customs processes, which originally began with the digitization of information flows by making trade-related data and documents available and exchangeable electronically. For all the improvements they’ve brought to paper-heavy processes, traditional electronic data exchange systems still face the challenges of authenticity and the unavailability of real-time data exchange.
For instance, the Netherlands and China launched a five-year project in 2010 to test the applicability of electronic sanitary and phytosanitary (SPS) certificates. A World Economic Forum white paper titled “Paperless Trading: How Does It Impact the Trade System?” noted that concerns around the authenticity of the electronic documents arose. This necessitated the adoption of electronic signature systems and a whole new legal framework that recognized the electronic signature.
Still, the entire process requires longer procedures and the introduction of new types of intermediaries — e-signature providers, for instance. Moreover, low-income countries, the trade costs of which remain high compared to high-income countries as according to World Bank data, may not have the budget to implement several new systems for data and document digitization. They still need to invest in better customs infrastructure.
Blockchain, on the other hand, if implemented in border protection, will ensure real-time availability and immutability of customs documents while saving considerable costs on excessive paperwork.
The WCO Policy Commission (PC) has seized the momentum garnered in the domain of electronic commerce and has unanimously adopted the Luxor Resolution at its meeting held this week from 4 to 6 December 2017 in the Egyptian city which gives its name to the Resolution.
The Resolution, developed in close collaboration with all stakeholders, outlines the guiding principles for cross-border E-Commerce addressing eight critical aspects, notably Advance Electronic Data and Risk Management; Facilitation and Simplification; Safety and Security; Revenue Collection; Measurement and Analysis; Partnerships; Public Awareness, Outreach and Capacity Building; and Legislative Frameworks.
The Resolution is aimed at helping Customs and other government agencies, businesses, and other stakeholders in the cross-border E-Commerce supply chain to understand, coordinate and better respond to the current and emerging challenges.
Additionally, and taking into consideration the relevance of the topic and the need to better position the work of the WCO and coordinate ongoing efforts, the PC has also issued a Communiqué to the Eleventh WTO Ministerial Conference (MC11), the Organization’s highest decision-making body, attended by trade ministers and other senior officials from the WTO’s 164 Members, that will take place in Buenos Aires, Argentina, from 10 to 13 December 2017.
The Communiqué strongly reaffirms the WCO’s leadership in providing policy and operational frameworks for the effective management of cross-border E-Commerce from both a facilitation and a control perspective, and clearly demonstrates its strong commitment to supporting the WTO’s Work Programme on E-Commerce, moving forward. Source: WCO
Deputy Minister of Trade and Industry, Mr. Carlos Ahenkorah, says Ghana a signatory to the WTO Trade Facilitation Agreement is too small a country to have two Single Window operators.
He challenged the pioneer and only single window operator, Ghana Community Network Services Limited (GCNet) to speedily re-double its efforts in actualising the full breadth of Single Window operations in the country.
He recalled GCNet’s drive to automate trade facilitation and port clearance processes in the country and the difference that brought to trade and port operators.
He praised the Ghana Integrated Cargo Clearance Systems(GICCS) deployed by GCNet as efficient and robust enough to deliver on any valuation needs and address any bottlenecks in the overall clearance systems at the ports to deepen trade facilitation and enhance revenue mobilisation.
He noted that GCNet had taken too long in securing the manifest, the seed document in clearance processes at the ports from source, a situation that may have encouraged other operators to exploit the loophole to try to secure that right from the International Air Transport Association.
The Deputy Trade Minister, however, noted that if GCNet had connected Maersk Lines to transmit its manifest into the Ghana Customs Management System (GCMS) over the past three years then there was no way that it could not oblige other carriers to emulate that example and ensure that both air and sea manifest are transmitted expeditiously.
He also urged GRA (Customs Division) as the statutory body to assist GCNet to get all other carriers to do so with dispatch going forward.
Mr. Ahenkorah also charged GCNet to remain committed to their tenets of innovation and service delivery and work harder to expand the scope of its TradeNet Single Window platforms in order to ward off any superfluous and duplicitous competition.
On his part, the Chief Executive Officer of the Ghana Shippers Authority, Dr. Kofi Mbiah, challenged Government to be bold to speedily resolve critical issues militating against the full actualisation of Single Window implementation in the country.
He said Ghana having been acknowledged as a pioneer in Single Window operations by international bodies like the World Bank and a number of countries having undertaking familiarization visits to Ghana to learn about the GCNet experience.
Dr. Mbiah noted that in as much as there was the need for collaboration between GCNet and other operators, it was also extremely important to define the parameters of engagement to create a level playing field for all players in the trade facilitation and revenue mobilisation eco-system.
Welcoming guests earlier to the event, the Executive Chairman of GCNet, Dr. Nortey Omaboe, noted that as a Public Private Partnership (PPP) conceived since its inception, the model over time had proved to be the most effective way of executing such a national mandate to support revenue mobilisation by Government, foster trade facilitation and enhance business competitiveness.
Dr. Omaboe observed that Government’s quest for increased revenue in an environment of reduced taxes to stimulate private sector growth meant greater focus on GCNet to come up with new initiatives to support revenue mobilisation efforts.
He, therefore, outlined a number of initiatives that GCNet had proposed to Government to enhance revenue mobilization.
These include the need to improve upon the valuation of consignments, the need to invoke bonds for transit goods that do not exit the country after 14 days and the review of the paltry charges currently imposed, ensuring that warehoused goods are ex-warehoused within the stipulated time periods.
Also, tighter control of free zone operations and the duty and tax exemptions granted thereon, the assignment of all newly registered taxpayers to relevant GRA Tax Offices and ensuring they file tax returns, etc.
Dr. Omaboe however expressed concerned about non-clarity in the role of some entrants in the trade facilitation and revenue mobilisation space following the cessation of the destination inspection companies and called for urgent steps to address the worrying development; and its inherent duplications and hence unnecessary cost to Government.
He was confident that what he termed ‘unnecessary complication’ would eventually be resolved mindful of the consideration that the interest of the country should remain paramount and be protected.
Dr. Omaboe assured guests that GCNet was poised for further growth and development in the years ahead as it leverages upon its continuous innovations in deploying systems that bring greater value to the Government and people of Ghana. Source: Ghana News Agency, Two Single Window Operators too much for Ghana, April 19, 2017
A major milestone for the global trading system was reached on 22 February 2017 when the first multilateral deal concluded in the 21 year history of the World Trade Organization entered into force. In receiving four more ratifications for the Trade Facilitation Agreement (TFA), the WTO has obtained the two-thirds acceptance of the agreement from its 164 members needed to bring the TFA into force.
Rwanda, Oman, Chad and Jordan (pictured above) submitted their instruments of acceptance to WTO Director-General Roberto Azevêdo, bringing the total number of ratifications over the required threshold of 110. The entry into force of this agreement, which seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms all over the world and creates a significant boost for commerce and the multilateral trading system as a whole.
Full implementation of the TFA is forecast to slash members’ trade costs by an average of 14.3 per cent, with developing countries having the most to gain, according to a 2015 study carried out by WTO economists. The TFA is also likely to reduce the time needed to import goods by over a day and a half and to export goods by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average.
Implementing the TFA is also expected to help new firms export for the first time. Moreover, once the TFA is fully implemented, developing countries are predicted to increase the number of new products exported by as much as 20 per cent, with least developed countries (LDCs) likely to see an increase of up to 35 per cent, according to the WTO study.
At present, 10 out of 24 Members of East and Southern Africa (ESA) have ratified the TFA. These are; Mauritius, Botswana, Lesotho, Kenya, Zambia, Seychelles, Madagascar, Swaziland, Mozambique and Rwanda. So where to now South Africa?