Third anniversary of WTO Trade Facilitation Agreement

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.

Source: World Trade Organisation, 22 February 2020

ICD 2020 – #MakeTradeWork

Picture courtesy of the WCO

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

Embracing Blockchain for Cross-border Trade

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.

Source: Original article titled: “Blockchain Adoption as a Cure for Cross-Border Trading“, authored by Craig Adeyanju, Cointelegraph.com, 2019.09.28

Customs Community Adopts Resolution on Cross Border E-Commerce

Luxor Resolution.png

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 

  • Access the Resolution on Guiding Principles here!
  • Access the Communique here!
  • Visit the WCO’s Cross-Border E-Commerce webpage here!

Ghana – Two Single Windows?

Ghana
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

Trade Facilitation Agreement enters into force

wto-tfa-enters-into-force

Trade Facilitation Agreement, 22 February 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?

WTO FTA – Just 4 more ratifications required…

WTO LogoThe WTO announced that the following countries have submitted their instruments of acceptance to the WTO Trade Facilitation Agreement (TFA):

  • 104. Ghana (4 January 2017)
  • 105. Mozambique (6 January 2017)
  • 106. St. Vincent and the Grenadines (9 January 2017)

Only four more ratifications from members are needed to bring the TFA into force. The TFA will enter into force once two-thirds of the WTO membership has formally accepted the Agreement.

WCO News – New Edition February 2016

WCO News Feb 2016Another bumper edition of customs news, views and success stories (click here to view!). Several countries showcase their modernization and digital developments under the theme “Digital Customs” from declaration management systems, carnet systems to paperless procedures for AEO’s. Nice to see an article featuring South African Customs once again.

There’s also a section featuring articles on ‘big data’. Learn about Canada’s approach to private sector stakeholder engagement. You’ll also find some interesting points of view regarding use and misuse of valuation databases and a whole lot more.  Source WCO

WCO accredited Customs Modernization Advisors and Mercator Programme Advisors

The WCO, in its effort to assist Members with Strategic Planning activities and WTO TFA implementation held two back to back accreditation workshops in Pretoria, South Africa. These events were held during the week of 1-5 February 2016 and 8-12 February 2016, were funded by the United Kingdom within the framework of the WCO-DFID ESA project and HMRC-WCO-UNCTAD project and organizationally supported by the South African Revenue Service.

24Customs officers from the WCO ESA and WCA regions participated in the workshops and were assessed against the Customs Modernization Advisors (CMAs) and Mercator Programme Advisors (MPAs) required profile through a series of testing exercises, presentations, role-plays, group activities and plenary discussions.

Participants were also required to demonstrate their knowledge and strategic application of core WCO tools and instruments and the WTO Trade Facilitation Agreement along with their potential to facilitate discussions with senior Customs and other officials in a strategic context.

At these two events 15 participants successfully completed step 1 of the accreditation process as they demonstrated their potential to become CMA’s/MPA’s during the range of workshop activities.

From the five WCO CMA/MPA accreditation events held to date a total of 41 participants have been assessed as being suitable to become CMAs and MPAs under step 1 of the accreditation process and will be invited to participate in TFA implementation support missions under the Mercator Programme in order to complete the accreditation process. It is expected that the successful candidates are made available by their Customs administrations for further support missions in the future. Source: WCO

South Africa – WCO ESA Regional Workshop on TFA implementation

ESA_Regional-WS_South-AfricaThe WCO Regional Workshop on Strategic Initiatives for Trade Facilitation and the Implementation of the WTO Trade Facilitation Agreement (TFA) – Mercator Programme – for the WCO East and Southern Africa (ESA) region was held from 15 to 17 September 2015 in Johannesburg, South Africa. It was hosted by the South African Revenue Service (SARS) representing the WCO Vice Chair of the ESA region, and financially supported by the United Kingdom Department for International Development (UK DFID) and the Ministry for Foreign Affairs of Finland. More than 100 participants from 21 ESA Members (Customs, Trade Ministries/equivalent Ministries), the WTO and other international organizations, development partners and the private sector participated in the event.

The Workshop was opened by the Commissioner of SARS, Mr. Thomas Moyane. He expressed his view that the WCO Mercator Programme created significant conditions for contributing to intra-African as well as international trade facilitation benefits. As Vice Chair of the ESA region, he hoped that the Workshop could recommend immediate actions for the region.

The Workshop raised a lot of interest and active discussions from a variety of well-prepared and informative presentations, including the role of the WCO in TFA implementation;  TFA regulations such as Article 23.2 on National Committees on Trade Facilitation (NCTF) and specific national and (sub-)regional examples of implementation approaches; experiences of Trade Ministries and several partner institutions active in the region; and discussions on further approaches to Capacity Building and TFA implementation, including in cooperation with Development Partners.

The region agreed on next steps forward, including on a regional focus on the establishment and maintenance of NCTFs (for instance further provision of replies to the respective WCO survey; identification of the situation within ESA Members); reporting the outcomes of the Workshop to the ESA Regional Steering Committee; encouragement of ESA Members who are not yet Contracting Parties to the Revised Kyoto Convention to accede to it as soon as possible (and/or to identify related Capacity Building needs) – as one concrete way to also support TFA implementation; and responsibility of the ROCB and the Vice Chair to continue collecting and publishing information on ongoing Capacity Building projects and work of partner organizations such as SADC, COMESA, SACU and UNCTAD especially in the TF(A) area in the region – while encouraging Members and partner organizations to share such information.

The Workshop was successfully concluded with positive feedback from Members, partner organizations and development partners. A summary document on the discussions held during the Workshop is currently under finalization by the Vice Chair’s office and the ROCB and will be circulated to all participants of the Workshop in due course. Source: WCO

TFA – Africa is on the move! Why not go faster?

WTO LogoThe following article is published with the kind permission of the author, Tapia Naula who is Principal Transport Economist at African Development Bank, based in the Ivory Coast. He is an international project manager and transport economist with experience in logistics business, research and trade facilitation. This article is a must for anyone associated with or working on the TFA on the African sub-continent, and a bit of a wake up call to those countries who have as yet done little or nothing to progress their participation.

In the World TFA Cup Asia is leading Africa 72 – 35. The first scores of the WTO Trade Facilitation Agreement are out as member countries submit their Category A notifications. Initial results of the African first series are somewhat unfulfilling. Some teams are playing defensive even if attacking tactic is the only way to win.

In December 2013, WTO members concluded negotiations on a Trade Facilitation Agreement (TFA) at the Bali Ministerial Conference, as part of a wider “Bali Package”. Among trade facilitation practitioners the Agreement was received with great enthusiasm: finally there was a legal instrument, which is concrete enough to make a difference! TFA will enter into force once two-thirds of members have completed their domestic ratification process. Section I contains substantive provisions in 12 main Articles. The members are required to categorize and notify each provision of the Agreement as either A, B or C Category. The A Category commits a country to implement the provision upon entry into force of the TFA, or one year after for LDC’s. For B-Category there will be a transitional period. C-Category provisions are allowed a transitional period, technical assistance and capacity building.

First, let it be said loud and clear: the WTO TFA is an excellent collection of modern trade and transport facilitation instruments in one folder. In developing countries its implementation would mean reforms that would save time, money and efforts for regular business people and consumers. These reforms may be painful but the countries that can do it, will be the future winners of their regional competition and they will be the ones that will most benefit from joining the global value chains. TFA is the best vehicle for poverty reduction invented so far and that is why it is so important.

In August, 2015, 14 African countries and 25 Asian countries had submitted notifications for category A provisions. Asian countries had “accepted” 72 % of all the provisions as A-Category commitments on average where the respective share of the African countries is only 35 %. On Article-level African countries lag behind on every Article except one (Table 1).

In addition to the low overall share of category A-notifications, the African notifications generally look like “random picks” of sub-paragraphs, compared to many Asian members that have commonly chosen the strategy of basically accepting the whole Agreement and making exceptions for certain few paragraphs according to their particular needs.

Were African governments well-informed of the impact and substance of each paragraph – or are they just being cautious, perhaps trying to delay the final commitment? The patterns between African and Asian countries are in any case different.

Table 1

TFA includes also “low hanging fruit” – sections that require little technical expertise to be implemented. At least some of these should have been easy for member countries to accept. “Publication and Availability of Information” is one of those sections. Access to information through internet is routine and affordable. It should not require transition periods or particular technical assistance. Donors are even competing to assist governments with such low cost and high-return activities. Still, less than one third of the African Governments notified this Article.

Here are some other peculiar findings:

  • Out of 14 African countries only Morocco accepted “Border Agency Cooperation” as A –Category provision. Three of the others countries that did not notify it are landlocked countries;
  • Only four out of 14 African countries had fully notified “Freedom of Transit.” Transit challenges in Africa are probably the single most significant source of inefficiency in trade logistics;
  • One of the foundations of modern customs management is the introduction of Risk Management. Only 3 out of 14 African countries had notified this provision;
  • Only Morocco notified Trade Facilitation Measures for Authorized Economic Operators (AEO), which gives certain privileges to traders and transport operators, who show high level of compliance to regulations. One wonders why Kenya, Uganda, Rwanda, Burundi and Tanzania did not notify it as we know that an AEO program is being piloted in the East African Community;
  • Only Senegal notified the sub-Article on Single Window, which is probably the most important one of the whole Agreement. Senegal perhaps deserves this honor – being the first truly African-based single window country – and also representing the good practice of SW management. Yet, according to the African Alliance for e-Commerce, currently there are at least 16 other single windows either already operational or under development in Africa. Why weren’t these developments recognized?

Despite the above “peculiarities” the African situation is fortunately nowhere near as somber as the A-Category notifications indicate. There are plenty of trade and transport facilitation initiatives under implementation – and Africa is indeed “on the Move.” We should on one hand side make sure that the valuable TFA Agreement is not becoming a separate formal process alongside the practical actions on the ground, but rather a framework for coaching governments in climbing up the stairs toward greater competitiveness. On the other hand, the countries should not ignore the existing achievements. A lot has been achieved in Africa in recent years and this process should go on and gain speed. Some sub-regions, which have been less successful in this field need  benchmarks, encouraging and coaching. This is where African and international organizations can play a role.

Although the direct cost of TFA implementation is relatively low, the indirect cost may be extremely high. The indirect cost concerns existing structures, which generate income for organizations and individuals, who often greatly benefit from the status quo. Some governments have entered into concessions outsourcing critical government functions such as pre-customs clearance operations and processing and submissions of declarations to customs. Western firms have efficiently seized the opportunity and negotiated deals, which guarantee profits for in many cases for decades to come. Single Windows in certain countries are good examples for these. In an unnamed Southern African country for example, humanitarian aid is exempt from taxes and duties in import. If however a UN agency for example imports a container of pharmaceuticals worth five million USD, it will have to pay for a Single Window fee of 42,500 USD! Such Ad Valorem fee arrangements are against the TFA. Such concessions are often built inside structures, which profit from the concessions and in exchange – protects its operations and continuity. This is why they are difficult to tackle. This is an example of the problematics that African policy makers must deal with when taking a position in committing in TFA provisions. It may be a whole lot more complicated than what it looks like.

Association between % Share of Sub-Article Level A-Category Commitments and the Corruption Perception Index Score (CPI). Sources: WTO and transparency International.
Association between % Share of Sub-Article Level A-Category Commitments and the Corruption Perception Index Score (CPI). Sources: WTO and transparency International.

The diagram above shows the association of share of the provisions that have been covered by A-Category notifications and the Corruption Perception Index (CPI) score of the countries. For African countries the correlation is moderate (correlation co-efficient: 0.42) but for Asian countries the association is strong (correlation co-efficient: 0.73). The association of the two variables is understandable: the less corruption a country has (the higher the CPI rank is), the more reforms the government is in liberty to conduct (the higher coverage of TFA as A-category Notifications).

We need to better understand the underlying reasons why policymakers cannot let reforms take off. Traditions, corruption and outdated structures are usually the biggest obstacles. These cannot be overcome by merely providing short-term technical assistance and bench-marking the world best practices but only strong political leadership can make the change. Developing partners should raise this topic on the highest political level and “live together” through the reforms with the counterparts.

The Northern Corridor (Kenya, Uganda, Rwanda) provides an encouraging example how multiple reforms can be carried out in very short time. Only two years ago it took staggering 27 days to transport a container from Mombasa Port and deliver it in Kigali, Rwanda. Today it takes only seven days. The improvement was enabled by series of reforms, which were championed by the Heads of States of the Corridor member countries. The example proves that major improvements can indeed be achieved in very short time. On the other hand, even with the most sophisticated instruments, reforms will not succeed if there the high-level ownership is not there. Author: Tapio Naula

OECD estimates WTO TFA could to cut trade cost by 17.5% on customs rules

cut-red-tape“Simplifying trade documentation”; “automating border procedures”; “streamlining border controls” – all cliche’s of the modern customs and international trade scene, but just how attainable are they? Beyond the pleasantries, and fanfare of ribbon cutting ceremonies, very little seems to happen at the cold face. Sovereign states are inward-looking and jealously wish to preserve their ‘sovereign domains’.

A major World Trade Organization deal on streamlining global customs rules could cut international trade costs by between 12.5 percent and 17.5 percent, a study by the Organization for Economic Co-Operation and Development showed on Thursday.

A deal between India and the United States on the Trade Facilitation Agreement last year, which needs to be backed by all 160 WTO members, had resurrected hopes that the trade body could push through such reforms to cut red tape.

“There are very practical measures that we’ve identified that offer significant benefits,” Ken Ash, the OECD director for Trade and Agriculture, told media.

“Things like simplifying the required trade documentation. Automating border procedures, or streamlining border controls.”
Economists say the Trade Facilitation Agreement could save $1 trillion. Ash declined to endorse this figure, only saying the Paris-based body expected each 1 percent reduction in worldwide trade costs to bring $40 billion in savings.

Australia was to formally accept the agreement later on Thursday, Steven Ciobo, parliamentary secretary to the minister of foreign affairs, said at the news briefing in Paris, making Australia the seventh WTO member to adopt the agreement.

WTO launches dedicated website for new Trade Facilitation Agreement Facility

new-Trade-Facilitation-Agreement-Facility-siteThe WTO has launched a new website which will serve as a focal point for members, donors, and others seeking information on the new Trade Facilitation Agreement Facility (TFAF). The TFAF was created at the request of developing country and least-developed country (LDC) members to help ensure that they receive the assistance needed to reap the full benefits of the Trade Facilitation Agreement and to support the ultimate goal of full implementation of the new Agreement by all members. The TFAF will support these countries in assessing their specific needs and identifying possible development partners to help them meet those needs through a diverse number of activities.

The Facility was formally launched on 22 July 2014 by WTO Director-General Roberto Azevêdo and became operational on 27 November 2014. The website can be accessed here! To benefit from this, developing and LDC members must notify the WTO which provisions they will implement when the Agreement enters into force or, in the case of LDCs, within one year after entry into force (Category A commitments); which provisions they will implement after a transitional period following the entry into force of the Agreement (Category B); and which provisions they will implement on a date after a transitional period following the entry into force of the Agreement and that require the acquisition of assistance and support for capacity building (Category C).

The aim of the TFAF is to help ensure that this assistance is provided to all those needing it. The website provides background on the Agreement and the TFAF, information on programmes that support implementation of the Agreement, as well as information on national contact points for trade facilitation in developing and LDC members.

The website also provides information on TFAF support related to the preparation of Category A, B and C commitments, assistance and support for capacity-building, and applications for TFAF grants where no other funding sources are available to developing and LDC countries to meet their implementation needs. The website is a “work in progress” and will be continuously updated to provide useful information for WTO members. Source: WTO

Event – Role of the Private Sector in Support of the Trade Facilitation Agreement

international-trade1The role of the private sector in the implementation of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) will be the focus of the 2015 edition of the Global Facilitation Partnership for Transportation and Trade (GFP) meeting. With the world’s customs administrations currently identifying their respective TFA  implementation commitments and setting up National Trade Facilitation Committees, trade and logistics operators can learn how they can participate in such initiatives by attending these sessions.

The GFP meeting will be held at Palais des Nations, Geneva, on 22 April, and will be divided into three thematic sessions.

The first session, ‘Governments’ Priorities: Strategies for Fostering Private Sector Participation in the TFA Implementation Process’ will look at how governments are planning to implement the TFA.

It will focus on how the private sector is consulted and how an effective participation of the private sector can be facilitated to implement the Agreement.

The second session, ‘Priorities, Perspectives, and Expectations from the Private Sector on TFA Implementation’ will assess how the private sector – including large corporates and small and medium-sized enterprises – view TFA implementation. It will look at the potential benefits from a private-sector perspective, and how the sector can contribute to national and international initiatives to implement the agreement.

The third session, ‘International Organizations’ Co-ordination and Partnership for Supporting TFA Implementation’, will provide an opportunity to share information and experiences on how the TFA can be implemented with public-private partnerships in mind, as how national trade facilitation committees can better support this process.

ITC invites all interested stakeholders to join the GFP meeting at the Palais des Nations on 22 April from 9:00. Click here for link to online registration.

Source: International Trade Centre (Geneva)

Important Implications of the WTO TFA on Landlocked Countries

WTO TFA implications for LLDCBackground

The Almaty Programme of Action (APoA): Addressing the Special Needs of Landlocked Developing Countries within a New Global Framework for Transit Transport Cooperation for Landlocked and Transit Developing Countries was adopted in 2003 as a response to the growing recognition by the international community of the special needs and challenges faced by the LLDCs. The Programme of Action emphasised five priority policy areas that landlocked and transit countries need to address to resolve the access problems of LLDCs: Transit policy and regulatory frameworks; Infrastructure development; International trade and trade facilitation; International support measures, and Implementation and review.

As one of the priority areas of the APoA, international trade and trade facilitation (streamlining customs and other border procedures) has taken on renewed focus, especially in light of the WTO Bali Ministerial Conference in December 2013, at which WTO members reached consensus on a Trade Facilitation Agreement, as part of the wider ‘Bali package’. As the end of the first ten years of the APoA is drawing to a close, the General Assembly of the United Nations decided to hold a comprehensive Ten-Year Review Conference of the APoA in 2014.

WCO TFA and Landlocked Countries

The WTO Trade Facilitation Agreement sets out commitments that promote clear rules and procedures, many of which are of particular interest to LLDCs. The three most important provisions for LLDCs are Articles 11, 10,and 8. The first one deals specifically with freedom of transit, the second sets out obligations in relation to trade procedures including transit, and the third requires WTO members to cooperate with other members with which they share a common border.

Other TFA provisions of interest to the LLDCs include Articles 1-5 which addresses Publication and Transparency, including the availability of information; Article 2 which provides specific guidance on Consultations before Entry into Force; Article 6, which sets out Disciplines on Fees and Charges imposed on or in Connection with Import and Export and Article 7 which provides rules on Release and Clearance of Goods, including Trade Facilitation Measures for Authorised Operators. In the new Agreement, the obligations take three forms: Binding, Best Endeavour, or a Combination of both.

The TFA presents an opportunity for LLDCs to upgrade their systems, infrastructure and procedures as the Agreement encourages national trade facilitation improvements. Policymakers should therefore ensure that trade facilitation is included in national development plans given the cross cutting nature of trade facilitation. Using this approach, LLDCs will increase their ability to access resources tied to different funding windows, for example, assistance for general trade policy and regulations.

There are 16 Landlocked countries in Africa, which signifies the importance of the WTO TFA and its consequential impact on regional trade groupings.

The WTO TFA is an innovative agreement as it will provide capacity building to developing countries to allow them to undertake the implementation of the agreement where necessary. The Agreement addresses concerns about the implementation costs and capacity building constraints in developing and least developed countries that would be required to implement these rules. The Agreement allows each LLDC to design its TFA implementation plan and choose a timetable of compliance in accordance with its needs, capabilities and confirmed funding and technical assistance from development partners. Further, guidance is provided to WTO members on the domestic institutional arrangements that should be established to maximise the resources to be made available by donors, as well as the structures and systems that should be adhered to at the WTO Secretariat itself to ensure that the process of accessing TFA implementation support is transparent and inclusive.

It is essential to note that the Agreement specifies a strict national approach to implementation and makes no provision to resolve the issues which are closest to LLDCs interests, such as regional economic corridors, which fall outside the purview of the WTO’s multilateral disciplines. Despite this shortcoming, LLDCs will benefit from deepening their links and their involvement in fora supported by the development banks and bilateral agencies which fund these regional programmes. This will ensure that their interests are adequately reflected in the design of development plans for regional infrastructure improvements, regulatory reforms, technical assistance and capacity building.

Although the language of the TFA is legally binding in relation to some key aspects of freedom of transit, it has one important proviso. If an LLDC developing country neighbour denotes freedom of transit as a Category C obligation, it will only become justiciable and fully legally binding after the expiration of the transition date determined by that country and the delivery of suitable technical assistance by donors. Against this background, an optimal outcome for LLDCs would be that as many transit countries as possible register freedom of transit as a Category A obligation, as this would come into force immediately.

Read the full preparatory report on the Implications of the WTO ATF on Landlocked Developing Countries, available on the United Nations Conference on Landlocked Developing Countries website.

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