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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Implementing the WTO Agreement on Trade Facilitation

WTO Agreement on Trade Facilitation

Click on the image to download the Infogram

It is anticipated that most Customs and Border Authorities have at least one common item on their national capacity building agenda’s for 2014 – the Agreement on Trade Facilitation. Many countries, being members of the WCO, would have already acceded to a level of commitment to the Revised Kyoto Convention (RKC). This requires of them to introduce, at an agreed time, the principles of WCO standards and policies according to the level of their sovereign commitment.

The General Annex to the RKC is the bare minimum a country would be expected to implement in order to for it to be considered compliant with the RKC. From a trade perspective, this also indicates the extent to which your country’s leaders have committed itself towards ‘global integration’.

What the recent Trade Facilitation Agreement (ATF) in Bali does is bind member states to a compendium of requirements necessary for the enactment of certain conditions and obligations as set out in the various articles contained in the agreement. Countries should also note that certain of the ATF provisions include items under the Specific Annexes to the RKC. For a quick reference to see how the RKC and other WCO standards and conventions stack up to the ATF, refer to the WTO Trade Facilitation Toolkit by clicking the hyperlink.

In addition to this, the ATF also makes provision for ‘special and differential treatment’ in regard to developing and least developed countries (Refer to Section II to the WTO ATF).

In essence this allows those countries and opportunity of identifying their (capacity building) needs and setting themselves realistic targets for implementation and compliance to the ATF. To this end 3 Categories are identified for national states to consider in the event they are not at present in a position to accede to some or all of the ATF conditions.

The WCO has also prepared various tools which aim at assisting its members in assessing their national position in regard to the ATF. Members are likewise encouraged to regularly visit the WCO website for updates in this regard.

The following working papers are available from the WCO website and, for ease of access, are listed below together with their hyperlink to the WCO site –

Other related Trade Facilitation documentation can be found at the following link – WTO Trade Facilitation Negotiations

Text of the WTO Free Trade Agreement

What border barriers impede business ability?

ICCThe International Chamber of Commerce (ICC) has released the results of its survey ‘What border barriers impede business ability?’. The analyses highlights common impediments to cross border trading that can be taken into consideration when determining how barriers to trade can be reduced to stimulate global economic growth.

The ICC recognises that the survey results are neither statistically valid nor entirely representative of the hundreds of thousands of organizations that trade globally, the survey does much to reveal a set of common prerequisites – such as predictability, reliability and consistency – that international traders seek. The ICC concludes that there is a need for further capacity-building efforts, in particular education and availability of information for both traders and border control officials on the correct process to follow. The survey results illustrates the need for an effective customs-business dialogue at national level to find ways to lessen delays in trade processes and shorten release times, as called for by ICC.

The survey coincides with a number of international developments seeking to facilitate trade and simplify border procedures. These include the conclusion of a multilateral agreement on trade facilitation at the 9th Ministerial Conference of the World Trade Organization in December 2013 and the ongoing negotiations of the Trans-Pacific Partnership Agreement, the Trans-Atlantic Trade and Investment Partnership and the Regional Comprehensive Partnership Negotiations. Source: International Chamber of Commerce

Business Guide for Developing Countries – WTO Trade Facilitation Agreement

Picture2The International Trade Centre has prepared a guide to help businesses take advantage of the WTO Trade Facilitation Agreement. The agreement simplifies customs procedures, allowing businesses to become more competitive. This jargon-free guide explains the provisions with a focus on what businesses need to know to take advantage of the agreement. It will also help policy makers identify their needs for technical assistance to implement and monitor it. To download the guide – click the following link: http://www.intracen.org/wto-trade-facilitation-agreement-business-guide-for-developing-countries/.

For instance, the guide explains how the article on ‘Advance rulings’ aims to address problems with inconsistent classification of goods by customs officials and the uncertainty it creates for traders. ‘Advance rulings are binding decisions by customs…on the classification and origin of the goods in preparation for importation or exportation. Advance rulings facilitate the declaration and consequently the release and clearance process, as the classification has already been determined in the advance ruling and is binding to all customs officers for a period of time,’ the guide explains. It goes on to list in jargon-free language the obligations and the procedure imposed on customs authorities related to advance rulings.

Reducing the on-the-spot decision making authority of individual customs agents thanks to advance rulings will also reduce bribery, the guide says. Corruption continues to be a key problem for developing-country exporters, who identified it as a major constraint on exports in a recent survey conducted by ITC.

The last chapter of the guide describes how the agreement will be implemented, including the special and differential treatment provisions that developing countries may invoke. Developing countries will be able to link the implementation of the commitments to technical assistance and support from donors. WTO member states will have to explicitly apply for delays for each commitment, which will need to be approved by the WTO and the implementation schedule published.

Source: International Trade Centre

What Does the WCO think of the WTO Trade Facilitation Agreement?

The Dublin Resolution, which was issued at the conclusion of the Policy Commission meeting in Dublin, Ireland on 11 December 2013, welcomes the WTO Agreement On Trade Facilitation (the “Trade Facilitation Agreement”), as embodied in the Bali Package’s Ministerial Decision, adopted at the WTO’s Ninth Ministerial Conference in Bali, Indonesia from 3 to 7 December 2013, under the framework of the Doha Development Agenda.

The Dublin Resolution emphasises the commitment of the WCO to the efficient implementation of the Trade Facilitation Agreement.

The WCO Secretary General, Kunio Mikuriya, said that he was very pleased with the timely and affirmative action of Policy Commission, which reflects the determination to drive forward the global Customs trade facilitation agenda.

Posted by Simon Lester for http://worldtradelaw.typepad.com

 

Bali Package has grievous implications for Africa’s people

Africa Trade Network, comments that: “Whatever the expectations with which African countries came to Bali, they are leaving virtually empty-handed. There is hardly anything of substance in the just adopted Bali package that addresses Africa’s developmental imperatives….We will expect our States to wake up, go back to the drawing board, take the negotiations seriously as having grievous implications for their people…”

Read Africa Trade Network’s conclusions in full.

 

WTO Bali – Trade Facilitation Agreement

WTO-globalvoices_org__au_The draft text relating to the outcome on a Trade Facilitation Agreement at 9th Ministerial Conference of the WTO can be located here!   It reveals some significant impact and far-reaching implications for the Customs administrations, but to a great extent it will probably be welcomed by the world’s trading community. In the South African context, readers may find Article 11 on “Freedom of Transit” extremely interesting, if not controversial by some members of the establishment. In essence it’s all about being transparent! Source: World Trade Organisation.

Experts Caution Against Rush into Trade Facilitation Agreement

Bali 2013A rather lengthy article published by Third World Network, but entirely relevant to trade practitioners and international supply chain operators who may desire a layman’s understanding of the issues and challenges presented by the WTO’s proposed agreement on ‘Trade Facilitation’. I have omitted a fair amount of the legal and technical references, so if you wish to read the full unabridged version please click here! If you are even more interested in the subject, take a look through the publications available via Google Scholar.

A group of eminent trade experts from developing countries has advised developing countries to be very cautious and not be rushed into an agreement on trade facilitation (TF) by the Bali WTO Ministerial Conference, given the current internal imbalance in the proposed agreement as well as the serious implementation challenges it poses.

“While it may be beneficial for a country to improve its trade facilitation, this should be done in a manner that suits each country, rather than through international rules which require binding obligations subject to the dispute settlement mechanism and possible sanctions when the financial and technical assistance as well as capacity-building requirements for implementing new obligations are not adequately addressed.”

This recommendation is in a report by the Geneva-based South Centre. The report, “WTO Negotiations on Trade Facilitation: Development Perspectives”, has been drawn up from discussions at two expert group meetings organised by the Centre.

Noting that an agreement on trade facilitation has been proposed as an outcome from the Bali WTO Ministerial Conference, the South Centre report said that the trade facilitation negotiations have been focused on measures and policies intended for the simplification, harmonization and standardization of border procedures.

“They do not address the priorities for increasing and facilitating trade, particularly exports by developing countries, which would include enhancing infrastructure, building productive and trade capacity, marketing networks, and enhancing inter-regional trade. Nor do they include commitments to strengthen or effectively implement the special and differential treatment (SDT) provisions in the WTO system”.

The negotiations process and content thus far indicate that such a trade facilitation agreement would lead mainly to facilitation of imports by the countries that upgrade their facilities under the proposed agreement. Expansion of exports from countries require a different type of facilitation, one involving improved supply capacity and access to developed countries’ markets.

Some developing countries, especially those with weaker export capability, have thus expressed concerns that the new obligations, especially if they are legally binding, would result in higher imports without corresponding higher exports, which could have an adverse effect on their trade balance, and which would therefore require other measures or decisions (to be taken in the Bali Ministerial) outside of the trade facilitation issue to improve export opportunities in order to be a counter-balance to this effect.

According to the report, another major concern voiced by the developing countries is that the proposed agreement is to be legally binding and subject to the WTO’s dispute settlement system. This makes it even more important that the special and differential treatment provisions for developing countries should be clear, strong and adequate enough. The negotiations have been on two components of the TF: Section I on the obligations and Section II on special and differentiated treatment (SDT), technical and financial assistance and capacity building for developing countries.

Most developing countries, and more so the poorer ones, have priorities in public spending, especially health care, education and poverty eradication. Improving trade facilitation has to compete with these other priorities and may not rank as high on the national agenda. If funds have to be diverted to meet the new trade facilitation obligations, it should not be at the expense of the other development priorities.

“Therefore, it is important that, if an agreement on trade facilitation were adopted, sufficient financing is provided to developing countries to meet their obligations, so as not to be at the expense of social development,” the report stressed.

The report goes on to highlight the main issues of concern for a large number of developing countries on the trade facilitation issue. It said that many developing countries have legitimate concerns that they would have increased net imports, adversely affecting their trade balance. While the trade facilitation agreement is presented as an initiative that reduces trade costs and boosts trade, benefits have been mainly calculated at the aggregate level.

Improvements in clearance of goods at the border will increase the inflow of goods. This increase in imports may benefit users of the imported goods, and increase the export opportunities of those countries that have the export capacity.

However, the report noted, poorer countries that do not have adequate production and export capability may not be able to take advantage of the opportunities afforded by trade facilitation (in their export markets).

“There is concern that countries that are net importers may experience an increase in their imports, without a corresponding increase in their exports, thus resulting in a worsening of their trade balance.”

Many of the articles under negotiations (such as the articles on ‘authorized operators’ and ‘expedited shipments’) are biased towards bigger traders that can present a financial guarantee or proof of control over the security of their supply chains. There is also the possibility that lower import costs could adversely affect those producing for the local markets.

“The draft rules being negotiated, mainly drawn up by major developed countries, do not allow for a balanced outcome of a potential trade facilitation agreement,” the report asserted.

New rules under Section I are mandatory with very limited flexibilities that could allow for Members’ discretion in implementation. The special and differential treatment under section II has been progressively diluted during the course of the negotiations. Furthermore, while the obligations in Section I are legally binding, including for developing countries, developed countries are not accepting binding rules on their obligation to provide technical and financial assistance and capacity building to developing countries.

The trade facilitation agreement would be a binding agreement and subject to WTO dispute settlement. The negotiating text is based on mandatory language in most provisions, which includes limited and uncertain flexibilities in some parts.

Therefore, if a Member fails to fully implement the agreement it might be subject to a dispute case under the WTO DSU (Dispute Settlement Understanding) and to trade sanctions for non-compliance.

“Many of the proposed rules under negotiations are over-prescriptive and could intrude on national policy and undermine the regulatory capacities and space of WTO Member States. The negotiating text in several areas contains undefined and vague legal terminology as well as ‘necessity tests’, beyond what the present GATT articles require.”

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India Seeks Binding Trade Facilitation Agreement and Mandatory Exchange of Customs Information

TFPrinciples tfig.unece.org

India has proposed changes in the trade facilitation agreement to address the concerns of developing countries in the proposal that tops the agenda of the WTO‘s Bali ministerial scheduled for early December.

The trade facilitation agreement aims to smoothen cross-border trade by removing red tape, improving infrastructure and harmonising Customs procedures. Seen as the developed countries’ agenda, the emerging economies have sought relaxations in the legally binding clauses like clearing shipments within three hours.

“We have informed WTO that there needs to be some restriction on the scope of expediting shipment, and should be only limited to air cargo and that too very urgent ones,” a commerce department official told ET.

The country should also be allowed to restrict it to courier services, as the ones very urgent. WTO has subsequently agreed to relax the clause to make expediting shipments within six hours or as rapidly as possible instead of three hours.

Negotiators from 159 countries have held several rounds of talks since September in Geneva to forge a consensus on the multilateral agreement.

Although talks started in 2001 in Doha, lack of consensus between the developed and developing countries has lead to an impasse.

The ninth ministerial round in Bali is being seen as the last attempt to renew the global trade agreement agenda by focusing on the low hanging fruit such as trade facilitation.

India’s commerce & industry minister Anand Sharma told WTO director-general Roberto Axevedo during his Delhi visit in October that India was in support of the trade facilitation agreement, “but needs a balance in the pact”.

India along with other developing countries had raised objection to the clause, which calls for a sufficient time gap between the announcement of change in tariff to its coming into effect. This would be against India’s constitution, since most of the budget announcements related to tariffs come into effect within 24 hours. “We cannot change our constitution for WTO,” said the official, adding that India has submitted an alternative proposal to this effect, wherein, budget-related announcement should be kept out of this clause since they need to become applicable immediately. “Deliberations are still on, we need to be given flexibility,” he added.

Besides, India has sought a binding agreement on Customs cooperation under trade facilitation, which will ensure mandatory exchange of information between Customs administrations (on request) so as to prevent under-invoicing, overvaluation, tax evasion and illicit capital flows.

However, the developed countries want to agree to it only on ‘best endeavour basis’. “It is important for us, and has been on the table for over 20 year. It is only for cross checking, as information is available at both ends. However, developed countries are putting in so many conditions, confidentiality laws, secrecy. So, we are not sure in what form it will finally look like,” said the official.

India has also been pushing for a binding technical and financial assistance by the developed countries to the developing countries to accept TF agreement. Source: Economic Times (India)