Trade facilitation: A forward agenda

15 November 2013

The Trade Facilitation deal needs to be reached with the required internal balance and a mix of some other development gains at the 9th Ministerial Conference in Bali.

Trade Facilitation (TF)  is at the heart of the current negotiations  ahead  of the World trade Organization (WTO ) Ministerial Conference to be held in Bali in early December this  year. WTO members agree that a result on TF  alone will not be sufficient without a mix of other deliverables. It will also be important to ensure that an agreement on any additional element does not jeopardise the overall balance of the DDA deal to be agreed upon.

With pressure mounting on members of the WTO, rigid posturing on TF has now given way to real negotiations and an attempt to find substantive solutions. Returning empty- handed  from the Bali  Ministerial this time may sound  the death knell for the Doha Development Agenda (DDA) and deal a terrible blow to the WTO 's credibility in normative rule-making for the multilateral trading system (MTS).  Small and vulnerable economies, particularly least developed countries (LDCs), for whom these consequences would be most catastrophic, deeply need both the "insurance policy" that a rule-based MTS would provide against  discriminatory practices as well as a participative voice in determining what those rules should be in the future  to avoid marginalisation. Moreover, beyond systemic concerns, the small and vulnerable Economies (SVEs) have a more direct stake in the  content of the TF negotiations for their own development and should not allow tactical considerations or other trade-offs to divert them from securing a good deal on TF.

The need for a deal on Trade Facilitation

Most SVEs and LDCs are more or less open economies and very dependent on international trade for survival. Because they do not have large internal domestic markets that can sustain demand on a national scale and they cannot produce all their requirements, most LDCs are net food-importing countries. Exports, therefore, are an important factor for their development, and their strategy is essentially based on capturing as much value as possible in global production chains.

Their aim, however, is not only to integrate emerging  global value chains  (GVCs)  but also to take advantage of the increasing globalization of production. The fragmentation of global production into various tasks represents an opportunity for LDCs to upgrade their participation in higher value- added segments of the production chain and/or to position themselves  in  niche  markets.  In  this  context, the  ultra-defensive  narrative of some  developing countries on  trade facilitation that it facilitates imports against exports does not make real sense both in the context of their trade strategies and the globalization of production. Integrating GVCs warrants a more proactive agenda, rather than the traditionally defensive approach LDCs have taken toward special and differential treatment (S&D). it also means a more discerning approach towards imports, which could include imports as inputs for their own future exports. One must get used to the idea that one country's imports are another's exports, as the composition of global trade is increasingly dominated by intermediary products, and individual states are now connected in a chain model as opposed to the traditional one of pure production/consumption.

The composition of imports is also important to consider. Imports, in fact, may contain capital goods, like equipment, or necessities for consumer  welfare, the facilitation of which would be in the interest of any developing country. Therefore, TF does not only confer efficiency and welfare gains for LDCs, but also it is strategically important for them to integrate and upgrade in GVCs.

The rationale to develop a more positive approach on TF is more pronounced for African countries in view of their professed ambitions in terms of their trade and development agendas. Through the creation of multiple regional economic communities (RECs), Africa has strongly pursued  the continental integration outlined in the 1991  Abuja  treaty. Moreover, with most RECs having a free-trade agreement (FTA) in place, a lot of progress has been achieved in terms of systemic progress towards integration.  Unfortunately, the full desired results of integration have not been  realised yet, and the volume of intra-regional  trade has stagnated at a low level of 10-12  percent,  while much higher performances have been achieved in other regions of the world. For deeper integration to happen, however, it is necessary to address both border and behind-the-border measures; simply lowering and eliminating tariffs is not enough.

African leaders have realised this deficit in their strategy. At the African Union (AU) summit in June 2011, AU Member states complemented their approach on integration by outlining the dual objectives  of fast-tracking  continental  integration  and boosting intra-African trade as priorities for Africa.  This ultimately provoked serious re-thinking at different levels of decision-making in Africa to recalibrate approaches to integration.

Foremost  among  these approaches  is the need  for  a  transformational  agenda  that will empower drivers of growth and connect the engines of growth to achieve broader integration. This transformational agenda permeates all areas and sectors from achievement of the Millennium Development goals (MDGs) to trade and other areas of the economy. If trade is to serve this transformational agenda it has to promote deeper integration, and thus create positive linkages  between trade and  development. This implies that Africa must go further in the design of FTAs by addressing behind-the-border non-tariff barriers (NTBs) to trade that hinder exchanges. Conscious of this fact, RECs in Africa are now deploying programmes in the fields of quality infrastructure and TF to deliver on the dual objectives set at the Au summit.

African  trade negotiators need  to be  aware  that TF is now  a  priority for Africa,  as determined by Africans themselves, and for which they must have a proactive agenda at the multilateral level as well. TF is not an area where there can be extensive differential treatment, and  the  most-favoured  nation  (MFN)  principle  will be  applied  to most measures decided. So, why not wisely trade off what is objectively now an imperative for Africa's trade development and which is being pursued at the level of the continent for better concessions at the WTO?

This is where the trade negotiators of African countries in the WTO  have a responsibility to bring home a deal on TF.

Blending TF with other development gains

This deal, however, needs to be reached with the required internal balance and a mix of some other development gains, which could both save the credibility of the WTO  and help SVEs and LDCs utilize TF as a useful tool for trade and development. Such an approach would reinforce the credibility of SVEs and LDCs and project them as positive players in future multilateral negotiations.

So, which elements could constitute a take-home deal for SVEs and LDCs in TF? In reality, most of the elements are already on the table. To start with, much of this  outcome was already foreseen and conceptualized in the mandate which conditions acceptance obligations with S&D   in the form of  technical assistance and phased implementation. In fact, these obligations enable LDCs to stagger commitments over a self-selected calendar in three categories namely, obligations that could be implemented immediately, obligations that only require longer time-frames and finally those that need both longer time-frames and technical assistance. The negotiators, as it is understood, are fine-tuning the details of the modalities of implementation and the scheduling of TF commitments.

It should be noted, however, that the nature of these S&D modalities is unique in WTO negotiating history and may well be the harbinger of a new approach to S&D. the current approach breaks from the past in two respects. First, it overcomes the systemic difficulty of having to extend S&D to all developing countries indiscriminately, which is what the current architecture  related to the division of rights and obligations in the GATT/WTO  prescribes and which is a major bone of contention in the DDA stalemate. Second, as a consequence  of the above, it avoids the politically sensitive issue of differentiation of developing countries; instead, it  proposes  a  menu-driven, tailor-made S&D for each developing country.

However, the means of delivering technical assistance, and for some, the difficulty of assuming definite  scheduling commitments under  TF even  with  long time frames  if technical assistance is not guaranteed or monitored,  remains an issue. For others, it is not only capacity building that is required, but also the recurrent cost of ensuring these services on a sustained basis as yet another fiscal burden on their budgets. While these are genuine problems faced by LDCs and one must not give up prematurely on one's position in a negotiation it is important for SVEs and LDCs to keep in mind the strategic objectives underpinning TF for development and ultimately weigh tactical and other considerations against this imperative.

Conclusion

Experience has shown that WTO  negotiations are not the venue where you can negotiate the creation of global development funds. Aid for trade is a case in point. Nevertheless, the commitment that technical assistance through traditional channels will prioritise TF in the future must and can be secured. A monitoring exercise through the TF committee to be created  will be a powerful political tool to remind the WTO  membership of its responsibilities and assess the flow of technical assistance. Multilateral funding agencies, like the World Bank and the African Development Bank, could report on TF programmes and also on where there are bottlenecks or other problems. One possibility for articulating a concrete vehicle for delivery of technical  assistance  would be the European  union (EU), which could consider setting up an African, Caribbean, and Pacific Countries (ACP) Programme Management Unit (PMU) on TF. Such special-purpose vehicles for technical assistance already exist under the European Development Fund for the ACP. Thus, avenues exist to secure an outcome that is acceptable to SVEs and LDCs. Ultimately, it is more important to get something, even if it is not as ambitious as originally sought, than to risk losing everything.

Author: Shree Baboo Chekitan SERVANSING is presently in charge of the ACP-Eu TBT capacity –building programme based in Brussels, Belgium. He was the former ambassador of Mauritius in Geneva and Coordinator of the ACP group for over ten years

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