WTO members work to bridge trade facilitation divide ahead of July deadline

9 July 2014

The divide among WTO members over the implementation of the new Trade Facilitation Agreement (TFA) has continued to persist in recent weeks, despite an end-July deadline to agree on a protocol of amendment that would bring the deal into the organisation’s overall legal framework.

 

The TFA was the centrepiece of the so-called Bali package. Agreed by trade ministers at the WTO’s latest ministerial conference in December, the package was the organisation’s first global deal in nearly two decades. The Trade Facilitation Agreement itself aims to simplify customs rules and reduce inefficiencies that create long lag times in cross-border flows of trade, with some estimates placing the potential GDP gains at up to US$1 trillion.

 

Though the deal was hailed at the time as a significant advance for the global trade club, efforts to bring the TFA into force hit a snag in May, after members disagreed on whether it should be implemented on a provisional basis, pending the conclusion of the overall Doha Round.

 

The coming weeks will be decisive in solving the remaining issues, as WTO members have given themselves until 31 July to adopt the protocol of amendment. The pact will then be open for ratification until 31 July 2015, with two-thirds approval of the membership required for the pact to enter into force.

 

Ambassador Esteban Conejos of the Philippines, who chairs the Preparatory Committee on Trade Facilitation, reportedly urged members last week to continue their efforts on finding a compromise in time for a meeting scheduled this coming Thursday.

 

This, he reminded members, would enable them to adopt the protocol at the next meeting of the WTO’s General Council, which is currently set for 24-25 July.

 

“Provisional implementation” debate

 

The disagreements came following a conference of African Union trade ministers in April, where the African Group was directed to present language suggesting that the TFA be implemented on a provisional basis, in line with paragraph 47 of the Doha Declaration.

 

This suggestion was included in a paper presented by Lesotho on the African Group’s behalf in May in Geneva. At the time, the group indicated that the TFA should later be reviewed for balance with the rest of the Doha Round areas, once these are resolved. This, they said, would be in line with the WTO principle of the “single undertaking.” (See Bridges Africa, 7 May 2014).

 

The African Group’s suggestion was lambasted at the time by several fellow WTO members, who warned against revisiting what was agreed in Bali. These members have said that doing so could risk jeopardising the process currently underway to develop a Doha Round “work programme” by year’s end.

 

“If the Trade Facilitation agreement unravels, it’s hard to imagine a post-Bali work plan proceeding,” said Michael Punke, the US Ambassador to the WTO, at last month’s meeting of the organisation’s Trade Negotiations Committee. 

 

“Anything short of what is foreseen in the relevant Bali decision will very seriously undermine any existing momentum… on post-Bali,” said Angelos Pangratis, the EU Ambassador to the WTO, at the same meeting.

 

African leaders shifting position?

 

African Union  leaders have since appeared to be changing their tone, saying in recent weeks that they are willing to implement the Trade Facilitation  Agreement in line with the decisions reached in Bali. The decision was reportedly made at the African Union Conference in Malabo, Equatorial Guinea, on 26-27 June.

 

During the meeting, countries such as Nigeria and Mauritius were among those who refused to join the previous consensus among African trade ministers to implement the TF agreement on a provisional basis. Sources familiar with the deliberations say that some other African countries then followed suit, also withdrawing their support for the April declaration.

 

The new African Union Heads of State draft decision reached in Malabo – a copy of which has been seen by Bridges – instead “reaffirms commitment to the Doha Development Agenda and to its rapid completion in accordance with its development objectives.”

 

Furthermore, the African Union has also reiterated its commitment to “all the decisions the Ministers took in Bali which are an important stepping stone towards the conclusion of the Doha round… to this end, leaders acknowledge that the TF agreement is an integral part of the process.”

 

Some officials, however, have claimed that the change in position was the result of undue pressure from some developed countries, with Nelson Ndirangu, Director for Economics and External Trade in the Kenyan Foreign Ministry, telling the IPS news agency that there was “unprecedented pressure and bulldozing to change the decision reached by the African trade ministers on April 27.”

 

Trade sources indicate that some United States lawmakers had reportedly expressed scepticism about renewing the African Growth and Opportunity Act – a unilateral and non-reciprocal trade pact that offers duty and quota free access to certain goods from Sub-Saharan Africa into the US market – should the disagreement on TFA persist. The US legislation, known also as AGOA, is set to expire in September 2015.

 

Uncertainty ahead

 

Despite the apparent shift in the African Group’s position, resistance toward the trade facilitation pact has since emerged from other quarters, namely from India, which said last week that it will only allow the TFA process to advance if it sees its own concerns on food security addressed.

 

Meanwhile, sources have said that Tanzania, Uganda, Zimbabwe, the Solomon Islands, and South Africa are among those members who still support the provisional application of the agreement based on the single undertaking.

 

WTO members, South Africa said at the latest TNC meeting, should aim “to implement all decisions of the WTO Ministerials and not to cherry pick those which advance their interests,” according to a copy of their remarks seen by Bridges.

 

Balance of interests

 

Since the Bali package was agreed upon last December, critics have pointed to the “best endeavour” nature of some of the decisions taken, particularly regarding some of the development-related components of the deal.

 

Along with the Trade Facilitation Agreement and a few agriculture-related decisions, ministers in Bali had also signed off on decisions involving least developed country concerns (LDC), such as duty-free and quota free market access, preferential rules of origin, and a waiver that would allow for preferential access to services from these poorer nations.

 

Experts note, however, that given the complex and the political nature of the above-mentioned issues, the Bali decisions represent a significant outcome that should put in motion a process which will benefit the LDCs.

 

The TFA itself has been criticised by some developing countries since its adoption in Bali, with those countries arguing that it primarily benefits their developed trading partners. Observers note, however, that several proposals were tabled on special and differential treatment reflecting the actual gap between developed and developing countries. 

 

The African Group proposal for the TFA’s provisional application came as the result of concerns over ensuring that development issues are fully addressed in the future negotiations on the Doha work programme.

 

“[The Bali outcomes] were not the most optimal decisions in terms of African interest…we have to reflect and learn from the lessons of Bali on how we can ensure that our interests and priorities are adequately addressed in the post-Bali negotiations,” said African Union Trade Commissioner Fatima Acyl during the April trade ministers’ meeting.

 

Capacity-building, technical assistance

 

In Malabo last month, African leaders reiterated that assistance and support for capacity building should be provided as envisaged in the TF Agreement “in a predictable manner”, in order to help African economies acquire the necessary capacity to implement its requirements.

 

“For the first time in WTO history, implementation of an [Trade Facilitation] agreement is directly linked to the capacity of the country to do so,” said WTO Director-General Roberto Azevêdo last week at a Forum on Industrialisation and Inclusive Development in Africa.

 

Azevêdo explained that TF would support regional integration, facilitate integration in the global value chains and as such, give impetus for industrialisation and inclusive sustainable development.

 

Furthermore, Azevêdo explained, the TFA provides that not only must a country have the necessary capacity before implementing the agreement’s provisions, but that technical assistance and support must be provided to help these countries achieve that capacity.

 

“Moreover, developing countries and LDCs can determine for themselves when they have the capacity to implement each of the trade facilitation measures of the Agreement,” he added.

 

The WTO chief has backed the idea of establishing a new facility dedicated to TFA-related technical assistance and capacity building support, a suggestion that was reportedly backed during last week’s Preparatory Committee meeting by Lesotho on the African Group’s behalf.

 

The creation of a fund, Lesotho said, will help build confidence among the membership, while confirming donors’ intention to help developing countries acquire implementation capacity.

 

As per the terms of the Trade Facilitation Agreement, African countries will have to specify their capacity building needs in order to undertake specific reforms.

 

ICTSD reporting; “Africa under ‘unprecedented’ pressure from rich countries over trade,” IPS, 2 July 2014; “Commerce mondial: difficultés dans l’application des accords de Bali à l’OMC,” ROMANDIE, 26 June 2014; “No trade facilitation pact without resolving food security issue: Govt,” THE HINDU BUSINESSLINE, 3 July 2014.

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