Shanghai Cooperation Organisation Endorses Trade Facilitation Plan

14 June 2018

The Shanghai Cooperation Organisation (SCO) endorsed a statement aimed at facilitating trade across its members’ borders, with the regional economic grouping also pledging to support the multilateral system and warning against the escalation of trade tensions among major economies. 

Leaders from the SCO met in the Chinese city of Qingdao on Sunday 10 June, just over one year after they welcomed India and Pakistan into their ranks, joining China, Russia, Kyrgyzstan, Kazakhstan, Tajikistan, and Uzbekistan. The Qingdao meet was the first with the Indian and Pakistani leaders in attendance since joining the group. 

The SCO was formed 17 years ago with regional security objectives in mind, and has since taken on an increasingly wider agenda focusing on issues of shared economic concern, along with tackling subjects like energy and the environment.

“The SCO goals are becoming more attractive, close and understandable to millions of people around the world. An increasing number of countries and international organisations, including those outside the SCO area, are striving to cooperate with the Organisation,” said Rashid Alimov, the group’s Secretary-General.

As the host of this year’s meeting, Chinese President Xi Jinping highlighted regional cooperation’s achievements so far, as well as its future potential, while also acknowledging the wider global context on trade and the economy.

“While unilateralism, trade protectionism and backlash against globalisation are taking new forms, in this global village of ours where countries' interests and future are so interconnected, the pursuit of cooperation for mutual benefit represents a surging trend,” he said, according to a transcript of his remarks published in Xinhua.

Lowering trade costs, cutting border lag times

Among the milestones announced by leaders on Sunday was a joint communiqué focused on “simplifying trade procedures,” specifically on trade in goods.

The brief statement referred to the “significant potential for further developing mutual trade between the SCO member states, based on [their] close geographic location.” It also referred to past work within the coalition on simplifying such processes.

Within this context, leaders also called for continued regional cooperation in Central Asia to cull back on customs “formalities” for trading goods and for those in transit, along with outlining other steps focused on improving customs and border agency cooperation and transparency.

The communiqué provides limited further detail, calling for continuing talks among members on how they can tackle bottlenecks at the border. They also referred to taking into account “the importance of joint efforts needed to support and strengthen the multilateral trade system based on the standards and principles of the World Trade Organization.”

The WTO already has in place a Trade Facilitation Agreement (TFA) focused on streamlining customs procedures, improving transparency, and otherwise helping ensure that goods can pass across country borders more easily, thus lowering trade costs. The TFA is the WTO’s newest global trade agreement, taking effect in February of last year.

Of the SCO’s current members, China, India, Pakistan, Russia, Kazakhstan, and Kyrgyzstan have all ratified the WTO’s TFA. Tajikistan has not yet done so, though it is a WTO member. Uzbekistan is not yet a member of the WTO, but does have observer status. How the SCO’s plans will build on existing TFA provisions is not yet clear.

Crafting deeper regional ties

Simplifying trade procedures was one of many regional economic issues on the SCO meeting agenda, with other topics including any potential cooperation between the Belt and Road Initiative, the Chinese-led plan for building and improving new infrastructure across the region by both land and sea, with other regional projects such as the Eurasian Economic Union.

“We need to build a powerful engine to achieve common development and prosperity. We should increase complementarity of our respective development strategies, continue to advance the Belt and Road cooperation under the principle of delivering shared benefits through extensive consultation and joint contribution, accelerate regional trade facilitation, and step up the implementation of the Agreement on International Road Transport Facilitation and other cooperation documents,” said Xi this weekend.

Reports indicate, however, that not all SCO members were on board with language in the “Qingdao Declaration” on developing closer links between the Belt and Road Initiative and the Eurasian Economic Union. An “information report” published by the SCO referred to all countries endorsing the move towards greater cooperation, with the omission of India from that list. New Delhi has reportedly expressed regional security concerns, along with raising other questions over some of the projects being considered within the Belt and Road context.

Leaders also referred to cooperating with regional development banks, as well as the potential of setting up an “SCO Development Bank” and “SCO Development Fund” in the future.

Commentators such as Jonathan Hillman of the Washington-based Center for Strategic and International Studies (CSIS) have also noted that the Belt and Road Initiative has a long way to go before being fully operational, and that regional cooperation still has to overcome some challenges in practice.

“There have been few examples of tangible cooperation, and several infrastructure projects in the Far East remain stalled,” he said in an online article published by CSIS last week. Hillman did highlight, however, the significant potential value of improving regional trade facilitation initiatives.

“Onerous customs requirements, outdated technology, and other challenges all result in long waits to cross borders. One study of a road journey from Almaty, Kazakhstan, to Berlin, Germany, found that roughly half of the transit time was spent at border crossing points,” he said.

Supporting a global agenda

Commentators were quick to highlight the differences with another summit that took place this past weekend, the G7 leaders’ gathering in Charlevoix, which saw heated discussions over the use of unilateral trade measures, with the US ultimately withdrawing its endorsement of the final communiqué. (For more on the G7, see related story, this edition)

The SCO leaders’ statement referred repeatedly to the importance of safeguarding the WTO system and pushing back against protectionist pressures, along with avoiding the “fragmentation of trade relations.”

“The member states stand for the improvement of the architecture of global economic governance and the development of trade, economic, and investment cooperation. They proceed from the belief that the World Trade Organization is the key platform for discussing the agenda for international trade and adopting the rules of a multilateral trade system,” the Qingdao leaders’ declaration said.

Next year’s SCO summit will be held under the presidency of Kyrgyzstan, though further details on exact date and venue were not immediately clear at press time.

ICTSD reporting; “Opinion: How trade facilitation within SCO contributes to multilateralism,” CGTN, 12 June 2018; “A West in Crisis, an East Rising? Comparing the G7 and the SCO,” THE DIPLOMAT, 12 June 2018; “G7 chaos is a PR win for China,” CNNMONEY, 11 June 2018; “SCO's Qingdao Declaration: India refuses to endorse Xi Jinping's OBOR as part of statement; full text,” FIRST POST, 11 June 2018; “Full text of Chinese President Xi Jinping's speech at the 18th SCO Qingdao summit,” XINHUA, 10 June 2018.

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