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INTERNATIONAL TRADE POLICY Module 2 NON AGRICULTURAL MARKET ACCESS (NAMA) Trade Facilitation Outline • • • • • 1. What is Trade Facilitation? 2. Why Negotiate Trade Facilitation? 3. Trade Facilitation & Developing Countries 4. Trade Facilitation in APEC, ASEAN 5. Trade Facilitation in the WTO 1. What isTrade Facilitation? What is Trade Facilitation? • The WTO defines trade facilitation as: “the simplification and harmonization of international trade procedures. Where these procedures are activities, practices and formalities involved in the collecting, presenting, communicating and processing a data required for the movement of goods in international trade.” What is Trade Facilitation? • The WTO definition is narrower than that used in some other organizations. • Broader definitions often include areas that fall more under export promotion. This is often referred to as “business” facilitation rather than “trade” facilitation. What is Trade Facilitation? • In other organizations: – In APEC it refers to the simplification of procedural and administrative barriers to trade, such as customs administration, standards and technical regulations and barriers to the mobility of business people. – In ASEAN, considerable emphasis is place on the issue of standards and technical regulations. 2. Why Negotiate Trade Facilitation? Why Negotiate Trade Facilitation? • Rapid growth in international trade reflected in greater volumes crossing borders • Globalization and international competition have led to corporations using multiple locations for manufacturing and sourcing of inputs and final products • Changing business practices provide focus on speed of delivery, for example, “just-in- time” production. Benefits of Improved Trade Facilitation • To Government: – Increased revenue through improved tariff collection and reduction of corruption – Increase in trade and growth – Increased attractiveness to investors – Improved trade policy through improved statistics Benefits of Improved Trade Facilitation • To Business: – Decrease in transaction costs – Fewer procedural delays – Less documentary information required – Greater predictability in regulations Potential Savings • Various studies estimate the border related costs of supplying required customs documents and the surcharges arising from procedural delays are between 2% and 15% of the value of the traded goods. 3. Trade Facilitation & Developing Countries Trade Facilitation and Developing Countries • Trade facilitation is of benefit to all countries, but generally developing countries have greater potential gains from improved facilitation. Trade Facilitation and Developing Countries Potential Gains to Developing Countries: • Small and medium sized firms tend to be relatively more important in developing countries. They tend to benefit more from improved facilitation compared to large corporations. • Corruption is often common in border transactions. While it can occur anywhere, its costs and impacts are relatively more serious in developing countries. Since the Benefits are Real, Why isn’t it Easier? • Even if there is a national will (both economic and political), there may be a lack of capacity to improve trade facilitation: – Infrastructure capacity, particularly with regard to computer technology – Training required to develop human capacity – Inconsistent aims between ministries and bureaucracy, which may resist change (protection of areas of control). 4. Trade Facilitation in APEC, ASEAN Undertaking Trade Facilitation • Countries have independently undertaken to improve trade facilitation to better meet domestic needs. – A growing trend is to include facilitation in bilateral agreements. – APEC has taken a leadership role in the region, as trade facilitation has been a priority since APEC was founded in 1989. Undertaking Trade Facilitation • ASEAN has made significant progress with examples including: – Expedited customs clearance at some borders now at an average of two hours, down from several day – Single window in Customs at the national level – An AESEAN customs document – Harmonization of systems of classification and valuation – Standards harmonization across a number of products – Development of Mutual Recognition Agreements (MRA) for conformity assessment 5. in Trade Facilitation the WTO Trade Facilitation in the WTO • Exploratory and analytical work was mandated by the Singapore Ministerial (1996) • Became a part of the Doha Development Agenda for negotiations in July 2004 • Hong Kong WTO Ministerial (2005) reaffirmed the negotiation mandate and modalities and endorsed the work program Trade Facilitation in the WTO • The mandate is to clarify and improve the relevant GATT articles including: – Article V Freedom of Transit – Article VIII Fees and Formalities connected with importation and exportation – Article X Publication and Administration of Trade Regulations Examples of Most Frequent Proposals • Article V: – Eliminate fees not directly related to cost – Increase transparency of transit requirements – Simplify and standardize documents – Non discrimination between modes of transit – Some parties wish to have agreed transit routes and time-frames, while others wish to leave the route to the operator. Examples of Most Frequent Proposals • – – – – – – Article VIII: Use of risk assessment Early release of goods Simplification and reduction of documents Phase out mandatory use of customs brokers Publication of all trade related fees Single Window i.e., submit documents only once to one authority Examples of Most Frequent Proposals • Article X – Binding advance rulings – Establish national contact points. – Create official web page in each country linked to the WTO. Trade Facilitation in the WTO • All these negotiations involve special consideration for needs of developing countries: – Technical Assistance – Support for capacity building – Longer transition period