South and South-West Asia Office

Trade Facilitation: Identifying Opportunities through “Afghanistan WTO Accession and

Membership”

Dr. Dayaratna Silva, ESCAP-SSWA

Outline of Presentation

• Trade Facilitation: Concepts and Approaches • Trade Facilitation: Issues and Challenges for

Afghanistan• Trade Facilitation in WTO• Special and Differential Treatment for

Developing Countries and LDCs• Conclusion

Global Trading Environment and Trade Facilitaion

Structure of Production and Business changed- 30% of trade is component and unfinished-1/3 of global trade is intra-companySouth-South Trade has doubled since 1990

Increased Attention for Trade Facilitation

Revolutionary development

in ICT

Trade and Finance Liberalization Regional

Integration

Privatization

Trade Facilitation : Concept

• Not a new concept- became more visible after the Singapore Ministerial Conference of WTO in 1996.

• No universally agreed definition for trade facilitation (TF)• In a narrow sense TF primarily focuses on systematic

rationalization of regulatory procedures and documents at border crossings

• Focus of WTO Trade Facilitation Agenda is mainly linked to border issues (e.g. customs and other border agencies)

• Broader version of TF involves all stakeholders, measures from sellers to buyers covering both border issues and behind the border issues along the supply chain. (UNCEFACT)

Trade Facilitation: Concept

• Simplification, standardization and harmonization of trade procedures and associated information flows required to move goods and services from sellers to buyers and to make payments.

• Identifying and addressing bottlenecks that are imposed by weaknesses in trade related logistics and regulatory regimes. These weaknesses prevent movement of goods timely and cost effective manner

• Put it simply: TF is transparency and efficiency in the trade supply chain

• TF broadly encompasses two dimensions:– Hard dimension (infrastructure)– Soft dimension (custom management, transparency aspect)

Business Processes in a Typical Trade Transaction

Source: “Trade Facilitation: A Review” Andrew Grainger

Country A Country B

Customs•export declaration

Domestic Transit Procedures

Export Licenses•many different line ministries

Certificate of Origin

Sanitary and Phytosanitary (SPS)• certain types of goods subject to

SPS requirements during transit and in the importing country

• ex = Veterinary Health Certificate, Fumigation certificate, etc.

• many SPS need to be obtained before you export

Product Specific Certificates (PSC)• importers in third country are likely to require additional PSC

•ex = dangerous goods declaration, quality certificates, etc.

Customs•unless there is a transit agreement traders will have to:

• make a transit declaration• arrange for a financial transit

security• lodge a transit declaration

upon exit• request for the security to be

returned

Sanitary and Phytosanitary (SPS)•certain types of goods may be subject to SPS requirements

Transport Procedures• include: vehicle checks (weight, safety), cabotagechecks

Immigration Checks• truck driver, ship’s crews• cargo screening for illegal

immigrants

Customs• import declaration; pre-notifications and authorizations

Tariff Quota and Import Licenses

Commercial Procedures•arrange contract with seller, agree Incoterms, arrange for payment of goods, insurance, etc.

Sanitary and Phytosanitary (SPS)•certain types of goods may be subject to SPS requirements and must be declared

Immigration Checks• truck driver, ship’s crews• cargo screening for illegal

immigrants

Domestic Transit Procedures

Example: Trade and Customs Procedures for Exports from a Landlocked Country

Exporting Country Transiting Country Importing Country

Source: “Developing the Case for Trade Facilitation in Practice” Andrew Grainger

Key Issues and Challenges

• Excessive documentary requirements• Lack of standardization and harmonization regionally

and nationally• Continued manual processing of documentation – hard

copies still have to be submitted. Dual processes means the benefits of automation are lost

• Customs procedures and administrative formalities remain cumbersome, non-transparent, inefficient and time consuming

• Dwell time at ports is very high• Considerable delays in land border crossings. Road

transportation is most feasible and cost effective mode of transport for LLDCs for their seaborne trade

Key Issues and Challenges

• Range of transit issues• Lack of cooperation between custom and

other border agencies and traders • Lack of automated processes and scarce use

of IT• Lack of human and financial resources• Deficiencies in infrastructure

Different Approaches to Trade Facilitation

Trade Facilitation

Issues

BilateralFTAs

Multilateral(WTO, WCO)

RegionalAPEC,

NAFTA

Time and Cost to Trade in Selected RegionsRegion Time to

(days)Cost to

(US$ per Container)Export Import Export Import

East Asia & Pacific 21 22 923 958

Latin American & Caribbean 17 19 1,268 1,612

Middle East & North America 19 22 1,083 1,275

OECD High Income 10 10 1,028 1,080

South and South West Asia 32 33 1,603 1,736

• Afghanistan 74 77 3,545 3,830• Bangladesh 25 34 1,025 1,430

• Bhutan 38 38 2,230 2,330

• India 16 20 1,120 1,200

• Iran 25 32 1,470 2,100

• Maldives 21 22 1,550 1,526

• Nepal 41 38 1,975 2,095

• Pakistan 21 18 660 705

• Sri Lanka 20 19 720 775

• Turkey 13 14 990 1,235

Sub-Saharan Africa 31 37 1,990 2,567

Region Time to (days)

Cost to (US$ per Container)

Export Import Export ImportSouth Asia:• Afghanistan 74 77 3,545 3,830• Bhutan 38 38 2,230 2,330• Nepal 41 38 1,975 2,095Central Asia:• Kazakhstan 81 69 4,685 4,665• Kyrgyzstan 63 75 4,160 4,700• Tajikistan 71 72 8,450 9,800Europe :• Armenia 13 18 1,815 2,195• Azerbaijan 38 38 3,430 3,490• Macedonia 12 11 1,376 1,380Africa:• Botswana 27 37 2,945 3,445• Burkina Faso 41 47 2,412 4,030• Mali 26 31 2,202 3,067South America:• Bolivia 19 23 1,425 1,747• Paraguay 33 33 1,440 1,750

Time and Cost to Trade in Selected Landlocked Countries

Average Number of Documents Required to Export and Import by Region

0

2

4

6

8

10

12

OECD East Asia &Pacific

Middle East &North Africa

South Asia Afghanistan

ExportImport

• Excessive documentation significantly inhibits trade and market integration• Only six other countries in the world have a higher average number of export

documents required than Afghanistan: Angola, Cameroon, Congo, Nepal, Tajikistan and Uzbekistan. With Nepal being the only country in the region of South Asia

Trade Cost

16

Why TF at the WTO?

Trade Facilitation in theWTO: A Little History• TF was put on the WTO agenda at Singapore Ministerial

Conference of WTO in 1996• CTG (Council for Trade in Goods) entrusted with the task

of discussing the issue• TF was one of the Singapore Issues (SI) adopted in the

Doha Ministerial Declaration (para 27)• Serious differences over inclusion of SI in the negotiation

agenda• WTO Cancun Ministerial in 2003 decided to drop

Singapore Issues but considered TF more favorably

Trade Facilitation in the WTO• Finally, in July 2004, WTO members formally agreed to

launch negotiation on TF – under so called July package -Annex D

• Annex D of July package provides the mandate: modalities for Negotiation - 10 paragraphs

• Clarify and improve relevant aspects of V, VIII, and X of the GATT 1994, which is the WTO existing legal FW

• Negotiation Group on Trade Facilitation• WTO Trade Facilitation Agreement

Negotiation Progression

ØGeneral proposals (2005) fall into two pillars:• Technical pillar – 3 GATT articles and customs cooperation• Development pillar – S&D component

Ø Revised proposals in draft text form (1-2 years later)

Ø Secretariat Compilation of Members’ proposals (W/43)Ø First Consolidated Negotiating text was released in

December 2009 (TN/TF/W/165)Ø Latest Draft Consolidated Negotiating text

(TN/TF/W/165/Rev. 15- 27 March 2013)

Landscape of Future TF AgreementTwo Section: Section I and Section II , 15 Articles

cover 6 broad areas:• Substantive discipline to clarify and improve relevant

aspects of 3 GATT Articles V (Freedom of transit), VIII (Fees and formalities) and X (Publication of laws, rules and procedures – transparency)

• Customs Cooperation: establishment of multilateral mechanism exchange and handling of information

• Implementation related Issues– Institutional Arrangement – TF Committee – Establishment of National Committees– Cross cutting matters

• Special and differential treatment for developing countries and LDCs including technical assistance and capacity building

Three Pillars of Future WTO TF Agreement

Scope• Clarify and Improve 3

GATT Articles

• Customs cooperation mechanism

• Technical Assistance and support for capacity building

Objectives• Expedite movement,

release & clearance of goods

• Improve cooperation between customs/other border agencies

• Integrate credible Special and Differential Pillar

22

How to Clarify & Improve: Areas covered: Examples

GATT Article X• Publication and availability of

information ( internet, enquiry point, notification)

• Enquiry Point for trade information

• Interval between publish and enter into force

• Opportunity to comment• Advance rulings• Appeal procedures

GATT Article V• Restrictions on fees and

charges• Non-discrimination• No customs duties• Use of guarantee

GATT Article VIII

• Disciplines on fees• Pre-arrival processing• Risk management• Customs audit• Publication of average release

times• Authorized traders• Border agency cooperation• Review formalities and

documents• Single window• Eliminate use of PSI• Separate release from clearance

Special and Differential TreatmentGeneral provisions and principles- Section II : • Results of the negotiations should take principles of S&D

treatment fully into account• Should extend beyond traditional transition periods for

implementing commitments• Extent and timing of entering into commitments shall be

related to the implementation capacities of developing and LD countries

• Developing countries and LDCs are not obliged to undertake investments in infrastructure projects beyond their means

• Every effort to provide support and assistance – but not open ended

3 Categories of Commitments:

• Regulations that will apply immediately after entry into force of the Agreement

• Notify to the committee on entry into force or after X time of entry into force

Category A

• Those that will be designated for implementation after expiration of a transition period

Category B

• Those that will apply subject to proper and adequate provision of TACB

Category C

S &D Treatment

Categories of Commitments

• Implementation difficulties to notify the Committee through a mechanism of early warning with respect to categories B and C

• But must indicate the new date that such commitment can be implemented

• Developing countries and LDCs are allowed to shift between category B and C

S &D Treatment

• Will we see a WTO Trade Facilitation Agreement in 2013 as an early harvest of the Doha Round Trade Talks?

• This area of negotiation is included under Plan A of current negotiation

• TF is widely considered ‘low hanging fruit’ – the Draft Consolidated Negotiating text proved to be a useful template

• Win-Win for all and brings much needed life back to the WTO negotiation process

WTO Trade Facilitation Agreement at MC9?

Issues:• A stand alone agreement may discourage negotiating

other development issues• Some members want to de-link from other issues• Self balancing within Doha Round and TF Agreement itself• Technical differences still remain on specific provisions – a

number of bracket still high number• Credible commitment from developed countries on

technical assistance and capacity building as some provisions are in best endeavor language

WTO Trade Facilitation Agreement at MC9?

Conclusions• Unprecedented attention for TF reform as red tape and

administrative bottlenecks at the border impact on competiveness and trade

• Trade Facilitation reforms based on improved Customs processing and better border management procedures are an important development issue

• National reforms can have a significant benefits but regional approach can have bigger impact specially for LLDC

• A set of commitment at the WTO would facilitate regional integration – Examples transit regime, cross border cooperation, transparency.

• A possible WTO Agreement on TF is linked to the capacity and ground realities of developing countries and LDCs

Need Political Will

Thank You