trade facilitation in regional trade agreementsartnet.unescap.org/tid/artnet/mtg/tf_redden.pdf ·...

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IIBE&LInstitute for International Business, Economics & Law

ARTNeT Trade Facilitation Research Study

Trade Facilitation in Regional Trade AgreementsTrade Facilitation in Regional Trade Agreements

How trade facilitation issues are addressed in the How trade facilitation issues are addressed in the ASEAN, APEC, SAFTA and PACER agreementsASEAN, APEC, SAFTA and PACER agreements

Presented by Jim Redden

Institute for International Business, Economics and Law

UNDP/ESCAP ARTNeT Trade Facilitation Research Team Meeting,

15 March 2006, Bangkok, Thailand

[email protected]

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ContentsContents1. The Institute for International Business, Economics and Law2. Introduction to the Study on Trade Facilitation and RTAs3. ASEAN 4. APEC5. SAPTA6. PACER7. Initial Observations and Issues8. Summary

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1. Institute for International Business, Economics 1. Institute for International Business, Economics and Law and Law –– IIBE&LIIBE&L

Specialised Research & Contract Consulting

Custom Training Programs for Business & Governments

Post Graduate Teaching

Global & Regional Trade Surveys

Unique International Links

Focuses on Trade and Development Issues

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1. Key Institute Staff1. Key Institute Staff

Andrew Stoler – Executive DirectorAdjunct Professor, Former Deputy Director-General of the World Trade Organization and retired USTR senior official

Jim Redden – Senior Lecturer and Research ManagerAdjunct Senior Lecturer, Former Policy Director for the Australian Council for International Development & member of the Australian Government WTO Advisory Committee

Dariel de Sousa – Visiting WTO Fellow (May 2006)Counsellor in the Legal Affairs Division, WTO

Marie Gutsche – Office Manager and Personal Assistant to the Executive Director

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Associate Experts and Fellow ResearchersAssociate Experts and Fellow Researchers

Peter GallagherPrincipal, Inquit - Melbourne

Richard PomfretProfessor of Economics, University of Adelaide

Debra StegerExecutive in Residence –University of Ottawa

Geoff UptonDirector, Trade Focus International – Adelaide

Christopher FindlayHead of Economics Faculty, University of Adelaide

Letizia Raschella-SergiLaw Lecturer, Bond University

Richard SteinbergProfessor of Law – UCLA, Los Angeles

Claudia OrozcoTrade Consultant - Brussels

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2. Introduction to the Study2. Introduction to the StudyThe definition of trade facilitation used by the WTO andOECD is:

The simplification and harmonization of international trade procedures, including the activities, practices and formalities involved in collecting, presenting, communicating and processing data and other information required for the movement of goods in international trade

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2. Trade Facilitation 2. Trade Facilitation –– Extended DefinitionExtended DefinitionMeasures undertaken to reduce international transactional costs to traders by:

Reducing the time required for goods to reach and clear customsSimplifying the clearance procedures and making them more transparent and predictableIntroducing other provisions to speed clearance and assisting exporters in complying with import requirements

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2. Why is Trade Facilitation Important?2. Why is Trade Facilitation Important?

Many impediments still exist: transportation and transaction costs can exceed tariffs’ impact;Wide range of release times: 14 days in Mombasa compared to pre-arrival clearance in some countries;Each day in customs control can add one percent to the cost of the shipment;Some Governments lose too much through inefficiency & corruption.

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2. Introduction to TF2. Introduction to TFBased on the broader definition of Trade Facilitation it

can relate to a wide range of activities such as:

Import or export procedures (eg. customs or licensing procedures)Transport services, formalities and payments Insurance and other financial requirements

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2. Introduction 2. Introduction –– Key ObjectivesKey ObjectivesThe objectives of the study are to:

1. Analyse how trade facilitation issues are addressed in some major trade agreements of the Asia Pacific region, specifically in:

ASEAN - the Association of Southeast Nations APEC - Asia-Pacific Economic Cooperation SAARC - South Asian Association for Regional Cooperation PACER - the Pacific Agreement for Closer Economic relations

2. Identify best practises in this area and the implications for the WTO negotiations.

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2. Introduction 2. Introduction –– Key ObjectivesKey ObjectivesThis presentation discusses initial findings & observations:

In the treatment of Trade Facilitation (TF) in ASEAN, APEC, SAPTA and PACER

And on some implications and issues for future TF negotiations

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3. The Association of Southeast Asian Nations 3. The Association of Southeast Asian Nations (ASEAN)(ASEAN)

ASEAN was established in 1967 and is the oldest regional trading arrangement in the Asia-Pacific region.It was formed by Indonesia, Malaysia, the Philippines, Singaporeand Thailand and was joined by Brunei in 1985, Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1998.ASEAN had little impact on trade policy before the establishment of the ASEAN Free Trade Area (AFTA) in 1992.

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3. ASEAN3. ASEANIn AFTA, member states retain national trade policies towards non-members and liberalize intra-ASEAN trade by reducing tariffs to 5% or less on goods with at least 40% ASEAN content.The original six members implemented these changes in 2002, with exemption of a small number of sensitive agricultural products – exempted until 2010. However, the four newest members have extended transition periods.ASEAN has no institutionalized dispute resolution mechanism, and in practice the process in bilateral.

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ASEANASEANASEAN has made progress, particularly since 2002, in trade facilitation areas such as customs cooperation and standards harmonization and mutual recognition.ASEAN introduced a harmonized tariff nomenclature in 2004, which increases consistency and transparency in tariff application. A customs valuation guide introduced in 2003 is intended to ensure progressive adoption of the WTO Agreement on Customs Valuation in ASEAN customs procedures.Work is underway through the adoption of the ASEAN Customs Declaration Document to simplify, improve and standardize customs forms.

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ASEANASEANThe ASEAN Single Window Agreement (ASW) was signed in the 2005 summit and aims to cut customs clearance time to 30 minutes by 2010, from the current 3-4 hour average. This would be achieved by having a single point for the submission and processing of information relevant to customs clearance.

Standards harmonization has been slow and mainly in electronics,pharmaceuticals and cosmetics.

In all the areas of trade facilitation ASEAN members seek to conform to international standards, so at this stage it is somewhat unclear to what extent the regional agreement has independent impact.

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4. Asia4. Asia--Pacific Economic Cooperation (APEC)Pacific Economic Cooperation (APEC)APEC was established in 1989. Current membership consists of Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru Philippines, Russia, Singapore, South Korea, Thailand, USA and Vietnam.

http://www.apec.org/apec/tools/home.html

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4. APEC4. APECThe APEC Committee on Trade and Investment was established in 1993. The Committee’s four priority areas are:

1. Support for the multilateral trade system2. Trade facilitation3. Transparency and anti-corruption4. The digital economy and intellectual property

rights (IPR)

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A “Big Ticket” TF Item for APECA “Big Ticket” TF Item for APEC

2001 APEC Leaders in Shanghai set goal of 5% reduction in transaction costs by 2006:

Projected benefit: $154 billion in GDP growthTrade Facilitation Action Plan to reach target


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APECAPECThe Committee was mandated to reduce transaction costs on trade by 5% by 2006. Beginning in 2002 each member was expected to submit annual Trade Facilitation Action Plans, aimed at achieving the 5% target.

By 2004 1300 items had been selected in member states’ Trade Facilitation Action Plans, mainly in the sub-category of customs procedures. Over half of these have been completed and further quarter are in progress.

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APECAPECAPEC’s trade facilitation principles distinctively emphasize paperless trading and e-commerce and the facilitation and promotion of business people’s mobility.

It is clear that APEC has been able to assist in the integration of trade facilitation into WTO law by providing an inventory of trade facilitation measures and by highlighting examples of best practice.


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APEC Trade Facilitation PrinciplesAPEC Trade Facilitation PrinciplesTransparency, Communications, Consultation & Cooperation;Simplification, Practicality & Efficiency;Non-discrimination, Consistency, Predictability & Due Process;Harmonization, Standardization & Recognition;Modernization & Use of New Technologies


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CustomsCustoms--Related APEC Model MeasuresRelated APEC Model MeasuresAddressed to:Addressed to:

TransparencyImpartial administration, consistency & predictabilityRelease of goodsModernization and paperless tradingRisk managementCooperationFees and ChangesConfidentialityExpress ShipmentsReview and AppealPenaltiesAdvance Rulings

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4. APEC4. APECThe principles espoused in APEC documents relating to trade facilitation would presumably be suitable principles for a WTO trade facilitation regime.

APEC trade ministers have recently agreed to develop model measures on trade facilitation for free trade agreements. This has occurred in response to the problem of membership overlap between APEC and other regional trading arrangements. Membership overlap has increased the potential for spaghetti bowl effects, including conflicting trade facilitation arrangements.

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5. The South Asian Association for Regional 5. The South Asian Association for Regional Cooperation (SAARC)Cooperation (SAARC)

The South Asian Association for Regional Cooperation(SAARC) was established in 1985 by Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

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5. SAPTA5. SAPTAIn 1995 the SAARC Council of Minister agreed to establish aSouth Asian Free Trade Area and in 1996 an agreement was signed (The SAARC Preferential Trade Agreement -SAPTA)

This was the the first step towards a free trade area, with internal trade liberalization to begin in 2006 and be

completed by 2016.

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SAPTASAPTAIn trade facilitation areas there have been some institutionaldevelopments, but little actual progress. In 1996 a Group onCustoms Cooperation was established with a mandate to:

1. Harmonize customs rules and regulations, 2. Simplify documentation and procedural requirements3. Upgrade infrastructure and;4. Provide training

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5. SAPTA5. SAPTA

A draft Regional Agreement on Promotion and Protection of Investment within the SAARC region is under the consideration of member states and is hoped to create conditions favorable for promoting and protecting investments by investors from other member states.

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SAPTASAPTAIn 2004 an inter-governmental expert group was created to:

1. Consider agreement on Promotion and Protection of Investment.

2. Establish a SAARC Arbitration Council.3. Establish a Multilateral Tax Treaty with a limited

scope with regard to avoidance of double taxation.

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6. The Pacific Agreement for Closer 6. The Pacific Agreement for Closer Economic Relations (PACER)Economic Relations (PACER)

The Pacific Agreement for Closer Economic Relations (PACER) was signed in Nauru in August 2001 and is a framework agreement envisaging the creation of free trade area between the sixteen members – the 14 Pacific Island Nations, Australia and New Zealand. PACER entered into force on 3 October 2002.

The objective of PACER is to establish the framework for the gradual trade and economic integration of member countries in a way that is supportive of sustainable development in Pacific Island Nations.

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6. PACER6. PACERSince 1981 the Pacific Island Forum countries have had duty free access to the Australian and New Zealand markets through the non-reciprocal South Pacific RegionalTrade and Economic Cooperation Agreement (SPARTECA).

The initial focus of PACER has been on the development of cooperation on trade facilitation, particularly in the areas of customs, quarantine, and standards and conformance.

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PACERPACER

In fact a significant proportion of the document addresses trade facilitation. (Part 3 of the Agreement and Annex 1 on TF)

Article 11 of PACER provides for a trade facilitation program which Australia and NZ agree to part fund.

PACER Article 9 states that the Parties will establish detailed programs for the development, establishment and implementation of TF programs, which should be consistent with other regional and international agreements

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6. PACER6. PACER

Annex 1 of PACER provides that each TF program contain objectives and a detailed action plan, budget etc. To avoid duplication, the TF programs will be integrated with the work of other regional and international organisations involved in trade capacity building.

The Forum Secretariat is to review TF programs and identify the most beneficial TF reforms (Annex 1, Article 2.1)

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PACERPACER

Article 2 of the Annex allows for periodic revisions of the TF programs in accordance with Article 16 regarding an eventual formalised MoU between parties.

However Article 3 of Annex 2 gives Pacific Island nations the option to not participate in a TF reform if it is considered “disadvantageous” to them.

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6. PACER6. PACER

Article 4 of the Annex provides for a consultation process in accordance with PACER Article 15 for Parties who consider that an obligation of a TF program has not, or is not, being met. Further dispute resolution procedures are only applicable in so far as they are contained in a future MoU.

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7. Initial Observations and Issues7. Initial Observations and IssuesIt is evident from these four regional agreements that trade facilitation has become a major concern for policy makers wishing to increase the gains from trade.

Technological developments have raised prospects for a paperless customs clearance system and greater exchanges of trade related information. This would be implemented through an Electronic Data Interchange (EDI), which would increase the the potential gains from trade facilitation, and would entail the implementation of common standards.

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Initial Observations and IssuesInitial Observations and IssuesMany of the most obvious trade costs are imposed by national governments who exercise a heavy handed approach to trade and use red tape to control trade within their borders. In such cases the biggest gains form trade facilitation involve national action.

Some trade facilitation issues do require bilateral attention such as coordinating opening time of border crossings, but many current regional trade initiatives are addressing essentially multilateral issues and hence their relevance for future multilateral negotiations

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7. Initial Observations and Issues7. Initial Observations and IssuesThe USA has used bilateral FTA’s to push trading partners to implement financial reform aimed at reducing behind-the-border trade costs. Such pressure from major trading partners and the promise of reciprocity may contribute to the attractiveness of undertaking trade facilitation measures, but as APEC members have realized, it is desirable to coordinate trade facilitation.

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Initial Observations and IssuesInitial Observations and IssuesA key challenge in analysing trade facilitation agreements in the Asia-Pacific region is to distinguish exactly when trade facilitation is actually occurring.

Many announcements of trade facilitation measures remain paper measures, with the actual practice at the border not readily changing.

This assessment appears to apply to SAARC’s trade facilitation efforts through SAPTA. It is early days for PACER but further analysis is required.

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7. Initial Observations and Issues 7. Initial Observations and Issues APEC however has, since 2001, had a more structured trade facilitation program, but there is a some evidence that individual countries only introduce measures that they would pursue unilaterally even in the absence of APEC. Others argue that APEC provides the coordinating mechanism which has given the political and economic impetus for important reforms.

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Initial Observations and IssuesInitial Observations and IssuesASEAN countries have gone further in pursuing coordinated trade facilitation measures, but there is significant variations in implementation with Singapore having the most efficient trade practise and Thailand leading the way in trade facilitation improvements in recent years, mainly as a result of its desirability to implement EDI and one-stop arrangements.

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Initial Observations and IssuesInitial Observations and IssuesPrevious research (Duval, ARTNeT 2005) demonstrates that if TF components of such regional trade agreements are to be effectively implemented then they need to be:

Specific and detailedContain clear indicators and measurement standardsBe transparent supported by clear publication of regulations andproceduresFacilitated preferably by national enquiry points & single windowsSimplify and harmonise trade documentation

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8. Summary8. SummaryTrade facilitation within RTAs can be usefully studied for three main

reasons:

1. The negotiations within these fora over the last five years have helpedclarify the principles upon which a multilateral trade facilitation program should be based with implications for future negotiations.

2. An inventory of trade facilitation measures may provide usefulguidelines on where to look for gains.

3. Economists can measure the gains from trade facilitation measures such as those being introduced within ASEAN tobolster the will of policymakers to pursue a trade facilitationagenda.

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8. Summary8. SummaryThrough further examination of primary and secondary material with respect to the four Asia-Pacific regional agreements along with some interviews with research colleagues, relevant government officials and industry representatives, this rest of this study will focus on:

A comparative analysis of TF in these regional trade agreements and implications for multilateral principles and for future negotiations on trade facilitation.

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ContentsContents1. The Institute for International Business, Economics and Law2. Introduction to the Study on Trade Facilitation and RTAs3. ASEAN 4. APEC5. SAPTA6. PACER7. Initial Observations and Issues8. Summary

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Comments and Suggestions Welcome Comments and Suggestions Welcome

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