Trade Facilitation (TF) Issues at Stake

1. Trade Facilitation (TF) Issues atStake «ImplementingAid for Trade Road Maps» Organized by UNECE July 10th 2013

2. Background: the tradefacilitaitonnegotiations • TF negotiations one of multiple issues on the WTO negotiations agenda; need for a balanced outcome by Bali (implementation issues and S&D, agriculture and food security, LDC issues…) • Modalities of negotiations are set out in Annex D of the July 2004 Framework Agreement • TF negotiations have three pillars:  • 1st Pillar: Clarifying and improving GATT Articles V, VIII and X, with a view to further expediting the movement, release and clearance of goods, including goods in transit. • 2ndPillar: Enhancing Technical Assistance and support for Capacity Building (TACB) in the area of TF. • 3rd Pillar: Enhancing cooperation on TF and customs compliance issues.

3. TF articles under the GATT • The objective of Articles V, VIII, and X GATT is to reduce trading costs and facilitate trade. • Article V GATT (Freedom of Transit) provides for hassle-free movement of transit goods through the territory of other WTO Members. • Article VIII GATT (Fees and Formalities connected with Importation and Exportation) seeks to rationalize and simplify border procedures, formalities and charges.   • Article X GATT (Publication and Administration of Trade Regulations) requires prompt publication of trade laws and regulations and their uniform, impartial and reasonable administration.

4. Centrality of special and differential (S&D) treatment Annex D of July 2004 framework and Annex E of Hong Kong Ministerial Declaration stress that: • Negotiations “shall take fully into account the principle of special and differential treatment for developing and least-developed countries” (WT/L/579) • Implementation is conditioned on acquisition of financial, technical, and capacity building by developing countries and related to delivery of technical, financial, and capacity building assistance by developed countries Members of WTO • S and D to extend beyond transitional periods for implementation • In cases where required support and assistance for such infrastructure (infrastructure development) is not forthcoming, and where a developing or least-developed Member continues to lack the necessary capacity, implementation will not be required • Developed country Members providesupport and assistance to developing and least developed country Members in a comprehensive manner and on a long term and sustainable basis, backed by secure funding, in order to allow implementation.

5. Status of the negotiations • Section I of the negotiatingtextdealingwith new rules on trade facilitation aimsat ‘clarifying and improving’ the GATT • An extendedtext of 30 plus pages, 16th revised version, and including more than 500 bracketsjust four monthsbefore the Ministerial • Overall, rules are designed based on mandatory language in most provisions, which includes limited and uncertain flexibilities in some parts. • Section II on special and differentialtreatment, includingtechnical and financial assistance and capacity building • The discussion remainsstalledat the conceptaullevel up until a few monthsbefore the Ministerial • The current design does not includestrong basis for defining obligations of developed countries Members of the WTO towardsoperationalization of the S & D, and includeburdensome obligations for developing countries and LDCs Overall, there is still a significant imbalance within the text

7. Issues for consideration • Needs of developing and least-developed countries members in facilitation of trade differ from what the negotiations cover • Aid for trade should ensure prioritizing broader objectives of supporting productive and trade capacities, needed infrastructure,… • Financial assistance should not be diverted away from development objectives of developing Member and LDCs; additional resources should be available for purposes of implementing the potential TF agreement • Many provisions under the negotiating text have no relationship with the provision of technical and financial assistance and support for capacity building, but are purely a policy and regulatory matters.

8. Implementation issues associatedwithpotential TF agreement • Regulatory implications • Legislative and institutionalneeds • Short-term and long-termcost implications

9. On the regulatory front The rules under negotiations are currently designed in a manner that could undermine the regulatory capacities and space of WTO Member States and could introduce multiple grounds based on which laws and regulations of Member States could be challenged under the WTO DSU. • Lessonsfrom the GATT and WTO jurisprudence: Dozens of dispute settlement cases have been raised based on legal grounds under Articles V, VIII and X GATT WTO often finding WTO Members in violation of their obligations under these articles. • Design of the rules under negotiations is over-prescriptive; propose detailed lists of criteria for designing and applying certain custom practices, or the use of international standards as basis for such practice  would limit the space and options for Members to design and apply several of the requirements under a potential trade facilitation agreement. • Proposed rules open the influence on national legislative processes to an undefined open-ended category of ‘interested parties may lead to speculation, lobbying pressures, and profiteering by interest groups and tilt the balance in national regulatory and legislative processes away from the national constituencies and development priorities

10. On legislative and institutional fronts Hold significant administrative and institutional burdens on Member States, especially developing countries and LDCs, whose customs and customs-related institutional mechanisms are not as advanced compared to developed countries. Examples: • Setting in place and continuously updating systems for managing information, and assigning staff or specific units to follow that • In some cases, the national legislative process would need to be changed in order to accommodate requirements stipulated by the agreement (such as commenting on national laws) • Need a legal act or formal policy to identify the government agency (or agencies) or other entities that would be responsible for implementing the obligation and legislative or administrative acts to designate responsibilities and define the mandate and authority of the responsible institution. • Burdens of implementing across the board at the national level; while some Members may already have the practice implemented in some regions or custom agencies, it remains significantly difficult to ensure a homogenous alignment with the requirements across the national level.

11. In relation to costs • Would include human resource expenses, equipment and information-technology systems, as well as other significant infrastructure expenditures. • Most costs of a recurring nature; would not be limited to a one-time investment  necessitate a carve-out of the national budgets on a yearly basis. • Could essentially lead to a disproportionate diversion of limited resources from other vital institutions and public services to customs administration. • Assessment of the needs to meet these costs should be of a long-term nature, cannot be addressed by assessing the available funds at the period of negotiations. • Important to unpack the nature of the international funds available to support the implementation of a trade facilitation agreement  should not be a diversion from meeting development needs and goals, nor should it be of a debt-creating nature. • Calculate the potential costs associated with irreplaceable loss of tariff revenues.

12. NeededWayForward • Need a balanced agreement the allows for the respect of developing Members’ development context, policy space, and flexibility to adopt and implement commitments commensurate with their capacity to do so, and subject to the provision of technical assistance and capacity building where needed. • Pre-requisites include: • New TF rules that do not extend beyond the mandate of negotiations, are based on a best-endevour basis that respects the ability of WTO Members to implement according to their capacities, and does not intrude on national regulatory capacities. • A strong and operational section on special and differential treatment that preserves the intent reflected in the mandate of the negotiations (Annex D, 2004), which conditions implementation on acquisition of capacity, and technical and financial assistance. • Overall, need a balancedoutcome of the WTO Doha negotiations, thataddresses the implementation issues and S&D at the heart of the multilateraltrading system • Aid for tradeshould focus on building the productive and export capacities of developing countries