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No binding rules on trade facilitation at WTO, says India

Geneva, 18 May (Chakravarthi Raghavan) -- While developing countries are taking measures, according to their priorities and resources, to improve and enhance trade infrastructures to facilitate trade, they cannot agree to negotiating binding rules, including the application of the dispute settlement process at the WTO, a ‘global forum’ on trade facilitation, organized by the UN regional body for Europe, was told here last week.

The forum (14-15 May), the second such event, was organised by the Economic Commission for Europe (ECE), the UN regional body with membership from US, Canada, West Europe and East Europe and members of the CIS (the former Soviet Union states now grouped in the Commonwealth of Independent States), and Israel.

At a panel discussion, India’s ambassador, Hardeep Singh Puri delivered the message (that was supported during the panel discussions by other developing country governments, who were participating as invitees), and circulated to the forum and the media, the copy of his statement.

Nevertheless, the ECE secretariat issued a press release to the effect that though representatives of certain developing countries, notably Amb. Puri of India, had expressed reservations over including ‘trade facilitation’ in the WTO negotiations, “they did not exclude completely the possibilities of changes in this position before the next WTO ministerial meeting!”

However, Puri questioned the press release and its conclusions, and said that he had presented the position of the government of India at the panel meeting and had clearly stated India’s opposition to the WTO talks, and that this had received the support of other developing country speakers.

The ECE secretariat’s trade wing, financed by extra-budgetary funding from the EU (and some from the United States), runs programmes to promote the EU/US agendas. The global forum was organized by the trade wing.

The global forum on trade facilitation has been sought to be used by the ECE trade wing to promote WTO talks on ‘trade facilitation’, one of the Singapore issues, and the meeting was convened with an eye on the September Cancun Ministerial meeting of the WTO. At the forum, the business representatives and the EU and US government representatives all promoted the idea of ‘benefits’ to developing countries through trade facilitation, and negotiating an agreement and rules for this at the WTO.

In the panel discussions, the secretariat promoting a particular view, came for some adverse comments.

In presenting India’s views and circulating, to the participants and to the media, the text of the speech, India’s Ambassador Puri outlined the “valid and legitimate” reasons for developing countries to follow a “staged path to establish an autonomous, sustainable trade management infrastructure” for better management of foreign trade and their own security concerns, and simplify procedures for their own exporters and foreign operators trading with the countries, raise revenue realization and compliance, and the efficiency and cost effectiveness of their international trade transactions, with backward and forward linkages.

For this to be achieved, developing countries had the right to “set their own methodology and time frame, within the human and financial resources they can spare and mobilize, adopting best practices as they think fit.”

Many developing countries, he said, had pursued autonomously measures for rationalization, harmonization and automation of trade procedures, especially customs procedures, and use of modern Information Technology tools, including EDI (electronic data interchange). In India, for example, such electronic data information linkages had been established at 23 customs locations - covering major ports, airports, inland container depots and freight stations, covering about 75% of India’s international trade.

Developing countries recognized trade facilitation as a necessity at present. It was being dealt with multilaterally at the World Customs Organisation. However, some developed countries were trying to bring this issue into the WTO, as part of the Singapore Issues, presumably to make compliance with such standards mandatory for all countries as part of a single undertaking with all that it implied in terms of binding dispute settlement linked obligations.

This effort to “bridge the trade facilitation gap” between developed and developing countries was not fair or desirable, nor in the best interests of developing countries or a development-oriented trading system promised at Doha.  Such an approach would ignore the reality of resource constraints and crowd out the welfare and development priorities of developing countries.

Most of the trade facilitation standards being evolved and held up as models were those devised by developed countries in the light of their own needs, experiences, capacities and objectives to bring a state-of-the-art technology and tools at their command. Compliance with such standards will be virtually cost-free for them. But developing countries, being standard-takers and not standard-setters, would have a double disadvantage in upgrading their trade infrastructure, and adopting something which is not home-grown, as well as bearing the cost of adjustment.

Trade facilitation should not be seen as an end in itself, but a means to increasing trade revenues and thus development dividends for developing countries’ participation in international trade. It is not a mechanical process to be addressed or redressed and at one stroke remove all transaction related difficulties.

There has to be a systemic approach to different obstacles posed to an efficient flow of trade, and which looks at both forward and backward linkages.

For backward linkages there was the question of supply chain of trade efficiency - entire realm of production, transport, services infrastructure and legal frameworks - all having an impact on speed, cost and predictability for trade operations. In many developing countries, deficiencies in the roads, rail, air and port infrastructure, physical and institutional and involving heavy costs, have to be tackled. “Merely tinkering with customs procedures will not bring the promised benefits in terms of reducing barriers to trade, lowering transaction costs, dealing with corruption, raising revenues, making them more competitive from the perspective of global TNC and business community, and giving a fillip to their trade and investment opportunities and prospects.”

The forward linkages include issues of international transport, logistical and financial frameworks, and the complex trade restrictive procedures followed by developed countries which are the main markets of the developing world. The low level of control that developing countries have on the external dimensions of trade facilitation relating to their export trade was an issue of major concern to them, and no amount of reform at domestic levels to strengthen backward linkages will suffice.

The Indian envoy also referred to various security-related initiatives recently taken against terrorism, and the adoption of such measures like Container Security Initiative that had some major drawbacks for developing countries.  These involved re-routing of trade flows from certain origins and destinations, particularly those in the USA, and calling for a very high level of supply chain management capacity, technological and financial resources mobilisation and significant disruption of developing country trade and adding to the costs.

As UNCTAD studies have brought out, all these were valid and legitimate reasons for developing countries to adopt a staged path for an “autonomous, sustainable trade management structure”. Developing countries also had their own security concerns and their cultural, social and political contexts within which they had to work out trade facilitation strategies. These concerns of developing countries were as relevant as the measures taken by some developed country partners, profoundly affecting trade facilitation environment in key markets for developing countries.

The logic of those pushing for an enforceable multilateral trade facilitation regime in the WTO, on the ground that a voluntary approach is too slow and ineffective and needed to be speeded up, is “unacceptable” said Puri.

“It is in the interests of developing countries to make haste slowly so that they could manage the balancing of the costs and benefits of trade facilitation and integration according to their ability, technological and institutional preparedness and control across the supply chain of efficiency on the one hand, and the external elements of trade facilitation on the other.

“The WTO is not a suitable forum for dealing with trade facilitation issue, and there is no reason for duplicating work which is going on in the World Customs Organization, an expert body, in the context of the revised Kyoto Convention of the WCO. There is no need to bring procedural issues to the WTO, a body focussed more on trade rules, rights and obligations.”

It would be particularly harmful to developing countries to lodge trade facilitation with binding rules in the WTO, with the possibility of enforcing them through dispute settlement mechanism. Even a country like India will find it difficult to meet standards of automation and modernization at all its ports, airports and land customs stations. “Promises of S&D (in this matter as in others) cannot be taken at face value given the lack of progress in this area in the Doha negotiations so far. And the ‘one-size-fits-all’ transition time that may be offered will be of scant comfort and utility. “Trade facilitation would thus become another onerous obligation on developing countries and provide developed countries with yet another sophisticated instrument for trade harassment against developing countries,” Puri pointed out.

Referring to the lack of progress on implementation of some of the key WTO agreements with trade facilitation dimensions such as Rules of Origin, TBT, SPS and Customs Valuation, Puri said: “it would be better if there is concentration on finalising work on these agreements that have profound implications for trade facilitation, and on which developed country partners have not shown any political will to move.”

Citing World Bank economists who have estimated the costs of implementing only three of the agreements - SPS, TRIPS and Customs Valuation, for an average typical developing country to be at least $150 million, not to speak of outgoes in terms of revenue loss or development and welfare foregone, the Indian envoy said: “the only way to reach the laudable goal of global trade facilitation, and in a manner that would increase benefits for developing countries, is for progressive, voluntary efforts, not linked to WTO’s enforceability provisions and dispute settlement mechanism.” – SUNS5348

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