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TWN Info Service on WTO and Trade Issues (May05/11)

24 May 2005

Trade Facilitation in WTO:  Developing Countries Stress Need to Clarify Scope of Negotiations

The WTO's Negotiating Group on Trade Facilitation held its third meeting on 2-3 May. There were 11 new papers, coming from Bolivia, Mongolia, Paraguay, Korea, the European Communities, Switzerland, again Paraguay, Rwanda, Peru, Hong Kong China, Norway, New Zealand, Singapore, China, Pakistan and the African Group. Several of the papers were joint submissions from some of the above countries.

In addition, there was a statement from the LDC Group, and an informal paper by India, Kenya and the Philippines (on behalf of the "Core Group" of developing countries) providing a response to earlier papers that had been presented at the previous meeting of the Group in February.

While some members pressed ahead with proposals for new clarification of the relevant existing GATT rules as well as new obligations, several developing countries voiced their concern that some proposals that have been put forward exceeded the mandate for the negotiations.

Many countries, especially the LDCs and the African Group, also stressed the importance of giving concrete form to special and differential treatment (SDT) for developing countries, assessment of implementation costs and the method of assisting developing countries to meet these costs, and capacity building needs.

The mandate of the trade facilitation negotiations (as specified in Annex D of the General Council 1 August 2004 decision, widely known as the "July package") is to clarify and improve relevant aspects of Article V (transit of goods), Article VIII (fees and charges) and Article X (transparency in the publication and administration of trade regulations) of GATT 1994, with the aim to further expediting the movement, release and clearance of goods including goods in transit.

Below is a report of the meeting.

With best wishes
Martin Khor
TWN

________________________

Trade Facilitation in WTO:  Developing Countries Stress Need
to Clarify Scope of Negotiations

By Goh Chien Yen and Martin Khor (Third World Network)
Geneva, 11 May 2005

Introduction

The Negotiating Group on Trade Facilitation held its third meeting on 2-3 May. The meeting heard submissions of eleven new papers, coming from Bolivia, Mongolia, Paraguay, Korea, the European Communities, Switzerland, again Paraguay, Rwanda, Peru, Hong Kong China, Norway, New Zealand, Singapore, China, Pakistan and the African Group. Several of the papers were joint submissions from some of the above countries.

In addition, there was a statement from the LDC Group, and an informal paper by India, Kenya and the Philippines (on behalf of the "Core Group" of developing countries) providing a response to earlier papers that had been presented at the previous meeting of the Group in February.

While some members pressed ahead with proposals for new clarification of the relevant existing GATT rules as well as new obligations, several developing countries voiced their concern that some proposals that have been put forward exceeded the mandate for the negotiations.

Many countries, especially the LDCs and the African Group, also stressed the importance of giving concrete form to special and differential treatment (SDT) for developing countries, assessment of implementation costs and the method of assisting developing countries to meet these costs, and capacity building needs.

The mandate of the trade facilitation negotiations (as specified in Annex D of the General Council 1 August 2004 decision, widely known as the "July package") is to clarify and improve relevant aspects of Article V (transit of goods), Article VIII (fees and charges) and Article X (transparency in the publication and administration of trade regulations) of GATT 1994, with the aim to further expediting the movement, release and clearance of goods including goods in transit.

Comments from Some Developing Countries to Clarify Trade Facilitation Needs Scope of Negotiations

Given the somewhat open-ended nature of the mandate, instead of going straight into making proposal on Articles V, VIII and X, some members have in their communications sought to bring more precision and clarity as to the scope and content of the negotiations. "Though the scope of trade facilitation is limited to Articles V, VIII and X, it still covers a wide range of areas if take over at random," China and Pakistan pointed out. They proposed that an assessment be carried out on the needs and priorities of developing countries as the basis for further negotiations. Other countries pointed out that some previous proposals had exceeded the mandated scope of negotiations. The African Group also observed that "a number of proposals go beyond the mandate of these negotiations." The LDC Group said it was not clear to it whether some proposals fall within the negotiating mandate. India, Kenya and the Philippines also gave details on how some previous proposals had gone beyond the mandated scope of the mandated negotiations.

According to the joint communication from Pakistan and China, "negotiations on trade facilitation should be based on the needs and priorities of members, especially developing and least-developed countries," in line with Annex D of the July Package. The identified needs and priorities and a "clear idea of [members] trade facilitation efforts... will facilitate substantial work on the negotiations", they pointed out. "Only when we know what the problems are can we know how to work them out, whether it comes to rule setting or arrangement of technical assistance, capacity building and special and differential treatment."

They thus proposed that an assessment be carried out of the needs and priorities of members and their current levels of trade facilitation. Members could submit a report to the WTO Secretariat on the assessment of their respective trade facilitation needs and priorities based on a common methodology to be agreed. "Based on the summary reports, the Secretariat prepares a document reflecting major areas of interests to Members or a list of needs and priorities of Members within the general scope of GATT Articles V, VIII and X. Future rules on trade facilitation will be developed mainly on the basis of those major areas."

The African Group made comments on the proposals submitted so far. They found that "a number of the proposals go beyond the mandate of these negotiations as they espouse additional commitments. They [also] do not provide for adequate S and D treatment for developing and least developed countries" and "The technical assistance components of these proposals are of a "best endeavour" nature."

The Group reminded the meeting of the mandate of the Negotiating Group as provided for in Annex D of the July Package. It reiterated that "the scope of the negotiations conduced under the aegis of the Negotiating Group must be in essence remain consistent with these objectives. The negotiations should be focused solely on clarifying and improving these Articles." They underscored that "enhanced special and differential treatment, technical assistance, support for capacity building and implementation assistance is a critical component of these negotiations."

They added that "the right to select policy options and exercise policy flexibility granted in favour of developing and least developed countries must remain sacrosanct. Any findings on the cost implications [of the new commitments]..... with respect to public works infrastructure, ICT infrastructure... should be directly linked to the provision of adequate technical and financial assistance and support for capacity building."

Referring to para 6 of Annex D, the African Group highlighted that the "implementation of new commitments on trade facilitation by developing and least-developed countries is conditioned on the provision of adequate technical and financial assistance and support for capacity building in trade facilitation in developed countries."

In relation para 5 of Annex D in order to ensure to the effective participation of developed and least developed countries in the negotiations on TF, the African Group proposed the "establishment of an appropriate mechanism, to be agreed not later than the end of July 2005, for the provision of by developed countries of technical assistance and support for capacity building the negotiations," such as specific travel support and trade facilitation negotiations oriented research.

On the issue of S and D, the African Group made clear that S and D treatment "goes beyond longer transitional periods." Special and differential treatment provisions should be "precise, effective and operational"; it should also "provide policy space and flexibility for developing and least developed countries while determining when, how, and the extent to which such new commitments on trade facilitation are to be implemented by them." Furthermore, the "implementation by developing and least developing countries of such new commitments" will be tempered by the provision by developed countries of effective technical and financial assistance.

The LDC Group, represented by Zambia, said it is not clear to the LDCs whether some proposals fall within the negotiating mandate, especially those proposals related to binding advance rulings for customs purpose (Canada), the obligatory use of HS tariff classification system (New Zealand), release of goods including the use of collateral or monetary security (US, Australia and Canada), pre-arrival clearance and post-clearance audit system (Chinese Taipei), and express shipments (US).

These proposals require substantial investment, including in infrastructure, and so implementation must be linked to capacities, said Zambia.

The LDC Group added that some proposals entail direct and indirect financial costs, including publication of laws, establishment of enquiry point, risk management, and post clearance audit system. Detailed assessments based on quantitative data should thus be made by the proponents in terms of cost implications to governments as against the expected benefit to traders.

In relation to implementation costs, broader legal and administrative implications of the proposed measures need to be taken more into account, as some proposals require capital, physical, institutional, administrative and human resource investment. Further, some proposed legal obligations such as binding advance rulings have profound legal implications as a failure to meet these would invoke judicial review and remedial measures by affected parties within the domestic framework and eventually the WTO dispute settlement system, if applicable.

The LDC Group requested clarification on how the burden on LDCs will be addressed. Thus the legal and administrative implications of proposed measures need careful examination in view of the LDCs' existing institutional and administrative capacities.

On SDT, the LDC Group expressed concern that the kind of SDT suggested by some proposals is limited to longer transition periods. This is not adequate in nature and sufficient in scope, given the Annex D modalities. Members wishing to create new obligations were thus requested to clarify what the SDT component will be, translated in practice, in relation to the proposed specific measures. SDT should include technical and financial assistance and in principle LDCs should not be subject to mandatory legal obligations.

India, the Philippines and Kenya (on behalf of the "Core Group" of developing countries) also made detailed responses to proposals submitted at the previous
meeting of the Group.

India said that proposals for more transparency in laws and regulations, judicial decisions, and administrative rulings, seem to increase the scope of 'transparency' and felt that this was excessive. On another proposal to 'make easily available' information, India said that this will put additional requirements on developing country members. On the creation of an inquiry point, India said that it should not be subject to the kind of rigid commitments requiring adequate time periods for comment. India also objected to the acceptance of copies of documents. This should not be compulsory since Indian customs administration has the right to require original documents.

With regards to a proposal on the maintenance of the integrity of customs officials (in relation to incidences of corruption), India said that this is something that does not fall within the ambit of the WTO and that it is for governments to police.

Kenya said that the requirements for publication of data and more information on the decision-making process goes beyond what is required by the mandate of the negotiations. It also has serious reservations regarding the multilateral commitment on prior consultations on new laws, regulations and administrative rules. On the need for better circulation of information, Kenya said that many developing countries especially those in Africa, face a lot of problems in infrastructure concerning information technology and unless technical assistance is provided, they would have great difficulty in complying with commitments that would require publication of all these information.

The Philippines was opposed to the establishment of new administrative bodies to provide more information and to expedite judicial procedures. The advance rulings also would appear to fall outside the scope of the negotiating group.


Article X (Transparency in Publication and Administration of Trade Regulations)

One of the issues on which members disagreed was a proposal to include "advance rulings" in the negotiations. According to the Singapore communication (TN/TF/W/38), Article X on the transparency in the publication and administration of trade regulations would entail the usage of advance rulings. From their point of view, "advance rulings may be issued [to traders] on matters such as tariff classification, applicable duties and valuation... the advance ruling would [then] be binding on custom authorities for a period of time."

The US, Canada and Taiwan have also submitted proposals on the usage of advance rulings at the previous meeting. In response, several developing country members have questioned whether "advance rulings" is within the remit of Article X.

The Philippines, on behalf of the Core Group (which includes, Kenya, Rwanda, Malaysia and India) pointed out that "the proposals on Advance Rulings, as indeed all the other proposals containing elements on 'advance rulings', would appear to fall outside the scope of the NG's mandate insofar as it seems to fall outside the parameters of Article X." This is because "whereas Article X appears to refer to publicizing/publication requirements, these proposals suggest an obligation to establish a distinct substantive system for issuing advance rulings," Philippine explained.

Other proposals submitted for this meeting relating on Article X were made by Peru and Hong Kong. According to Peru, enquiry points on trade related information should be established and that all relevant legislation on custom procedures should be published. There should also be "minimum time periods before the entry into force of new regulations." Amongst other things, the Hong Kong proposal on Article X called for the establishment of "effective mechanisms for exchanges with traders, whose views should be duly taken into account" concerning customs administration. In addition "when formulating, implementing and reviewing any measures in Article X, opportunities should be provided for consultation with traders..."


Article VIII (Fees and Charges)

On Article VIII (Fees and formalities connected with importation and exportation), proposals from HK, Peru, New Zealand, Norway and Switzerland were received for the consideration of the NG at this meeting.

According to the joint proposal of New Zealand, Norway and Switzerland, documentation and date requirements should be reduced "to the necessary minimum, consistent with the need to enforce legitimate policy objectives." They also proposed the use of international standards as the "United Nations Layout Key for Trade Documents" as a basis for documentation and data requirements.

Similarly, the HK proposal has asked members to ensure that export/import requirements "are no more administratively burdensome or trade restrictive than absolutely necessary to achieve their legitimate objectives and are applied in an efficient manner." In addition, according to their proposal, any fees, charges, and requirements referred to in Article VIII, "should not be maintained if .... the circumstances or objectives can be addressed in a less trade restrictive manner." HK also wanted members to "review its fees, charges, formalities and requirements at reasonable and regular intervals."


Article V (Transit of Goods)

Several proposals on Article V (transit of goods) were made for this meeting, especially by landlocked country members such as Mongolia, Rwanda, Paraguay, Bolivia and Switzerland . The proposals made by these members primarily seek to simplify and streamline custom procedures and rules in order to expedite the movement of goods. These include the "harmonization of vehicle and loading requirements," "limiting the number of physical inspection and controls" and the "promotion of regional transit arrangements."

A paper by Bolivia, Mongolia and Paraguay (TN/TF/W/28) on Article V noted that traders in landlocked countries face different transit formalities with neighbouring Members and even between federal states of the same Member, generating unnecessary costs. These formalities include additional controls and checks as well as excessive security measures applied on goods in transit.

They added that excessive documentation requirements for transit are burdensome in terms of money and time for traders. In addition, traders in a landlocked Member are faced with unpublished and unreasonably high transit charges in neighbouring Members.

They proposed the following: measures for non-discrimination between modes of transport, origin and destination, carriers, routes and goods; publication of fees and charges; periodic review of fees and charges; periodic meeting of neighbouring Members' authorities; reasonable transit formalities and a periodic review; use of international standards for transit formalities; a bonded transport regime; and simplified and preferential clearance treatment for perishable goods in transit.

Paraguay, Rwanda and Switzerland (TN/TF/W39) said that many landlocked developing countries have not been able to compete efficiently mostly as a consequence of the high cost of transport. Their freight and insurance costs as a percentage of exports (12.9% on average) largely exceed those of developing (8.1%) and developed countries (5.8%), yet reaching astronomic proportions namely in Africa (in some cases over 50%).

According to the Korean proposal on Article V, members should be "obliged to review that transit procedures to ensure that border requirements for goods in transit are minimized." In addition, goods in transit "that do not require transshipment" be accorded "less burdensome treatment than goods in transit that do require transshipment."

The EC in their communication on Article V proposed amongst other things that there should be "more effective... discipline of charges for transit", simplifying documentation, data requirements and procedures and "ensuring non discrimination between means of transport, between carriers and between types of consignment in relation to transit procedures." The EC also pointed out that the question of infrastructure to improve the movement of goods in transit "should primarily be addressed in the context of long-term development strategies involving multilateral and bilateral development cooperation and investment bodies."

The EC outlined a list of problems identified by traders in relation to transit of goods. These include lack of information on and transparency of transit requirements; high, discriminatory and unwarranted transit charges and illegal roadblocks used to levy fees; excessive, burdensome and non-standardized documentation, data requirements and procedures; difficulty with the return, at the point of exit, of cash guarantees posted at the point of entry; unjustifiable restrictions on means of transport, on drivers and goods in transit; lack of coordination between different agencies involved in transit; and lack of resources in terms of trained personnel and infrastructure.

Concerning Article V Peru suggested the use of international instruments relating to customs transit, simplification of customs formalities; and development of automated and internationally standardized procedures for the receipt and submission of information on goods. It also proposed that WTO members accede to the conventions administered by the World Customs Organization (WCO) which seek to harmonize and simplify customs procedures.

Next Meeting

The next meeting of the Negotiating Group on Trade Facilitation will be on 13-14 June.


Note:  Kanaga Raja also contributed to this report.

 


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