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Trade Facilitation (TF)

Trade Facilitation (TF). by Yann Duval, Trade and Investment Division, UNESCAP. ESCAP/ITD/DTN/WTO Capacity Building Workshop for Free Trade Agreement Negotiations 20 – 24 August 2012 Asia Hotel, Bangkok, Thailand. Presentation Outline. Trade facilitation (and importance): introduction

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Trade Facilitation (TF)

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  1. Trade Facilitation (TF) by Yann Duval, Trade and Investment Division, UNESCAP ESCAP/ITD/DTN/WTO Capacity Building Workshop for Free Trade Agreement Negotiations 20 – 24 August 2012 Asia Hotel, Bangkok, Thailand

  2. Presentation Outline • Trade facilitation (and importance): introduction • Trade facilitation: a regional perspective • The WTO trade facilitation negotiations – brief overview • Trade facilitation provisions in regional trade agreements

  3. Trade Facilitation (TF)? • “The plumbing of international trade” (Staples, 1998) • “The simplification and harmonization of international trade procedures.”, where trade procedures are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.” (based on WTO documents) • “Any measure, or set of measures, that aims to increase the cost-effectiveness of international trade transactions”.http://www.gfptt.org/Entities/TopicProfile.aspx

  4. Trade Transactions: Buy-Ship-Pay Model

  5. Trade facilitation essential to trade competitiveness • Lower transaction costs • Lower costs related to preparation, submission and approval of documents; lower cost of clearance and transportation of goods • Reduce average transaction time • Less waiting time at borders, faster clearance process and transportation  reduce need for financing, risk of spoilage… • Increased timeliness • Because procedures and processes are rationalized and transparent, facilitation of just-in-time delivery • Compliance with security initiatives in major export markets

  6. How important are Trade Facilitation and Behind-the-Border (BtB) Measures for trade? • Consistently strong evidence that trade facilitation matters • No. of import or export documents, cost of moving goods from factory to ship deck, customs efficiency • Port infrastructure, internet/IT services infrastructure • Transport and Logistics services/competition • TF matters more than Tariffs for trade – particularly for trade with OECD countries • General Business/Investment environment regulations also matters for trade • Contract enforcement, ease of getting credit, ease of starting a business, bankruptcy law…

  7. Impact on Trade of a 5% Improvementin selected areas BtB trade facilitation in exporting country Source: Duval and Utoktham (2009)

  8. Presentation Outline • Trade Facilitation (and importance) • Trade Facilitation: a regional perspective • The WTO trade facilitation negotiations – brief overview • Trade Facilitation provisions in regional trade agreements

  9. Trade Facilitation (TF) in Asia and the Pacific • Significant progress made in reducing time of import/export since 2005, • but developed economies also improved during that period • On average, it still takes 30 days to move goods from factory to deck-of-ship at the nearest seaport • South Asia: 30 days • South-East Asia: 20 days • Developed economies: 10 days  Improvements in TF could bring $250 billion in additional trade for Asia and the Pacific

  10. Ease of Trading Across Borders (GMS)**Doing Business Report 2012, WB

  11. ESCAP’s Intraregional Trade Cost Database • ESCAP (Bilateral) Comprehensive Trade Costs: • Capture all additional costs involved in trading goods bilaterally relative to those involved in trading goods domestically, including • International shipping and logistics costs • Tariff and non-tariff costs, including indirect and direct costs associated with trade procedures and regulations • Costs from differences in language, culture, currencies… • are based on the comprehensive trade costs measure proposed by Jacks, Meissner and Novy (2009) • Measure derived from the gravity equation, i.e., ratio based essentially on bilateral trade data and Gross Output data  “objective” measure of costs

  12. Non-tariff intra and extra regional trade costs in Asia and the Pacific (2007/2009)* *values in parenthesis show change since 2001/3 (in %)

  13. Non-tariff intra and extra regional trade costs in Asia and the Pacific (2007/2009)* *values in parenthesis show change since 2001/3 (in %)

  14. What explains changes in the trade costs across countries?* Tariff costs 0-10% 60-90% Availability/use of ICT services 10% Business environment 10% 25% Liner Shipping Connectivity (port and maritime services efficiency) Policy-related Non-Tariff trade costs Direct cost of trade procedures 1% 50+ % • Other factors, including: • Indirect cost of trade procedures • Currency / exchange rate • Non-tariff Measures (SPS, TBT) 10-30% Natural trade costs (geographic and cultural distance between countries) *simplified representation based on Duval and Uthoktham (2011)

  15. Logistics Performance (GMS countries)*Connecting to Compete 2012, World Bank

  16. Presentation Outline • Trade Facilitation (and importance) • Trade Facilitation: a regional perspective • The WTO trade facilitation negotiations – very brief overview • Trade Facilitation provisions in regional trade agreements

  17. GATT 1994 Focus of WTO TF negotiations • Freedom of Transit • Art. V Fees & Formalities connected with Importation & Exportation • Art. VIII Publication and Administration of Trade Regulations • Art. X • The 3 articles lack clarity and precision • Difficult (often impossible?) to enforce • Not effective in ensuring/improving transparency and predictability • Absence of requirements for cooperation among various stakeholders

  18. Trade Facilitation Proposals • Proposals submitted to the Negotiating Group on Trade Facilitation (NGTF) for new GATT disciplines on about 50 different issues. • Transparency provisions - Article X GATT: • better and easier access to information for traders • use of modern technology (Internet publication) • enquiry points • prior publication and consultation • advance rulings • right of appeal for traders.

  19. Trade Facilitation Proposals • Fees and formalities, Article VIII GATT: • greater predictability and reliability of procedures • cost-based fees and charges • simplified formalities and documentation • use of international standards • single window for traders • elimination of pre-shipment inspection, mandatory customs brokers, consularization • expedited release and clearance of goods • risk assessment techniques and authorized traders • post-clearance audits

  20. Trade Facilitation Proposals • Transit, Article V GATT: • strengthened non-discrimination (MFN and national treatment) provisions; • predictable, reduced and simplified fees and charges; • more transparent transit formalities and documentation for traders; • use of international standards; • promotion of regional transit arrangements; • limitation of inspections and controls (bonded transport); • quota-free transit.

  21. Trade Facilitation Proposals • Transit, Article V GATT: • strengthened non-discrimination (MFN and national treatment) provisions; • predictable, reduced and simplified fees and charges; • more transparent transit formalities and documentation for traders; • use of international standards; • promotion of regional transit arrangements; • limitation of inspections and controls (bonded transport); • quota-free transit. Other proposals on Special and differential treatment (S&D) and link between commitment and technical assistance/capacity building (TA/CB)

  22. WTO Negotiating Group on Trade Facilitation Draft Consolidated Negotiating Text(TN/TF/W/165/Rev.12, 8 May 2012) SECTION 1 • Article 1: publication and Availability of Information • Article 2: prior publication and consultation • Article 3: advance rulings • Article 4: appeal [REVIEW] procedures • Article 5: other measures to enhance impartiality, non-discrimination and transparency • Article 6: disciplines on fees and charges imposed on or in connection with importation and exportation • ARTICLE 7: Release and Clearance of Goods • ARTICLE 8: CONSULARIZATION • ARTICLE 9: BORDER AGENCY COOPERATION • ARTICLE 10: FORMALITIES CONNECTED WITH IMPORTATION AND EXPORTATION and transit • ARTICLE 11: FREEDOM OF TRANSIT • Article 12: CUSTOMS cooperation • Article 13: INSTITUTIONAL ARRANGEMENTS • Article 14: NATIONAL COMMITTEE ON TRADE FACILITATION SECTION 2 • SPECIAL AND DIFFERENTIAL treatment Provisions for Developing Country Members and Least Developed Country Members

  23. Special and Differential Treatment mechanism of the WTO TF Agreement • Each developing and least developed country schedules the various TF measures covered by the agreement in the three categories depending on their own self-assessment… • Cat. A: to be implemented on signature • Cat. B: to be implemented after a delay • Cat. C: to be implemented after capacity to do so has been acquired (through Aid for Trade in particular) • Creation of a TF Committee to manage implementation and the agreement

  24. WTO TF Needs Assessment initiative(2008-2010) • Identified TA/CB needs/priorities for the implementation of proposed measures • Better determination of national negotiation position for each proposed measure and TACB • Be better prepared for implementation • Develop capacity to continue assessment of needs and priorities (Notes: self-assessment guide [may 09] recommended reading  provides definitions and “basics standards” for the main trade facilitation measures Summary of WTO TF Needs Assessment Results available since 21 May 2012 in Doc. TN/TF/W/177 )

  25. ARTNeT*TF Research Implications for Negotiations • If priorities are based on the perceived need of the private sector and the expected cost of implementation for the Government, basic package of TF measures might include: • Timely and consistent publication of trade rules and regulations (online) • simplification/ standardization/ harmonization of trade documents • Independent and effective national systems of appeal • TF is mostly about improving internal systems • Key TF issues not covered by WTO Neg. * Asia-Pacific Research and Training Network on Trade (ARTNeT); www.artnetontrade.org

  26. Presentation Outline • Trade Facilitation (and importance) • Trade Facilitation: a regional perspective • The WTO trade facilitation negotiations – brief overview • Trade Facilitation provisions in regional/preferential trade agreements (RTAs/PTAs) • Trade Facilitation and RTAs • Good Practices • Building on existing regional TF initiatives

  27. Increased focus on trade facilitation in PTAs involving Asia-Pacific countries • … but often no specifics, • and no harmonization • Even “trade hubs” countries have different provisions in their various BTAs • (what is trade facilitation?) • Trade facilitation increasingly mentioned in PTAs (or associated agreements/ frameworks)... Number of PTAs with Trade Facilitation Provisions

  28. Focus of Trade Facilitation Provisionsof PTAs in Asia-Pacific (Bin and Misovicova, 2008)

  29. Focus of Trade Facilitation Provisionsof PTAs in Asia-Pacific Number of PTAs w/ TF provisions which include provision(s) in a particular area (Bin 2008)

  30. Trade Facilitation Coverage in PTAs: A closer look Duval, Y. (2011), Trade Facilitation in Regional Trade Agreements: Recent Trends in Asia and the Pacific, ESCAP TID Staff Working Paper Series, http://www.unescap.org/tid/publication/swp211.pdf

  31. Trade Facilitation Coverage in PTAs: A closer look

  32. Trade Facilitation Coverage in PTAs: A closer look • Duval, Y. (2011), Trade Facilitation in Regional Trade Agreements: Recent Trends in Asia and the Pacific, ESCAP TID Staff Working Paper Series, http://www.unescap.org/tid/publication/swp211.pdf

  33.  Trade facilitation chapter in the ASEAN Trade in Goods Agreement  CHAPTER 5 - TRADE FACILITATION Article 45 - Work Programme on Trade Facilitation and its Objectives 1. Member States shall develop and implement a comprehensive ASEAN Trade Facilitation Work Programme, which sets out all concrete actions and measures with clear targets and timelines of implementation necessary for creating a consistent, transparent, and predictable environment for international trade transactions that increases trading opportunities and help businesses, including small and medium sized enterprises (SMEs), to save time and reduce costs. 2. The ASEAN Trade Facilitation Work Programme shall set out actions and measures to be implemented at both ASEAN and national levels. Article 46 - Scope of the ASEAN Trade Facilitation Work Programme The ASEAN Trade Facilitation Work Programme referred to in Article 45 shall cover the areas of customs procedures, trade regulations and procedures, standards and conformance, sanitary and phytosanitary measures, ASEAN Single Window and other areas as identified by the AFTA Council. Article 47 - Principles on Trade Facilitation Article 48 - Progress Monitoring of Trade Facilitation …For this purpose, an ASEAN Trade Facilitation Framework shall be agreed by Member States within six (6) months after entry into force of this Agreement… Article 49 - Establishment of the ASEAN Single Window Article 50 - Implementation Arrangement

  34. Singapore-Australia Free Trade Agreement • Trade facilitation measures: • Chapter 4: Simplification of customs procedures • Chapter 5: Harmonisation of technical regulations • Chapter 11: Promotion of paperless trading • Defining characteristics: • Binding trade facilitation obligations, enforceable by dispute settlement • Cross-reference to pre-existing multilateral agreements and international standards

  35. Trade Facilitation and PTAs: Emerging Good Practices

  36. Trade Facilitation in PTAs: Good Practices (1) • Identify trade regulatory/procedural bottlenecks through stakeholder consultations during negotiation; and Include concrete measures to address them • Ensure the provisions are consistent with WTO and other commitments (e.g., Article V, VIII, and X) • Refer to established trade facilitation instruments, standards whenever possible (e.g., WCO Revised Kyoto Convention, UN/CEFACT Recommendations, TIR Convention,…) • Ensure that the trade facilitation measures included can apply to both members and non-members (committing to administer differentiated trade procedures would likely become problematic)

  37. Trade Facilitation in PTAs: Good Practices (2) • Support/seek provisions on customs cooperation and technical assistance (particularly in case the level of development between partners is significant) • Consider including TF measures found to be lacking at the national level, taking into account assessed priority and cost of the measure(s) (to accelerate domestic reforms) • Keep rules of origins (RoOs) – and related administration procedures - as simple and transparent as possible

  38. Trade Facilitation and PTAs:Building on Regional Trade Facilitation Initiatives

  39. Building on Existing Initiatives (1) • “Most progressive” regional trade facilitation initiatives • ASEAN • ASEAN Single Window initiative • MRAs for conformity assessment • APEC • Trade Facilitation Action Plans • IAP Peer review mechanisms • ESCAP • MAY 2012: Resolution 68/3 on Cross-Border Paperless Trade Facilitation  Towards regional arrangement(s)… • http://www.unescap.org/commission/68/documents/English/2012-Resolutions-E68_24E.pdf • APTA

  40. Building on Existing Initiatives (2) • The Asia-Pacific Trade Agreement (APTA) • Links east, Southeast and South Asia • Trade Facilitation Framework Agreement • Simple and common RoOs • Simple and common Rules of Origin with minimum local value requirement of 45% f.o.b. Current Members: Bangladesh China India Lao PDR Republic of Korea Sri Lanka Disclaimer: The boundaries shown on this map do not imply official endorsement or acceptance by the United Nations.

  41. TF and PTAs: Summary and Conclusions • Increasing number of PTAs feature trade facilitation provisions • Trade facilitation provisions generally not preferential – should be kept this way • Simplifying RoOs important for trade facilitation • Large variety of regional trade facilitation initiatives/agreements to learn from • TF provisions in trade agreements can help… but TF begins at home  see ADB/ESCAP Reference Book on Designing and Implementing Trade Facilitation in Asia and the Pacific

  42. Thank YouEmail: duvaly@un.org Need help on implementing trade facilitation and papereless trade? Join the United Nations Network of Experts for Paperless Trade in Asia and the Pacific, Visit us at: www.unescap.org/unnext/

  43. Annexes

  44. WTO Trade Facilitation Neg. Research Cost, Benefits and Time Needed for Implementing TF Measures

  45. ESCAP’s Intraregional Trade Cost Database (version 2, December 2011) • Bilateral Comprehensive Trade Costs (CTC) • Between 107 countries • From 1994 to 2009 (2010 for some countries) • 2 sectors: Agricultural CTC & Manufacturing CTC • CTC excluding tariffs (NT-CTC) also calculated • Available at: www.unescap.org/tid/artnet/trade-costs.asp

  46. Trade Facilitation initiatives in Asia and the Pacific* Greater Tumen Initiative Central Asia Regional Economic Cooperation Asia-Pacific Economic Cooperation Pan-Beibu Gulf APTA Asia-Pacific Trade Facilitation Framework Agreement Economic Cooperation Organization (ECO) SAARC Greater Mekong Subregion ASEAN India-Mekong *diagram is not comprehensive and to illustrate overlaps only

  47. ESCAP Trade Facilitation Framework (1) • What is it? • Series of suggested Trade Facilitation implementation steps and sub-steps • With associated (yes/no) indicators (to assess state of implementation) • Also include suggested key performance indicators • Developed by a regional team of TF experts in 2003/4 • http://www.unescap.org/tid/publication/t&ipub2327.asp

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