trade facilitation, the wto, and development: an overview john s. wilson, the world bank tsunehiro...

Trade Facilitation, the WTO, and Trade Facilitation, the WTO, and Development: An Overview Development: An Overview

John S. Wilson, The World BankJohn S. Wilson, The World BankTsunehiro Otsuki, Osaka UniversityTsunehiro Otsuki, Osaka University

Key Issues for DiscussionKey Issues for Discussion

Definition and scope of trade facilitationDefinition and scope of trade facilitationBenefits of trade facilitationBenefits of trade facilitationThe role of the WTOThe role of the WTOObstacles facing developing countries in Obstacles facing developing countries in implementing reformsimplementing reformsDesigning strategies for reformsDesigning strategies for reforms

Key QuestionsKey Questions

1. What are the key WTO disciplines related to trade 1. What are the key WTO disciplines related to trade facilitation agenda?facilitation agenda?2. What are the major constraints confronting developing 2. What are the major constraints confronting developing countries in implementing the WTO agreements in trade countries in implementing the WTO agreements in trade facilitation? facilitation? 3. What are advantages and disadvantages of making 3. What are advantages and disadvantages of making uniform applications of rules on trade facilitation?uniform applications of rules on trade facilitation?4. How can the WTO agreements in trade facilitation 4. How can the WTO agreements in trade facilitation reflect development needs?reflect development needs?5. What area of trade facilitation should be given priority 5. What area of trade facilitation should be given priority in the light of feasibility and cost effectiveness?in the light of feasibility and cost effectiveness?

What is Trade Facilitation?What is Trade Facilitation?

A narrow senseA narrow sense–A reduction/streamlining of A reduction/streamlining of

the logistics of moving goods through ports or the logistics of moving goods through ports or

the documentation requirements at a customsthe documentation requirements at a customs

post at the borderpost at the border

A broad senseA broad sense–The above plus,The above plus,

improvement in domestic regulatory environment and improvement in domestic regulatory environment and

institutions associated with tradeinstitutions associated with trade

BackgroundBackground

High trade logistics costsHigh trade logistics costsTrade costs associated with transportation Trade costs associated with transportation charges, documentation requirements and delay in charges, documentation requirements and delay in clearance are becoming importantclearance are becoming important

GlobalizationGlobalizationAbility of countries to deliver goods and services Ability of countries to deliver goods and services in time and at low costs is a key determinant of in time and at low costs is a key determinant of their participation in the global economy their participation in the global economy


Average Days Required for Customs Clearance by Sea

0 2 4 6 8 10 12 14 16

Argentina

Egypt

India

Brazil

Guinea Bissau

Taiwan, China

South Africa

Mozambique

Mexico

Thailand

Zimbabwe

Indonesia

Singapore

US

France

Germany


Trade FacilitationTrade Facilitation

Trade Trade ExpansionExpansion

Economic Economic GrowthGrowth

Trade facilitation as an engine of growthTrade facilitation as an engine of growth


Port Efficiency and per Capita GNP

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2 2.5 3 3.5 4 4.5 5

log of per capita GNP (PPP)

Por

t effi

cien

cy

BackgroundBackgroundIncreasing demand for multilateral rule Increasing demand for multilateral rule making and regional or plurilateral making and regional or plurilateral coordination regarding trade facilitationcoordination regarding trade facilitation

–At the WTO At the WTO

One of the four Singapore issuesOne of the four Singapore issues

Doha development agendaDoha development agenda–At the WCOAt the WCO

Kyoto ConventionKyoto Convention


Limited progress in the WTO negotiationLimited progress in the WTO negotiation–No consensus made on modalities of No consensus made on modalities of negotiations at the Cancun Ministerial Meetingnegotiations at the Cancun Ministerial Meeting–Limitation in capacity to implement trade Limitation in capacity to implement trade facilitation measuresfacilitation measures–Uncertainty about provision of technical Uncertainty about provision of technical assistanceassistance–Inflexibility of agreementsInflexibility of agreements

OutlineOutline

Empirical evidenceEmpirical evidence–Did trade facilitation work in reality?Did trade facilitation work in reality?

Trade facilitation agenda at the WTOTrade facilitation agenda at the WTO–How does the WTO manage trade facilitation?How does the WTO manage trade facilitation?

Developing countries’ concernsDeveloping countries’ concernsOptions to move forward on trade facilitation modalities

Empirical EvidenceEmpirical Evidence

Transport costsTransport costs–Transport cost barriers outweigh tariff barriers Transport cost barriers outweigh tariff barriers for 168 of 216 countries (World Bank 2002).for 168 of 216 countries (World Bank 2002).–1% reduction in the fees could increase Asian 1% reduction in the fees could increase Asian GDP by $3.3 billion (UNCTAD 2001)GDP by $3.3 billion (UNCTAD 2001)


Customs modernizationCustoms modernization–Switching to electronic documentation save 1.5 to 15% oSwitching to electronic documentation save 1.5 to 15% of landed cost of the imported items. (Australian Departmef landed cost of the imported items. (Australian Department of Foreign Affairs and Trade and Chinese Ministry of Fnt of Foreign Affairs and Trade and Chinese Ministry of Foreign Trade and Economic Cooperation 2001)oreign Trade and Economic Cooperation 2001)

–Standards harmonization for e-business and automating cStandards harmonization for e-business and automating customs procedures between Japan and Singapore increase ustoms procedures between Japan and Singapore increase trade flows between the two countries and trade with the rtrade flows between the two countries and trade with the rest of the world (Hertel, Walmsley and Itakura 2001)est of the world (Hertel, Walmsley and Itakura 2001)


Customs corruptionCustoms corruption–The introduction of electronic data interchange The introduction of electronic data interchange (EDI) system in Chilean customs led to saving of (EDI) system in Chilean customs led to saving of over $1 million per month for a system cost of $5 over $1 million per month for a system cost of $5 million (WTO, 2000)million (WTO, 2000)


Time costTime cost–One day less in delivery times-by reducing delay One day less in delivery times-by reducing delay in ports and customs- reduces landed costs of gooin ports and customs- reduces landed costs of goods around the world by 0.5% (Hummels 2001)ds around the world by 0.5% (Hummels 2001)–1 day less in the trading time will save $240 billi1 day less in the trading time will save $240 billion annually in developing countries (Hummels 20on annually in developing countries (Hummels 2001)01)


Multi-dimensional capacity buildingMulti-dimensional capacity building–Trade facilitation defined in four dimensions Trade facilitation defined in four dimensions (Wilson, Mann and Otsuki 2004)(Wilson, Mann and Otsuki 2004)

•Port efficiencyPort efficiency•Customs environmentCustoms environment•Regulatory environmentRegulatory environment•Service sector infrastructureService sector infrastructure

Benefit of Capacity Building in Trade Benefit of Capacity Building in Trade FacilitationFacilitation

0

2

4

6

8

10

12

14

16

18

OECD East Asia ECA LAC South Asia Sub-Sah.Africa

% C

hang

e Ports

Customs

Regulations

Services

Trade Facilitation Agenda in the WTOTrade Facilitation Agenda in the WTO

One of the four Singapore issuesOne of the four Singapore issuesReflected in three GATT ArticlesReflected in three GATT Articles

–V (Freedom of transit)V (Freedom of transit)–VIII (Fees and formalities related to importation VIII (Fees and formalities related to importation and exportation)and exportation)–X (Publication and administration of trade X (Publication and administration of trade regulations)regulations)

Doha Development AgendaDoha Development Agenda

General Trade Principles Reflected in General Trade Principles Reflected in GATT ArticlesGATT Articles

TransparencyTransparencyPredictabilityPredictabilityDue processDue processNon discriminationNon discriminationSimplificationSimplificationAvoidance of unnecessary restrictions to Avoidance of unnecessary restrictions to tradetrade

Doha Development AgendaDoha Development Agenda

Importance of implementation capacity of Importance of implementation capacity of developing and least-developed countriesdeveloping and least-developed countriesUse of special and differential treatment to Use of special and differential treatment to achieve trade expansion goalsachieve trade expansion goals

Developing Country ConcernsDeveloping Country Concerns

Cost of implementationCost of implementation–Improved technologies and institutions required Improved technologies and institutions required for customs reformsfor customs reforms–Institutional changes and costs related to dispute Institutional changes and costs related to dispute settlement cases settlement cases

Developing Country ConcernsDeveloping Country Concerns

Institutional improvementInstitutional improvement–Appropriateness of enforcing institutional Appropriateness of enforcing institutional improvements through rulemaking improvements through rulemaking

Technical assistanceTechnical assistance–Uncertainty about the actual delivery of Uncertainty about the actual delivery of promised technical assistance to help countries promised technical assistance to help countries implement these arrangementsimplement these arrangements

Options to Move Forward on Trade Options to Move Forward on Trade Facilitation ModalitiesFacilitation Modalities

The importance of negotiations focused on the The importance of negotiations focused on the GATT ArticlesGATT ArticlesTaking into account limited implementation Taking into account limited implementation capacity: A Trade Facilitation Programcapacity: A Trade Facilitation ProgramCommitments for technical assistance and Commitments for technical assistance and capacity building for trade facilitationcapacity building for trade facilitationDispute Settlement OptionsDispute Settlement OptionsMultilateral vs. Plurilateral ApproachMultilateral vs. Plurilateral ApproachCoordination with regional integration Coordination with regional integration initiativesinitiatives

Scope of NegotiationsScope of NegotiationsA focused agenda on the three GATT A focused agenda on the three GATT articles, not an expansive agenda articles, not an expansive agenda

A Trade Facilitation ProgramA Trade Facilitation Program

Consideration of specific circumstances, Consideration of specific circumstances, needs, and capacities of individual countries needs, and capacities of individual countries

–Allowing flexibility in disciplines to be appliedAllowing flexibility in disciplines to be applied–Making Consistency with domestic development Making Consistency with domestic development prioritiespriorities

Technical Assistance and Capacity buildingTechnical Assistance and Capacity building

Support for existing programs in the Support for existing programs in the WCO, the UNCTAD, the World Bank, and WCO, the UNCTAD, the World Bank, and regional development banksregional development banks

–Kyoto Convention Kyoto Convention –Automated System for Customs Data and Automated System for Customs Data and Management (ASYCUDA) , etc.Management (ASYCUDA) , etc.

Dispute Settlement OptionsDispute Settlement Options

Compulsory dispute settlement for countries Compulsory dispute settlement for countries above a certain level of development (in case above a certain level of development (in case of not meeting the obligations)of not meeting the obligations)Exemption granted to countries below that Exemption granted to countries below that levellevel

Other OptionsOther Options

Multilateral vs. Plurilateral Approach Multilateral vs. Plurilateral Approach Coordination with regional integration Coordination with regional integration initiativesinitiatives

ConclusionsConclusions

Trade facilitation likely contributes to a long-Trade facilitation likely contributes to a long-term growthterm growthCollective actions neededCollective actions neededUniform application of multilateral agreements Uniform application of multilateral agreements complemented by capacity building and technical complemented by capacity building and technical assistanceassistanceFlexibility to be given according to levels of Flexibility to be given according to levels of development and development goalsdevelopment and development goalsA step-by-step building block approach from A step-by-step building block approach from core principles towards expanded onescore principles towards expanded ones

trade facilitation, the wto, and development: an overview john s. wilson, the world bank tsunehiro...

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