Trade facilitation and the developing world

For those following the Trade facilitation debate (I have blogged about it here and here), it's need and the latest negotiations that are on at the WTO a piece in VoxEU may throw some light. It argues that trade facilitation not only benefits the developed world but also exporting firms from the developing world.

Titled 'Who profits from trade-facilitation initiatives?' it argues that trade facilitation does have a positive impact on developing countries too.

Any counters?

2013 - Would multilateralism prevail?

With the Bali Ministerial is fast approaching (in the context of trade negotiations a year is definitely 'fast approaching') calls for a reinvigoration of multilateralism have started surfacing again. The failure of the Doha round and a growth in bilateralism are seen as threats to the rule-based, non-discriminatory international legal framework.

Peter Sutherland, a former GATT and WTO Director General, called upon the US and China to take a lead in restoring the credibility of the WTO negotiation process. Writing in Livemint on the issue he stated:

"It is not too late to reverse the apparently inexorable tide of bilateralism. But the only way to do so is by proceeding with WTO negotiations. Even if the Doha Round cannot be concluded, there may be other routes, such as implementing what has already been agreed. 

Another alternative might be to advance multilateral negotiations among willing countries in specific areas, such as services, with other WTO members joining later. 

But if we are to move forward rather than revert to earlier, more dangerous times, the US, in particular, must reassert a constructive role in multilateralism. The US must lead again, as it did in the past. And now it must do so with China at its side."

WIll multilateralism prevail in 2013? WIll the low hanging fruit of multilateral negotiations be picked? Will a Trade Facilitation Agreement get a thumbs-up? Will more plurilateral agreements be entered into, to be adopted later by all members? Will it lead to the resurrection of multilateral negotiations to break the juggernaut of PTAs and FTAs? How will the impasse be broken? Which countries will take a lead? How will dispute settlement react to the progress in negotiations? How much pressure would it be able to withstand? Will it be continue to evoke the respect it does now?

One would need to see through 2013 for some of these answers, I guess.

Trade Facilitation - Getting into details

How much does easy facilitation of trade impact economies? How relevant is it in the interconnected world? I have blogged about trade facilitation issues here. Does Trade Facilitation have a significant impact on the development and growth of economies? Do they play a dominant role in the ability of countries to participate in the global economy?

This piece in Vox EU argues that a slew of measures under the broad rubric of "Trade Facilitation" does matter. The authors argue that cutting transaction costs, better infrastructure, logistics has a positive impact on a country's exports and imports. Thus an environment that is conducive for trade would boost a country's participation in the world economy.

"Trade facilitation may have little of the glamour of headline-hitting trade talks, but recent research suggests that it packs a powerful economic punch. Moreover, it may be the best way and perhaps only way forward for the world trade system in today’s difficult political climate."

What stops country's from entering into a multilateral Trade Facilitation Agreement? It is obvious that the developed world is far ahead in providing infrastructure and logistics to enhance exports and imports. Procedures, infrastructure and processes in countries hitherto not part of the globalized network would require considerable churning. A country is disadvantaged if its customs procedures are archaic and time consuming. One would also have to deal with the systemic challenges of addressing inefficiencies.



The Global Trade Enabling Report 2012 of the World Economic Forum captures the essence of the issues that trade facilitation involves. It is a detailed report on what challenges a country faces in enhancing its trade competitiveness and what its benefits are. SIngapore ranks first in the Enabling Trade Index (ETI):

"Singapore remains at the head of the ETI rankings by maintaining its outstanding performance across the board. As a small country, Singapore has a very open trade policy and exporters face only a few barriers in target markets. Singapore also is rewarded for the extreme simplicity of its tariff structure, ranking 4th on this indicator, just a few places behind first-placed Hong Kong. Singapore’s border administration is second to none in terms of efficiency and is highly transparent (3rd). As in previous years, the assessment of the quality and availability of its transport infrastructure is equally excellent. Singapore leads the way for the quality of its air transport, seaport, and road infrastructure. Even more importantly, its regulatory environment is the best in the ETI sample, with well-defined property rights,little corruption and undue influence, and a high level of openness to FDI. Taken together, all these factors enable Singapore to be one of the most successful trading nations worldwide."

The Report gives a valuable insight into what is required to enable better trade facilitation int he context of global supply chains. Would trade facilitation take centre stage in the context of the failed Doha Round? Can it provide the impetus for global rule making or is too mundane and non-headline catching? Trade facilitation deals with the nuts and bolts of international trade - the way bureaucracies work at the borders, what requirements exporters and importers need to complete to trade in a country, the logistics and transportation requirements. Unless countries streamline these procedures, the tall claims of international trade benefitting countries will not be able to be realized. The devil, as always, is in the details.

Time for a Trade Facilitation Agreement to break the Doha impasse?

The Doha round impasse in multilateral trade negotiations and the possible way forward has been the subject matter of many scholarly articles, discussions and vociferous debates. I have blogged about some of them here, here and here. Should the "single undertaking" condition be waived to seize low hanging fruit and move the negotiations forward? Are there areas in which both the developed and developing world can see a common benefit and agree to disagree on the rest? The Doha Ministerial Declaration in 2001 which began the Doha round of negotiations was clear on the 'single undertaking" when it stated:

"With the exception of the improvements and clarifications of the Dispute Settlement Understanding, the conduct, conclusion and entry into force of the outcome of the negotiations shall be treated as parts of a single undertaking. However, agreements reached at an early stage may be implemented on a provisional or a definitive basis. Early agreements shall be taken into account in assessing the overall balance of the negotiations."

A Project Syndicate piece by Robert Zoellick, Ahmad M.Al-Madani, Donald Kaberuka, Haruhiko Kuroda, Thomas Mirow, Luis A Moreno titled "How to Make Trade Easier" highlights the need for an offensive by the WTO to clinch achievable missions to make international trade more attractive to both the developed and developing world. Arguing that efforts must be made to make "trade easier, they have canvassed for a new "Trade Facilitation Agreement" to benefit all trading countries. Offence, in trying times, is the best form of defence.

"The WTO’s best defense of open trade is a good offense. A new WTO Trade Facilitation Agreement would benefit all by increasing developing countries’ capacity to trade, strengthening the WTO’s development mandate, and boosting global economic growth. More than a decade after the launch of the Doha Round of global free-trade talks, this agreement could be a down payment on the commitment that WTO members have made to linking trade and development.

Comments

Developing countries stand to gain the most from improving trade facilitation. The right support would help traders in poorer countries to compete and integrate into global supply chains.

Comments

There are rich opportunities for gains. Inefficiencies in processing and clearing goods put traders in developing countries at a competitive disadvantage. Outdated and inefficient border procedures and inadequate infrastructure often mean high transaction costs, long delays, opportunities for corruption, and an additional 10-15% in the cost of getting goods to market – even more in landlocked countries."

Implying  that a Trade Facilitation Agreement is a non-controversial subject, benefitting all countries it can be agreed upon coupled with capacity building and technical assistance to countries who need to implement it. 

"In international negotiations, there is always a way forward if the benefits of an agreement are shared by all. Trade facilitation offers a development dividend for all countries. It is time for WTO members to make progress on issues where there is room to do so. It will be a down payment on a solid investment."

 Some observations:

1. Will countries be willing to give up the "single undertaking" principle so easily? Can there be other such non-controversial subjects in the basket of negotiating agendas that can be agreed and implemented? 

2. On a more skeptical note, does Trade facilitation impact developing countries and the developed world equally? It is seen that less developed countries and some developing countries have archaic trade procedures that impact both their exporters and importers. Trade Facilitation will help simplify non-transparent rules and procedures. Is this a way of increasing access of developing countries markets to the developed world? The developed world already has better trade procedures which may not be impacted by the Trade Facilitation Agreement.

3. One area where the Trade Facilitation Agreement will certainly help is capacity building and infrastructure support to improve trading and reducing transaction costs. If it helps a poor exporter from a developing country to access developed markets, the Trade Facilitation Agreement is a welcome relief. However, the impact should not be one sided - improving access to developing countries markets while the developed markets remain a distant reality.

4. What is stopping countries from agreeing on a Trade Facilitation Agreement if it benefits one and all? Is it only the single undertaking pitfall or is there something more?