Implications of WTO Trade Facilitation Agreement on Your Business

Impact of WTO Trade Facilitation Agreement on Your Businesses and Profits

Recently concluded WTO Ministerial Meeting at Bali has taken one more step to make the world more open market place. In other words, policy makers are forced to make the system more open and time bound. Approvals and clearances will be time bound. Businesses will have to respond faster to changing market reality.
Now, domestic Industry have to compete, with international products and services, at home. 

WTO Agreement on Trade Facilitation:

Trade facilitation boosts trade by reducing costs and delays for traders, through measures that provide predictability, simplicity and uniformity in customs and other border procedures. It makes it easier for businesses big and small to participate in trade around the world – and to support jobs through that trade.

The WTO Trade Facilitation Agreement creates binding commitments across 159(+) WTO Members to expedite movement, release and clearance of goods, improve cooperation among WTO Members on customs matters, and help developing countries fully implement the obligations. The agreement will increase customs efficiency and effective collection of revenue, and help small businesses access new export opportunities through measures like transparency in customs practices, reduction of documentary requirements, and processing of documents before goods arrive.

Globally, manufacturers, producers of perishable goods, freight forwarders, logistics providers, express carriers and entrepreneurs seeking to enter the export market particularly stand to benefit from this agreement.

Looking around the world worked to negotiate provisions to help least-developed countries meet new obligations and gain their share of benefits in cost savings and income growth.

The cost savings of trade facilitation pay real dividends: The OECD estimates that for every one-percent reduction in global trade costs, global incomes go up by $40 billion – and that the new WTO Trade Facilitation Agreement struck at the 9th WTO Ministerial Conference in Bali, Indonesia can cut trade costs by almost 14.5 percent for low-income countries, 10 percent for high-income countries. Other studies estimate that significant trade facilitation like that supported in this agreement could increase global GDP by almost $1 trillion.

KEY DISCIPLINES ADDRESSED IN THE WTO TRADE FACILITATION AGREEMENT:

· Publication of Laws, Regulations and Procedures

· Internet Publication of Practical Steps to Import, Export and Transit Goods

·    Enquiry Point for Trade Information

·  Information on New Laws and Regulations Before their Implementation

·      Provision of Advance Rulings

·      Enhanced Right of Appeal

·      Notification of Detained Goods

·      Disciplines on Fees and Charges

·      Penalty Disciplines to Prevent Conflicts of Interest

·      Pre-Arrival Processing of Goods

·      Use of Electronic Payment

·  Use of Guarantees to Allow Rapid Release

·  Promoting Risk Management

·  Creation of Authorized Operator Schemes

·  Procedures for Expedited Shipments

·  Quick Release of Perishable Goods

·  Reduced Documents and Formalities

·  Utilizing Common Customs Standards

·  Promoting use of Single Window

· Uniformity in Border Procedures & Documents

·  Temporary Admission of Goods

·  Simplified Transit Procedures

·  Customs Cooperation

· Facilitate Developing Country Implementation

Negotiations on trade facilitation (TF) – reducing the cost of trading – entailed making binding commitments in customs procedures and regulations. Improvements in TF are a ‘no-brainer’, but we need to distinguish between ‘improvements’ and ‘commitments’. Commitments made in the WTO are binding and subject to legal action if they are not adhered to. Meeting trade facilitation commitments will require investment, and many will be capital intensive. Developing countries, and in particular LDCs, will need finance and technology to upgrade and improve TF.

Bali Declaration provides assurance that developing countries and LDCs will be supported in building capacities to implement the agreement.

What is the implication for you and your businesses?

Cutting Red Tape at the Border

The issue of trade facilitation brings the WTO right to the customs’ gate. Traders from both developing and developed countries have long pointed to the vast amount of red tape that still exists in moving goods across borders.

Documentation requirements often lack transparency and are vastly duplicative in many places, a problem often compounded by a lack of cooperation between traders and official agencies.

Despite advances in information technology, automatic data submission is still not commonplace.

UNCTAD estimates that the average customs transaction involves 20–30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60–70% of all data at least once. With the lowering of tariffs across the globe, the cost of complying with customs formalities has been reported to exceed in many instances the cost of duties to be paid. In the modern business environment of just-in-time production and delivery, traders need fast and predictable release of goods.

An APEC study estimated that trade facilitation programs would generate gains of about 0.26 percent of real GDP to APEC, almost double the expected gains from tariff liberalization, and that the savings in import prices would be between 1–2% of import prices for developing countries in the region.

Analysts point out that the reason why many small and medium size enterprises — who as a whole account in many economies for up to 60% of GDP creation — are not active players in international trade, has more to do with red tape rather than tariff barriers. The administrative barriers for enterprises who do not regularly ship large quantities are often simply too high to make foreign markets appear attractive.

For developing country economies, inefficiencies in areas such as customs and transport can be roadblocks to the integration into the global economy and may severely impair export competitiveness or inflow of foreign direct investment. Trade facilitation will not only benefit importers and consumers who face higher prices caused by the red tape in their own import administration, but exporters as well. Developing country exporters are increasingly interested in removing administrative barriers in other developing countries, which today account for 40% of their trade in manufactured goods.

Questions you and your team leaders should evaluate?

· Are you ready to face the competition in open trade environment when cost of import is going down?

· Will you be able to retain your profit margins?

· Have you identified the countries where you want to enter and so far were not able to do because of some entry barriers (as listed above).

If answer to any question is NO. It may be high time to go back to drawing board and relook into your business approaches, products and processes.

For peaceful and happy life, join the party and answer to the questions should be YES.

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