As a small, land-locked, and commodity-dependent country in a fast-expanding region, Lao PDR’s growth prospects are directly linked to its ability to integrate with the global economy. This is why the government has been prioritizing economic integration with both the Southeast Asia region and the multilateral rules-based trading system. In 2010, Lao PDR became signatory to the ASEAN Trade in Goods Agreement (ATIGA), acceded to the World Trade Organization (WTO) in 2013, and ratified the Trade Facilitation Agreement in 2015.
In a recent study, we provide a comparative overview of the landscape of Non-Tariff Measures (NTMs) affecting imports in Lao PDR, and identify lingering regulatory hurdles that hamper its ability to reap the gains of deeper integration with the global economy. Our findings reveal that while the existing NTM framework is broadly in line with regional practices (figure 1), Ultimately, the system of quantitative controls applied by Lao PDR is equivalent to an ad-valorem tariff of 5.4%, which is well above regional and world averages.
There are three main problems associated with the procedures for obtaining import licenses in Lao PDR:
Trade Facilitation Agreement
As the global economy struggles to emerge from its chronic slow-growth stall, policymakers are increasingly focused on an energetic opportunity to help jump-start economic growth: the adoption of the landmark Trade Facilitation Agreement (TFA) that is now nearing ratification and implementation. By helping reduce trade costs and by helping enhance customs and border agency cooperation, a recent WTO report has found, the successful implementation of the TFA’s provisions could boost developing-country exports by between $170 billion and $730 billion per year. The OECD has calculated that the implementation of the TFA could reduce worldwide trade costs by between 12.5 percent and 17.5 percent.
Buoying the spirits of those who hailed the broad support for TFA at December’s ministerial conference of the World Trade Organization (WTO) in Nairobi, 68 countries have already ratified the agreement. The number of county-by-country ratifications is fast approaching the total of 107 required for the TFA to go into effect. Adopted in December 2013 at the WTO’s conference in Bali, the TFA is the WTO’s first-ever multilateral accord, having won approval from all 162 WTO member nations. The agreement contains provisions for expediting the movement, release and clearance of goods traveling across borders. It also sets out measures to promote cooperation among customs and border authorities on customs compliance issues.
A recent seminar at the World Bank Group – convened by the Trade Facilitation Support Program (TFSP) of the Trade and Competitiveness Global Practice (T&C) – explored the provisions of the TFA and learned of the increasingly active role of the private sector in supporting the TFA’s enactment. Awareness and momentum are building as a new coalition of private-sector firms – the Global Alliance for Trade Facilitation – mobilizes business support for TFA’s effort to speed and strengthen cross-border commerce. As the seminar heard from Norm Schenk, who serves as the chairman of the International Chamber of Commerce’s (ICC) Commission on Customs and Trade Facilitation, members of the alliance plan to meet in Washington this week to explore strategies for promoting the TFA’s adoption.
Over the last few years, the international community has been busy establishing new indicators for the Sustainable Development Goals (SDGs), which officially replaced the Millennium Development Goals (MDGs) for the period 2015-2030. SDG #6: Ensure access to water and sanitation for all, seeks to reduce the incidence of malnutrition, communicable diseases, and inequities that are directly related to lack of access to improved sources of drinking water (affecting 663 million people worldwide) and sanitation (which 2.4 billion people still lack). This new goal implies a commitment by countries to monitor and report on their progress, similarly to what was done for the MDGs, but with much more detail.
Under the Millennium Development Goals (MDGs), countries were requested to report the coverage of water and sanitation, distinguishing between “improved” and “unimproved” coverage. The WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation (JMP), established specific indicators for each, using definitions that could be captured with information from standard household surveys, which typically rely on self-reported questions on access to services collected from a nationally representative sample of households.
A key topic for the G20 this year is what can be done to boost inclusiveness in the global economy. Ministers and officials, with advice from the World Bank Group and others, have been looking into what policies they can adopt to maximize the development prospects of lower income countries outside the G20 (what the Turkish Presidency has termed “low-income developing countries” -LIDCs). A critical area of action is in trade – an area where G20 countries have asked the Bank Group to survey the current situation and provide recommendations.
In our work, we found that the value of LIDC imports and exports has increased substantially over the last decade, but it still represents only between 3 and 4% of world trade (Figure 1). The share of LIDC exports in the global services market is similarly low and has remained stagnant during the last 3 decades. Although there are some exceptions – Vietnam and the Philippines – LIDCs are poorly integrated into global value chains (GVCs) – they constitute only 3% of world imports in parts and components.
G20 countries are the main trading partners of LIDCs. Around 70% of imports of LIDCs come from the G20 and around 80% of LIDC exports are directed to the G20. Trade costs between LIDCs and any G20 country, however, are systematically higher than the trade costs between G20 countries or other non-LIDCs and any G20 country (Figure 2).
Naturally, many domestic factors that inhibit the productive capacity of LIDCs contribute to the low connectivity of LIDCs to GVCs and world trade more generally. However, trade policies of G20 members can help low-income developing countries integrate in the world economy. In our analysis for the G20 we reviewed key G20 trade policies and how they could be improved to benefit LIDCs.
At the Ninth WTO Ministerial Conference held in Bali on December 2013, all WTO members reached an agreement on trade facilitation and a compromise on food security issues, a contentious topic which had previously stalled talks during the 2008 Doha Development Round. The “Bali Package,” as it came to be known, was quickly heralded as an important milestone, reaffirming the legitimacy of multilateral trade negotiations while simultaneously recognizing the significant development benefits of reducing the time and costs to trade.
Seven months after the Bali Ministerial Conference, however, the Trade Facilitation Agreement (TFA) has yet to be ratified as India is concerned that insufficient attention has been given to the issue of food subsidies and the stockpiling of grains. India maintains that agreements on the food security issue must be in concert with the TFA.
Despite the current impasse in implementing the Bali decisions, the food security concern at the heart of the matter sheds light on the importance of improving the agribusiness supply chains of developing countries to ensure maximum efficiencies. Consider the fact that in 2014, farmers will produce approximately 2.5 billion tons of food. Yet, 1.3 billion tons are lost or wasted each year between farm and fork, while 805 million people suffer from chronic hunger.
- Doha Round
- Bali Agreement
- Trade Facilitation Agreement
- trade facilitation
- supply chains
- Agriculture and Rural Development
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- The World Region
- Macedonia, former Yugoslav Republic of
- Lao People's Democratic Republic
This week, we recap the World Bank’s Spring Meetings event, “Toward Universal Health Coverage by 2030.” Each Friday, we share a selection of global health Tweets, infographics, blog posts, videos and other content of note. For more, follow us @worldbankhealth.