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WTO Trade Facilitation Agreement: A Development Opportunity

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Signers of the Joint Communique. Source - WTO/Studio CasagrandeDuring this week’s World Trade Organization (WTO) Global Review of Aid for Trade in Geneva, almost all of the participants made a strong plea for concluding the Trade Facilitation Agreement. Developing countries shared the gains their economies have achieved by improving border procedures and updating antiquated customs rules. Senior representatives from 27 developed countries and international development organizations signed a high-level Joint Statement that reiterated their commitment to providing financial and technical support for trade facilitation-related assistance to developing countries. Speaker after speaker quoted the extensive, recent research that clearly demonstrates the large potential gains to developing countries from sound investments in trade facilitation. As we heard, diminishing the barriers that impose high trade costs and long delays on traders will result in increased bilateral trade, greater export diversification, enhanced foreign investment and improved national competitiveness. 

If everyone is singing from the same song sheet, why has this harmonious chorus not produced a final text that could be agreed upon by all WTO member states?

Whatever commentators might think about progress -- or lack of it -- in the overall Doha round, the trade facilitation negotiations have made significant progress. The outlines of a new Trade Facilitation Agreement are relatively clear. There is general consensus on the benefits to be obtained from a positive and ambitious outcome, and negotiations have been conducted in a spirit of cooperation and compromise frequently not evident in other areas of the negotiations. Indeed, several industrialized countries have submitted joint proposals with developing countries.  While technical differences remain between members on specific provisions of the proposed agreement, there is sufficient consensus on the broad content to suggest that a productive deal is possible.

Remaining issues that hamper progress include what the WTO refers to as “Special and Differential Treatment” (S&DT).  This means the text needs to provide a framework that includes flexibility for developing and least developed countries that accommodates their capacity constraints but at the same time provides for timely and effective implementation so they can benefit from the agreement as soon as possible.  Within that category, a specific concern is the availability of technical assistance to support developing countries in implementing any new commitments.

The World Bank Group – working closely with the WTO Secretariat, the International Monetary Fund (IMF), the World Customs Organization (WCO), the United Nations Conference on Trade and Development (UNCTAD), and the Organisation for Economic Co-operation and Development (OECD) – has supported the negotiation process by participating in a series of national needs-assessments and by providing detailed information on the likely costs, implementation challenges, and priorities for capacity-building support.  A study conducted by the World Bank last year found that the costs of implementing the measures likely to be covered by a new Trade Facilitation Agreement were relatively modest: they range from $7 million - $11 million in the countries studied.  While significant, these costs are small compared with the gains that a Trade Facilitation Agreement is likely to achieve. 

The development community is already providing significant capacity-building support and financing for governments that want to improve their trade facilitation regimes.  Major donor countries and international development organizations have put a priority on, and increased investment in, trade facilitation. According to the OECD, trade facilitation-related assistance has increased ten-fold, in real terms, from 2002 to 2010. This trend is likely to continue as all donors recognize the important contribution trade facilitation can make to economic growth. The World Bank’s own trade facilitation portfolio for fiscal year 2013 totals $5.8 billion, with two-thirds devoted to low- or lower-income countries.

The logic for this increase in donor spending on trade facilitation is clear; research suggests that assistance provided to support trade facilitation reform in developing countries returns significantly more in economic benefits. Research also finds that the impact of this assistance is greatest when the funds are directed at improving border management systems and procedures – the very issues covered by the trade facilitation negotiations.  According to the French Research Centre in International Economics (CEPII), the gains from trade facilitation are estimated at US$68 billion to global GDP, with developing countries in Sub-Saharan Africa and other regions benefitting most. 

In December, trade ministers from around the globe will assemble in Bali for the 9th WTO Ministerial Conference.  Many commentators have suggested the conference provides a genuine opportunity for WTO members to salvage something from a decade of work in Geneva and capitals by achieving at least one largely non-controversial but very important goal: an agreement on trade facilitation. Former Australian Trade Minister Craig Emerson recently encouraged the ministers to come to agreement, noting that trade facilitation alone accounts for more than an estimated 44% of potential gains from the entire Doha Round. This is a significant outcome and one that would provide a much-needed boost in confidence for the multilateral trade negotiation process.  More importantly, it would go a long way toward encouraging greater participation by developing countries in global trade. 

As always, securing commitment to a deal will require compromises from all sides. Flexibilities that major players have shown in the last round of negotiations and the intensification of work over the past two months suggest there is a genuine willingness to reach agreement ahead of the ministerial conference.  Understandably, developing and least-developed countries want a credible guarantee that donors will support their efforts to implement trade facilitation measures if a new agreement is signed.  The high-level Joint Statement signed this week provides a credible and tangible signal that the development community will stand by its commitment.


Selina Jackson

World Bank Special Representative to the UN and WTO

Gerard McLinden

Senior Trade Facilitation Specialist

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