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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009
THE AGREEMENT ON TRADE FACILITATION:
A concrete contribution of the WTO for the development of world trade

by Félix Peña
November 2017

English translation: Isabel Romero Carranza


 

The Agreement on Trade Facilitation was approved at the Ninth WTO Ministerial Conference, held in Bali in 2013. It entered into force on February 22, 2017, when it was ratified by two thirds of the WTO member countries. Argentina made it effective on July 6 of this year.

The need -and the convenience- to reduce the costs of crossing customs borders between WTO member countries, making transactions smoother without affecting transparency and security objectives, was a driving factor in the process that culminated in the Agreement on Trade Facilitation.

This has also become evident in the policies and administrative innovations that have been promoted in different regions, including Latin America. The "Single Window for Foreign Trade" (VUCE), recently implemented in our country, reflects this global and regional tendency to promote trade facilitation actions.

The costs of cross-border transit date far back in the history of world trade. However, the practical relevance of facilitating such transit has increased in recent years as a result of the profound changes that have taken place in transnational commercial exchanges. These changes are largely a consequence of the growing population distributed in more countries and more geographical regions, greater connectivity between different markets, and increased diversity in the goods and services that cross borders, which have accentuated transnational trade flows and the risks associated with such flows.

The sources of different types of risks have also increased. Among others, smuggling, drug trafficking and the defense of consumer health, have accentuated the need for more effective control of cross-border traffic. This usually has an impact on the number and diversity of administrative bodies that, in each country, intervene and supervise the traffic between different customs territories.

Moreover, the development of digital commerce is influencing expectations and demands for greater speed in international trade flows. More cross-border trade flows will then increase the demands for an effective and efficient trade facilitation policy. In this regard, the WTO has taken an important step towards a greater connection between international trade and economic development.


Entering or leaving a customs territory with different types of goods, usually involves costs -tariffs and other fiscal requirements- and compliance with the guidelines established by the competent authorities of the country from which you are leaving and that which you want to enter. It also entails the time needed to fulfill all the conditions required to be able to cross a certain customs border. Moreover, time can translate into costs. These are costs that affect, in particular, the ability of small and medium-sized firms to participate in foreign trade operations.

Precisely the need -and the convenience- to reduce the costs of crossing the customs borders of WTO member countries, improving the fluidity of transactions without affecting transparency and security objectives, was a driving factor in the process which culminated with the Agreement on Trade Facilitation.

This has also been evinced in administrative policies and innovations that have been promoted in different regions, including Latin America. (In this regard, refer to the excellent report by Christian Volpe Martincus, published by the IDB in the Special Report on Integration and Trade, referred to at the end of this newsletter). The "Single Window of Foreign Trade" (VUCE for its initials in Spanish), recently implemented in our country, reflects this global and regional trend to promote actions aimed at facilitating trade. (See the AFIP web page reference in the last paragraph of this newsletter).

As stated in the UNECE document cited below, "the primary goal of trade facilitation is to help make trade across borders faster, cheaper and more predictable, whilst ensuring its safety and security". It also adds that, "in terms of focus, it is about simplifying and harmonizing formalities, procedures, and the related exchange of information and documents between the various partners in the supply chain". Specifically, it defines trade facilitation as "the simplification, standardization and harmonization of procedures and associated information flows required to move goods from seller to buyer and to make payment".

The costs of cross-border transit date far back in the history of world trade. However, the practical relevance of facilitating such transit has increased in recent years as a result of the profound changes that have taken place in transnational commercial exchanges.

Such changes are largely a consequence of the growing population, distributed in more countries and more geographical regions, greater connectivity between different markets, and increased diversity in the goods and the services that cross borders. All this has accentuated transnational trade flows and the risks associated with such flows. At the same time, the growth of international trade within global value chains has increased the number of cross-border operations of the countless parts, pieces and inputs that converge in the production of final goods. As the WTO points out, these are goods "made in the world" which reflect the modalities of productive integration of plurinational scope that are a result of the dense miscegenation that characterizes today the production of goods and services in large part of the world.

As we said before, the sources of different types of risks have also increased. Among others, smuggling, drug trafficking and the defense of consumer health, have accentuated the need for more effective control of cross-border traffic. This usually has an impact on the number and diversity of the administrative bodies that, in each country, intervene and supervise traffic between different customs territories. All this affects the complexity and the costs of controlling the crossing of borders. Moreover, it also translates into a greater demand for transparency and agility in border controls by the different countries.

Moreover, the development of digital commerce is influencing expectations and demands for greater speed in international trade flows. Facts observed by citizens and consumers-such as the growing volume of electronic commerce that, for example, became evident in the "Singles Day" in China, where transactions this year exceeded 17 billion dollars in 24 hours- will not only intensify social pressure towards greater agility and speed of international trade, but will result in a significant expansion of the opportunities to link SMEs with consumers in very different and even distant geographical locations. More cross-border trade flows will then increase the demands for an effective and efficient trade facilitation policy. In this regard, the WTO has taken an important step towards a greater connection between international trade and the economic development of nations.

The Agreement on Trade Facilitation was approved at the Ninth WTO Ministerial Conference, held in Bali in 2013. It entered into force on February 22, 2017, when it was ratified by two thirds of the WTO member countries. Argentina made it effective on July 6 of this year. (On the Agreement and its entry into force, see the article by Florencia Carbone cited below).

This Agreement has highlighted the value of the WTO for global trade governance. It has done so at an opportune moment, since it is a known fact that the WTO's effectiveness as the central axis of a multilateral system of global trade is being questioned, even by the countries that originated it through the creation of the GATT.

The conclusion of the Agreement was not easy to achieve. Its negotiations took a little more than 15 years. (In this regard, see the article by Nora Neufeld included as recommended material on the subject of trade facilitation). The Agreement gave rise to a legal instrument of global scope that contains innovative elements, especially including differentiated modalities of fulfillment dependent on the degree of development of the WTO member countries. One wonders whether such an agreement would have been viable without the global institutional scope of the WTO.

As a complement to our analysis of the subject, we provide a selection of recommended material that allows us to have a better knowledge of trade facilitation within the WTO and in Argentina: AFIP, "Ventanilla Única de Comercio Exterior" (Foreign Trade Single Window), http://www.afip.gob.ar/vuce/; Carbone, Florencia, "La autopista de la facilitación de comercio reduce los costos y la discrecionalidad" (The freeway of trade facilitation reduces costs and discretionary power"), Suplemento de Comercio Exterior, "La Nación", Marzo 23, 2017, on http://www.lanacion.com.ar/ (in Spanish); Ehutleche, Ana Belén, "Integración Inteligente. Una ventanilla para unificar el relacionamiento commercial con el mundo" (Intelligent Integration. A window to unify Commercial Relations with the world), Suplemento Comercio Exterior, "La Nación", Julio 13, 2017, on http://www.lanacion.com.ar/ (in Spanish); UNECE, "Trade Facilitation Implementation Guide", on http://tfig.unece.org/; Neufeld, Nora, "The Long and Winding Road: How WTO Members Finally Reached a Trade Facilitation Agreement", WTO, Economic Research and Statistics Division, Staff Working Paper, ERSD-2014-06, April 7, 2014, on https://www.wto.org/; Neufeld, Nora, "Implementing the Trade Facilitation Agreement: From Vision to Reality", WTO, Economic Research and Statistics Division, Staff Working Paper ERSD-2016-14, September 29, 2016, on https://www.wto.org/; Restaino, Carlos, "Que implica el Acuerdo sobre Facilitación del Comercio" (What does the Agreement on Trade Facilitation imply), Suplemento Comercio Exterior, "La Nación", Junio 29, 2017 on http://www.lanacion.com.ar/ (in Spanish); Volpe Martincus, Christian, "Out of the Border Labyrinth. An assessment of Trade Facilitation initiatives in Latin America and the Caribbean", Special Report by the Integration and Trade Sector, IDB, Washington D.C. 2017, on https://publications.iadb.org/; Saavedra, Marcelo and Fossati, Verónica, "Facilitación del comercio: definiciones, negociación en la OMC e impacto" (Trade facilitation: definitions, WTO negotiation and impact), Revista del CEI Nº 6, Septiembre 2006, http://www.cei.gob.ar/ (in Spanish); WTO, "Trade Facilitation Agreement Facility", on http://www.tfafacility.org ; WTO, "World Trade Report 2015. Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement". WTO, Geneva 2015, on https://www.wto.org/.


Recommended Reading:


  • Acharya, Amitav (ed), "Why Govern? Rethinking Demand and Progress in Global Governance", Cambridge University Press, Cambridge 2016.
  • Bartesaghi, Ignacio, "Libre comercio, ¿asignatura pendiente del Mercosur?, en "El Observador", Montevideo, Octubre 17, 2017, en https://www.elobservador.com.uy/.
  • Basri, M. Chatib, "ASEAN against the world on trade", en East Asian Forum, 29 October 2017, en http://www.eastasiaforum.org/.
  • Chong, Alan, "Portents of transactional diplomacy in US-Southeast Asia relations", en East Asia Forum, 10 November 2017, en http://www.eastasiaforum.org/.
  • Drysdale, Peter, "APEC's moments of truth in Da Nang", East Asian Forum, 10 November 2017, en http://www.eastasiaforum.org/.
  • Fang, Cai; Xiaojing, Zhang, "How can China sustain growth", en East Asian Forum, 23 October 2017, en http://www.eastasiaforum.org/.
  • Freedman, Lawrence, "The Future of War. A History", BBS Public Affairs, New York 2017.
  • Herreros, Sebastian; García-Millán, Tania, "Opciones para la convergencia entre la Alianza del Pacífico y el Mercado Común del Sur (Mercosur). La regulación de la inversión extranjera directa", Serie Comercio Internacional, CEPAL, Santiago de Chile, Setiembre 2017, en http://repositorio.cepal.org/.
  • Irwin, Douglas A., "Peddling Protectionism. Smoot-Hawley and the Great Depression", Princeton University Press, Princeton and Oxford 2011.
  • Monteiro, José Antonio, "Provisions on Small and Medium Size Enterprises in Regional Trade Agreements", WTO Working Paper ERSD-2016-12, 18 August 2016, en https://www.wto.org/.
  • Mazower, Mark, "What you did not tell. A Russian Past and the Journey Home", Other Press, New York 2017.
  • Osnago, Alberto; Piermartini, Roberta; Rocha, Nadia, "Trade policy uncertainty as barrier to trade", WTO Working Paper ERSD-2015-05, 26 May 2015, en https://www.wto.org/.
  • Peña, Félix, Entrevista, de Nieves Guerrero Lozano, en Suplemento "Comercio Exterior", diario "La Nación", jueves 2 de noviembre, página 8, en http://www.lanacion.com.ar/.
  • Peña, Félix, "Un liderazgo colectivo mundial, oportuno y eficaz", en Spanish CHINA.ORG.CN, 08-11-2017, en http://spanish.china.org.cn/.
  • Reyes Matta, Fernando, "China: Innovación y Tradición. Nuevas relaciones de Estado-Mercado-Sociedad", Universidad Andrés Bello - Ril editores, Santiago de Chile 2017.
  • Scott, James C, "Against the Grain. A Deep History of the Earliest States", Yale University Press, New Haven and London 2017.
  • Tirole, Jean, "Economics for the Common Good", Princeton University Press, Princeton and Oxford 2017.
  • Torres, Hector, "Argentina: An Opportunity to Rethink the WTO's Working Practises", CIGI Papers Nº 143 - September 2017, en https://www.cigionline.org/.
  • Trentmann, Frank, "Empire of Things. How We Became a World of Consumers, from the Fifteenth Century to the Twenty-First", Allen Lane - Penguin Random House, London 2016.
  • Zarazaga, Rodrigo S.J.; Ronconi, Lucas (compiladores), "Conurbano Infinito. Actores políticos y sociales, entre la presencia estatal y la ilegalidad", Siglo XXI Editores - CIAS - Fundación OSDE, Buenos Aires 2017.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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