E. The Challenges Of Implementing The Trade Facilitation .
WORLD TRADE REPORT 2015E. The challenges ofimplementing the TradeFacilitation AgreementThis section of the report looks at the variouschallenges involved in ratifying and implementingthe Trade Facilitation Agreement (TFA), particularlyfor developing and least-developed countries(LDCs). It first assesses the implementation needs ofdeveloping countries, then goes on to evaluate thecosts associated with implementing the measurescovered by the TFA. It proceeds to explain therole of the Trade Facilitation Agreement Facility inmeeting the challenges of implementation and toreview the key success factors identified in previoustrade facilitation reforms. Finally, it underlines theimportance of monitoring implementation of the TFAand its economic impacts.106
II. SPEEDING UP TRADE: BENEFITS AND CHALLENGES OF IMPLEMENTINGTHE WTO TRADE FACILITATION AGREEMENTContents1Overview of implementation challenges1082Assessing the implementation needs of developing countries1083Implementation costs of trade facilitation reform1164The Trade Facilitation Agreement Facility (TFAF)1245Country experiences of successful reforms: what are the lessons?1276Monitoring implementation of the TFA1327Conclusions132Some key facts and findings Strong political will at the highest levels and commitment to the process of tradefacilitation are the most important success factors of any trade facilitation reform.Other key success factors include cooperation and coordination between ministriesand border management agencies, private sector stakeholder participation, andadequate financial, human and material resources.E. T HE CHALLENGES OFIMPLEMENTING THE TRADEFACILITATION AGREEMENT Trade facilitation is a high priority for developing economies and least-developedcountries (LDCs), according to surveys of WTO members. However, the cost ofimplementing trade facilitation is difficult to quantify due to a lack of systematic datacollection. Available data suggests that costs vary considerably depending on thetype of trade facilitation measures considered and country specific circumstances.Trade facilitation reforms are, on average, less costly than broader initiatives, such ascustoms modernization, and upgrades of transport infrastructure. The Trade Facilitation Agreement Facility will play a vital role in matching demandsfor capacity-building from developing countries and LDCs with the supply of capacitybuilding and assistance from donors. Efforts to monitor the progress of the TFA after it comes into force should includeevaluations of both implementation costs and economic impacts.107
WORLD TRADE REPORT 20151.Overview of implementationchallengesAs the first multilateral trade agreement adoptedsince the conclusion of Uruguay Round in 1994, theWTO Trade Facilitation Agreement (FTA) represents alandmark achievement for the organization. However, inorder to realize the gains promised by the agreement,members must now turn to the dual tasks of ratificationand implementation. In the first place, the TFA willonly enter into force once two-thirds of the WTOmembership have formally accepted the Agreement.Once this initial challenge is met, and in order to ensuresuccessful implementation, it is important to identifythe main issues and challenges that members mayencounter when putting the Agreement into practice.A high degree of political commitment on the part ofdeveloped, developing and least-developed countriesis crucial for both rapid ratification and successfulimplementation of the TFA, but this support cannotbe taken for granted. According to the results of amonitoring exercise undertaken in the context ofthe Fifth Global Review of Aid for Trade, althoughdeveloping countries and LDCs give a high priorityto implementing trade facilitation, they still express agreat deal of uncertainty about its benefits. They alsoassign different priorities when it comes to requestingtechnical assistance to implement specific provisionsof the TFA. Donor countries also continue to givehigh priority to trade facilitation, as reflected by theirrising aid commitments and disbursements, but manyare concerned about a potential lack of politicalwill in partner countries, that could hinder the fullimplementation of the measures covered by the TFA.Credible estimates of the likely benefits of the TFAsuch as those found in Section D of this report shouldbolster support for the agreement.108Costs associated with implementing specific tradefacilitation projects and measures could also be seenas impediments to swift ratification of the TFA and itsimplementation. Empirical evidence suggests that themagnitude of the inception costs associated with agiven trade facilitation measure can vary significantlyfrom one country to another, reflecting each country’sunique circumstances in terms of its initial state, needs,priorities and level of ambition with regard to tradefacilitation. Overall, measures related to transparencyand to the release and clearance of goods tend toentail implementation costs lower than those attachedto measures relating to formalities requirements,customs automation, and customs and border agencycooperation. However, the implementation costs oftrade facilitation reform remain smaller than thoseassociated with broader initiatives, such as customsmodernization and transport facilitation.Important lessons have already been learned fromexisting trade facilitation reforms that should makeTFA implementation easier. Empirical evidencesuggests that different, often interrelated, factorsplay a critical role in the successful implementationof trade facilitation reforms. While financial resourcesavailability and sustainability are essential, they do notconstitute a sufficient condition for automatic successin implementing trade facilitation initiatives. Otherfactors play a major role in successful trade facilitationreforms, such as strong commitment at the highestlevel, cooperation and coordination between ministriesand government agencies, private sector stakeholders’participation, adequate human and material resources,and the adoption of a sequencing approach.The presence of strong special and differentialtreatment provisions in the TFA should eliminate manypotential obstacles to implementation. Under the TFA,each developing country and LDC member will have theopportunity to establish its own unique implementationschedule based on its capacity and needs. In thiscontext, the WTO, through the newly created TradeFacilitation Agreement Facility (TFAF), could play aunique role in supporting the implementation effortby matching and coordinating countries requestingtechnical assistance with countries supplying capacitybuilding and technical assistance.The fact that challenges may emerge at any time duringthe process of TFA implementation highlights the needfor ongoing efforts to monitor the operation of theagreement. An effective monitoring and evaluationof the TFA’s economic impact requires reliabledata, indicators and analytical tools, such as impactevaluation studies.2.Assessing the implementationneeds of developing countriesSection D of this report identified a wide range ofpotential benefits from the TFA once it is implemented.In addition to reducing trade costs and increasingthe volume of trade between WTO members, theAgreement should raise members’ rates of GDP growth,promote job creation, diversify exports, increasecustoms revenue, and expand trade opportunitiesfor small and medium-sized enterprises (SMEs).Developing economies, and LDCs in particular, areexpected to benefit disproportionately from theTFA, especially under rapid and full implementationscenarios.However, if the benefits of trade facilitation are solarge and obvious, this raises the question of why somecountries were reluctant to engage in negotiations
II. SPEEDING UP TRADE: BENEFITS AND CHALLENGES OF IMPLEMENTINGTHE WTO TRADE FACILITATION AGREEMENTon trade facilitation in the first place, and why somemight be slow to ratify and implement the TFA. Someof this hesitancy can be explained by uncertainty onthe part of members, not only about the magnitude ofthe gains from the Agreement but also about the costsand timing of implementation. By increasing awarenessof the estimated costs and benefits of the TFA, thisreport should help members more accurately gaugetheir implementation needs, thereby advancing theratification process.Existing studies of trade facilitation reforms indeveloping countries, including Moïsé (2013) havefound that implementation costs tend to be very smallcompared to the benefits that these programmesdeliver. However, even modest implementation costsmay exceed the ability of least-developed and otherlow-income countries to pay. In order to address theparticular challenges faced by developing economies,the TFA contains special and differential treatmentprovisions that allow these countries to determine whenthey will implement certain provisions of the Agreement,and to identify provisions that will only be implementedonce the necessary capacity has been built. As alreadynoted in Section B, these commitments fall into threecategories:Category A: “provisions that a developing countryMember or a least-developed country Memberdesignates for implementation upon entry intoforce of this Agreement, or in the case of a leastdeveloped country Member within one year afterentry into force”; Category B: “provisions that a developing countryMember or a least-developed country Memberdesignates for implementation on a date after atransitional period of time following the entry intoforce of this Agreement”; and Category C: “provisions that a developing countryMember or least-developed country Memberdesignates for implementation on a date after atransitional period of time following the entry intoforce of this Agreement and requiring the acquisitionof implementation capacity through the provision ofassistance and support for capacity building”.Category C commitments provide a specific rationalefor assessing the technical assistance needs ofdeveloping and LDC members in implementing the TFA.On two occasions, the WTO Secretariat conducted atechnical assistance needs assessment exercise tohelp developing and least-developed WTO membersidentify their needs and priorities with regard toimplementing the TFA. While the results of these selfassessments remain confidential and cannot be used,(a)Review of the literature on tradefacilitation implementationA limited number of studies have attempted to assessthe status of trade facilitation reforms in developingcountries and LDCs, including their needs for technicalassistance. A recent report by the United NationsConference on Trade and Development (UNCTAD,2014b) reviewed 26 national trade facilitationimplementation plans conducted to assess, among otherthings, the implementation status of 39 specific tradefacilitation measures associated with different versionsof the consolidated negotiating text of the TFA. In amajority of the 26 participating countries, comprisingLDCs, landlocked developing countries and small islandeconomies, many trade facilitation measures were at ornear the midway point of implementation.Other available studies focusing on a smaller numberof countries confirm that most developing countriessurveyed have already implemented a number of tradefacilitation measures and that none would be startingthe implementation of the TFA from zero (UNESCAP,2014) . In particular, the authors of a 2013 report bythe United Nations Economic Commission for Africa(UNECA, 2013) observed that African countries andRegional Economic Communities were already activein putting in place measures aligned with the TFA. Forinstance, the Chirundu One-Stop Border Post betweenZambia and Zimbabwe has resulted in yearly savings ofUS 486 million (UNECA, 2013). However, despite thefact that many countries have already undertaken sometrade facilitation reforms, there are still important gapsin the levels of trade facilitation implementation, with asubstantial majority of the LDCs surveyed (73 per cent)having implemented only a small number of TFA-relatedmeasures (UNCTAD, 2014b).(b)Trade facilitation in the context of Aidfor TradeWhile it is extremely difficult to determine accuratelywhich measures of the TFA will be most challengingto implement and will therefore require assistanceuntil developing countries and LDCs actually submittheir category B and C commitments, useful insightscan still be inferred from information shared by WTOmembers. Besides Category A notifications under theTFA (see Box E.1), another recent source of informationon the priorities and challenges related to the TFAimplementation can be found in the replies to variousWTO-OECD questionnaires undertaken as part ofE. T HE CHALLENGES OFIMPLEMENTING THE TRADEFACILITATION AGREEMENT other existing and available, albeit limited, sources ofinformation provide insights on developing countries’aid priorities, expectation and needs.109
WORLD TRADE REPORT 2015Box E.1: Category A commitments under the TFAAccording to Section II of the TFA, each developing country and LDC member is required to self-designate, on anindividual basis, Category A provisions of the TFA for implementation upon entry into force of the TFA, or withinone year after entry into force for LDCs. As of June 2015, a total of 60 developing and five least-developedcountry members have submitted notifications of Category A commitments.While the most notified TFA provisions cover, on average, measures that are less likely to be considered aschallenging and requiring technical assistance, the TFA provisions that are least notified could be viewed asmeasures that are likely to be more complex and costly to implement. Under this assumption, Category Acommitment notifications indirectly provide insights on developing countries’ foreseen priorities and technicalassistance needs in terms of specific TFA measures. In particular, provisions related to single windows (a singleentry point for the submission of trade documentation and notification of the release of goods from bordercontrol), authorized operators, advance rulings, test procedures and border agency cooperation are, on average,less frequently notified as Category A commitments than provisions related to movements of goods, detention,use of customs brokers, pre-shipment inspection and freedom of transit (see Figure E.1). Other less-notified TFAmeasures include those involving setting up enquiry points, establishing and publishing average release times,and implementing various specific features of customs cooperation, such as information exchange, protectionand confidentiality. Many of these less-notified TFA measures are considered as relatively complex and arefrequently identified as areas of priority for technical assistance.Figure E.1: Top five most and least notified TFA provisions under CategoryA commitments56Movement of goods intended for importunder customs control55Most notifiedDetentionUse of Customs Brokers55252Preshipment Inspection436Freedom of Transit20.29Border agency cooperation529Least notifiedTest procedures27Advance rulings724Authorized operatorsSingle windowFully notifiedSource: WTO Secretariat.1103181Partially notified
II. SPEEDING UP TRADE: BENEFITS AND CHALLENGES OF IMPLEMENTINGTHE WTO TRADE FACILITATION AGREEMENTBox E.1: Category A commitments under the TFA (continued)Figure E.2 illustrates the average level of implementation over all TFA measures for countries that havesubmitted Category A commitments. Ranking countries according to the percentage of measures that are fullyimplemented, from lowest to highest, provides an indication of how much of the TFA is already in place and howmuch remains to be done.Figure E.2: Levels of TFA implementation implied by Category A commitments100%90%80%70%60%50%40%30%20%10%No implementationPartial implementationCountry 65Country 63Country 61Country 59Country 57Country 55Country 53Country 51Country 49Country 47Country 45Country 43Country 41Country 39Country 37Country 35Country 33Country 31Country 29Country 27Country 25Country 23Country 21Country 19Country 17Country 15Country 13Country 9Country 11Country 7Country 5Country 3Country 10%Full implementationthe Fifth Global Review of Aid for Trade monitoringand evaluation exercise. In particular, the analysis ofthe responses received from 62 developing and LDCmembers in various geographical regions, from 27bilateral donors, and from 23 development agenciessheds light on the importance that developing countriesplace on the TFA, how they expect it to influencetheir trade costs, and what challenges they expect toencounter during its implementation.1(i)Trade facilitation is a priority fordeveloping countries Developing countries seem to assign a high priority totrade facilitation, with 65 per cent of partner countriessurveyed ranking trade facilitation in their top threeAid for Trade priorities, higher than any other areas,such as trade negotiations, WTO accession, networkinfrastructure, transport infrastructure, cross-borderinfrastructure, competitiveness, export diversification,connecting to value chains, adjustment costs andregional integration. As shown in Figure E.3, landlockedcountries tend to give an even higher priority to tradefacilitation, while small island developing statesappear to prioritize other Aid for Trade areas. Inparticular, nearly 85 per cent of African and MiddleEastern developing countries and LDCs ranked tradefacilitation among their top five priorities, compared to75 per cent for Latin American countries and 67 percent for Asian developing economies, as depicted inFigure E.4.E. T HE CHALLENGES OFIMPLEMENTING THE TRADEFACILITATION AGREEMENTSource: WTO Secretariat.111
WORLD TRADE REPORT 2015Figure E.3: Ranking of trade facilitation in Aid for Trade priorities of landlocked countriesand small island developing states, 2015403530Per cent2520151050Rank 1Rank 2LandlockedRank 3Small islandRank 4Rank 5Not a top 5 priorityAll developing country respondentsNote: Definitions of landlocked countries and small island developing states taken from the United Nations.Source: WTO Secretariat.Figure E.4: Ranking of trade facilitation in Aid for Trade priorities of partner countriesby geographic region, 2015403530Per cent2520151050Rank 1Rank 2Rank 3Africa and Middle EastRank 4Latin AmericaRank 5Not a top 5 priorityDeveloping AsiaSource: WTO Secretariat.There were no stark differences in the priority levelassigned to trade facilitation by countries of differentincome levels. Figure E.5 suggests that high-incomedeveloping countries do appear to rank trade facilitationvery highly, with 50 per cent putting it in first place and50 per cent in third place. However, since only twohigh-income developing countries responded to thequestionnaire, these results are not very informative.112In contrast to the WTO-OECD questionnaires from theFifth Global Review of Aid for Trade, a survey carried outby UNCTAD (2014) distinguished between 39 differenttrade facilitation measures and asked respondents toassign priority levels to them. These results confirmthat trade facilitation is among developing countries’highest priorities.Despite differences between countries, these resultsconfirm the overarching consensus that has emergedin previous studies according to which governmentofficials and private sector agents in developingcountries recognize the potential of trade facilitation(UNESCAP, 2014). In particular, both developingcountries and LDCs tend to give the highest importanceto the most comprehensive and ambitious reforms,such as single window or border agency cooperation,
II. SPEEDING UP TRADE: BENEFITS AND CHALLENGES OF IMPLEMENTINGTHE WTO TRADE FACILITATION AGREEMENTFigure E.5: Ranking of trade facilitation in Aid for Trade priorities of partner countries byincome group, 201550454035Per cent302520151050Rank 1Rank 2Low incomeRank 3Rank 4Lower-middle incomeUpper-middle incomeRank 5Not a top 5 priorityH
E. The challenges of implementing the Trade Facilitation Agreement This section of the report looks at the various challenges involved in ratifying and implementing the Trade Facilitation Agreement (TFA), particularly for developing and least-developed countries (LDCs). It first assesses the implementation needs of
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