Through most of its history, the members of the World Trade Organization – and the GATT before it – simply assumed that, if a country signed a trade agreement, it had the knowledge and ability to carry it out. To say otherwise was to cast aspersions and violate a country’s pride. It eventually became clear that many developing countries, especially the least developed, did not have the money or the administrative capacity to fully carry out the agreements they had signed. Their ability to carry out agreements was often overshadowed by arguments that the developed world was expecting too much of developing countries and needed to leave room for the weakest to use things like “infant industry” policies to try to find economic growth. This confused the problem of the capacity to carry out agreements with the question of whether substantial obligations should be applied to developing countries at all.
The Tokyo Round in the 1970s saw a new style of trade agreement that contained special clauses to help the least developed countries. Some clauses delayed implementation if you were deemed a developing country, but with “graduation” procedures to prevent an eternal free ride. Others might give the least developed countries an out from implementing the toughest passages of an agreement. The definitional fights (who was developed, developing, emerging or least developed) would have impressed any theologian. I was one of the chief U.S. negotiators of these special clauses, which got wrapped up under the idea that developing countries should be offered “special and differential treatment” in trade agreements, recognizing their inherent limitations to fully implement such agreements. There were plenty of inside jokes among the negotiators that involved “S&D”.
One of the prime arguments was at what point, if any, developing countries should be “graduated” to follow more stringent requirements. Some seemed to look forward to “graduation” as a badge that they had succeeded in achieving economic growth. Others took the position that they should have S&D forever, while their competitors should be graduated. I knew we had made progress at a negotiating session in Geneva in which the Indian and Bangladeshi delegations nearly came to blows over when India should be graduated.
Forty years on, the WTO is achieving another watershed in treatment of developing countries. The WTO’s Trade Facilitation Agreement that came out of the Doha Round talks in December 2013 finally drops the question of whether or not developing countries “should” take on full obligations in an agreement, and focuses rightfully on how to help them get it done. The mechanism for this has the unfortunately bureaucratic name of the WTO Trade Facilitation Agreement Facility (TFAF). But what it will do is encouraging.
The Trade Facilitation Agreement aims to improve all those little nuts and bolts issues of moving goods or services across borders that drive companies crazy (especially small ones that can’t afford dedicated staff for this stuff). It gets into improving customs clearance processes, inspections, storage facilities, shipping infrastructure, document requirements and so much else that may simply be beyond the capacity of a poorer country to put in place. So the WTO, together with the World Bank, the Organization for Economic Cooperation and Development (OECD), United Nations Conference on Trade and Development (UNCTAD), the United Nations Economic Commission for Europe (UNECE) and the World Customs Organization are going to help them get the job done.
The Trade Facilitation Agreement broke new ground for the WTO in the way it will be implemented. For the first time in the WTO’s history, the requirement to implement an agreement is directly linked to the capacity of the country to do so. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity. ~ WTO Director-General Roberto Azevêdo, July 22, 2014
Some of the organizations, and other donors, will contribute funding to build capacity in the neediest countries. They and others will provide technical assistance and training. TFAF’s functions will include:
- supporting LDCs and developing countries to assess their specific needs and identify possible development partners to help them meet those needs
- ensuring the best possible conditions for the flow of information between donors and recipients through the creation of an information sharing platform for demand and supply of Trade Facilitation-related technical assistance
- disseminating best practice in implementation of Trade Facilitation measures
- providing support to find sources of implementation assistance, including formally requesting the Director-General to act as a facilitator in securing funds for specific project implementation
- providing grants for the preparation of projects in circumstances where a Member has identified a potential donor but has been unable to develop a project for that donor’s consideration, and is unable to find funding from other sources to support the preparation of a project proposal
- providing project implementation grants related to the implementation of Trade Facilitation Agreement provisions in circumstances where attempts to attract funding from other sources have failed. These grants will be limited to “soft infrastructure” projects, such as modernization of customs laws through consulting services, in-country workshops, or training of officials.
Why am I making such a big deal about this? TFAF is meant to make it easier to get trade done in all parts of the world. Improved customs procedures, for instance, in Malawi or Myanmar may make it easier for your company to sell in these markets, thus boosting the income of your firm and its workers, while at the same time lowering costs in importing markets.
The World Bank’s economists calculate that if trade could be facilitated worldwide to just half of what Singapore has done, for example, world income would grow by $2.6 trillion! You could take all the world’s tariffs to zero and not equal that. Trade facilitation means big money. And TFAF could be one of the least noticed, but hugely beneficial ways to boost world economic wellbeing.