India ready to discuss one S’pore issue - trade facilitation

At the first WTO ministerial conference in Singapore, held in 1996, work programmes were established on four issues, primarily at the behest of the European Union. These issues were trade and investment; trade and competition policy; trade facilitation and transparency in government procurement.

In 2001, during the Doha ministerial conference, it was agreed to commence negotiation on them once there was an explicit consensus on the modalities for negotiation. This consensus proved to be elusive, and till mid-2004 Singapore issues were seen to be a major stumbling block to the progress of the Doha negotiations. The deadlock could be resolved only after the EU agreed to the continuation of only one of these three issues, namely trade facilitation, and consequently the other three were dropped.

Trade Facilitation?

Very broadly, trade facilitation refers to simplification of border clearance processes for goods. Cumbersome procedures can be a formidable non-tariff barrier. OECD studies have indicated that the cost of poor border procedure could range from 2-15% of the total transaction cost. Since Customs procedures constitute a major component of border clearance procedure, the main focus of the trade facilitation negotiation is to simplify and reduce Customs-related procedures.

Some of the important proposals in the ongoing negotiations are to reduce formalities and documentation requirements, to adopt systems like risk management, post-clearance audit, authorised trader system and pre-arrival clearance. All these are aimed to minimise human intervention at the border and thus reduce clearance time.

Transparent systems of information dissemination also add to trade facilitation as traders, particularly smaller ones, need not then invest time and resources in collecting information on how to clear the goods at the border.

There are proposals for Internet publication of trade regulations and to have a system of consultation with stake holders before bringing new regulations in place. For landlocked countries, transportation cost accounts for a large proportion of their transaction cost. There are several proposals on the table to improve transit conditions and formalities.

India’s active role

India has travelled a long distance in its approach to negotiation on trade facilitation. While it did not favour negotiation on Singapore issues as a package, it has been an active participant in the trade facilitation negotiation.

As India has taken substantial steps on its own in modernising the Customs clearance procedures and has also signed the World Customs Organisation’s General Annex of the revised Kyoto Convention — a model for modern Customs procedures — it is a confident player in the negotiation. Yet, it needs to tread carefully in order to ensure that the commitments that emerge do not cast unsustainable resource burden, or in any way compromise its fundamentals regarding tax collection and compliance systems.

India has played a vanguard role in emphasising the linkage between facilitation and compliance. On its insistence, the issue of effective Customs cooperation for compliance with laws has been added as one of the aims of the trade facilitation negotiation in the agreed Annex D modality of WTO’s July Framework Agreement of August 1, 2004. India has since filed detailed proposals on how such a mechanism can be operated at the multilateral level. A satisfactory outcome on this aspect of the negotiation would help achieve the right balance between facilitation and compliance issues.

Another interesting feature of India’s participation in the negotiations is that it has identified its own trade facilitation needs and priorities through field surveys of exporters concerning problems faced in the destination markets.

On this basis, it has tabled proposals to bring uniformity and transparency in the external trade regime of Customs union. For instance, it has been proposed that the border procedures as well as forms and documentation requirements in a Customs union should be uniform; there should be a mechanism for quick and uniform decision of inspection authorities and an appeal provision against such decisions. Some proposals are also aimed at addressing the existing procedural problems of Indian exporters like destruction of rejected food consignments and the ‘trade chilling effect’ caused on account of onerous systems of ‘import alerts’ in some of its major markets.

Developing countries have, over the years, become immense negotiation savvy, which, inter alia, includes their ability to leverage common interests through issue-based coalitions. G-20 in the agriculture negotiation is its most famous example. In this area too, India is a member of the core group of developing countries on trade facilitation, which presently consists of 21 countries, including Bangladesh, Egypt, Indonesia, Kenya, Malaysia, Philippines, Nepal, etc.

Challenges

The trade facilitation negotiation has not been in the glare of the public eye as has been the market access pillars of agriculture, industrial goods and services. It can, however, serve as a significant market access multiplier in goods sector by cutting down transaction cost for trans-border movement of goods.

The challenge for developing countries is to dovetail the commitments that might emerge into its ongoing Customs reform programme.

At the same time, it needs to be ensured that commitments and the modalities for their implementation are such that they provide adequate comfort to resource-deficit developing countries. It would, therefore, be important to ensure that commitments are not too onerous, are sufficiently flexible so as to be free of ‘one size fits all’ syndrome and there is a robust mechanism for technical assistance to help poorer countries implement the commitments.

Such an outcome would encourage countries at all levels of development to join the new facilitation paradigm rather than to look at the escape hatches provided in the negotiating modality to opt out of a process whose end result can considerably boost international trade and investment.

(Writer is an officer belonging to IRS (customs and central excise) and has dealt with negotiations on trade facilitation. Views are personal)