The Bali Trade Tally (1) : Philippine Challenges in Trade Facilitation

CURRENT TRADE CONCERNS
Elpidio V. Peria
19 January 2014

Now that the holidays are over, it is the time to gradually pick through the results of the World Trade Organization (WTO) 9th Ministerial Conference in Bali, Indonesia and really think through how the country will go through implementing those commitments.

For this series of tallying up those Bali outcomes, we will start on trade facilitation and our own Department of Trade and Industry (DTI) Secretary Gregory Domingo has this to say on this last year as picked up by Interaksyon.com news website last 9 December 2013 :

The ‘Bali Package’, which includes the agreement on trade facilitation, complements the government’s initiatives to improve customs operations and will greatly benefit our country’s small and medium sized enterprises that participate in trade.

The Secretary further stated :

Together with special and differential treatment provisions, the trade facilitation agreement will complement the Philippines’ initiatives to institute domestic customs administration reforms towards a more efficient and streamlined mechanism for traders, while respecting implementation capacities. Transparent and streamlined customs procedures will encourage new and innovative SMEs to enter the mainstream of trade.

What was that trade facilitation agreement that we have agreed to in Bali and what was that special and differential treatment that the DTI Secretary was talking about?

Trade facilitation, based on a South Centre paper (WTO Negotiations on Trade Facilitation : Development Perspectives, (http://www.southcentre.int/wp-content/uploads/2013/11/Trade-Report-on-Trade-Facilitation_EN.pdf, accessed 19 January 2014) , has been in the negotiations agenda of the WTO since 2004 as part of the July 2004 Framework package, mainly pushed by the developed countries and it focused on measures and policies intended for the simplification, harmonization and standardization of border procedures. They do not address the priorities for increasing and facilitating trade, particularly exports by developing countries, which would include enhancing infrastructure, building productive and trade capacity, marketing networks, and enhancing inter-regional trade.

As foreseen by the South Centre paper, the trade facilitation agreement would lead mainly to the facilitation of imports by the countries that upgrade their facilities, since the expansion of exports would require a different type of facilitation mainly improving supply capacity and access to developed country’s markets.

If we look closely at the contents of the 11 December 2013 Trade Facilitation Agreement (WTO Document WT/MIN (13)/36, WT/L/911) , it mainly contains provisions on publication and availability of information, opportunity to comment, information before entry into force and consultation, advance rulings, appeal or review procedures, specific disciplines on fees and charges imposed on exportation or importation, release and clearance of goods, freedom of transit and customs cooperation.

One crucial aspect that may cause the country’s customs brokers to rise up in arms is a provision in Article 10 (6) (6.1) where it states that “Members shall not introduce the mandatory use of customs brokers”, which may somehow affect the practice of customs brokers in the country.

Now, the DTI Secretary also spoke about availing of some special and differential treatment (SDT) provisions in the recently agreed trade facilitation agreement, but looking at the contents of the agreement, there appears to be three types of SDTs that the Philippines may avail of, namely:

Category A – provisions in the Agreement that a developing country designates for implementation upon entry into force of the Agreement;

Category B – provisions in the Agreement that a developing country designates for implementation on a date after a transitional period of time following the entry into force of the Agreement

Category C – provisions in the Agreement that a developing country designates for implementation on a date after a transitional period of time following the entry into force of the Agreement and requiring the acquisition of implementation capacity through the provision of assistance and support for capacity building,

According to the Asian-African Legal Consultative Organization, in its 2003 Study on Special and Differential Treatment in WTO Agreements, SDT is an important legal principle in international law which enables weak and less developed Members to integrate in the international community by granting them special advantages and flexibilities and in this case of the Trade Facilitation Agreement, it is the WTO member itself which designates which categories of implementation it will subject certain provisions of the Trade Facilitation Agreement.

How would the DTI choose which provisions in the Trade Facilitation Agreement it will implement immediately and which obligations will it subject to capacity-building so that it will first acquire the necessary implementation capacity so that it will make good on these commitments?

If we look at the recent Policy Note by the Philippine Institute for Development Studies last November 2013 where it identified some policy issues relating to border and behind-the-border restrictions in logistics and trade facilitation in the Philippines, restrictions related to airport capacity constraints, traffic congestion, and outdated customs processes, can be addressed through more vigorous investments in the logistics sector. The other restrictions will require amendments to existing laws and even enactment of new laws, particularly : foreign equity restriction in domestic companies, restriction imposed by Presidential Decree 1466 on moving international companies, cabotage (transporting local passengers and cargo in Philippine territorial waters) restrictions in maritime transportation, imposition of truck bans, infrastructure issues hindering liberal skies policies.

Given these challenges and the non-binding obligation of developed country WTO members to provide assistance for capacity-building, the question remains whether the costs involved in making these changes to come up to the standards of the Trade Facilitation Agreement will be worth the costs, time and effort, and will the SMEs be given support by the DTI for them to also comply with these trade facilitation rules?

By the way, a country that does not live up to its commitments to the Trade Facilitation Agreement will be subjected to a dispute settlement procedure of the WTO, meaning, all the potential gains in trade might all be lost if a country is sued for damages for not following through on its commitments in this Trade Facilitation Agreement.

oOo

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