Trade facilitation in Regional Trade Agreements (RTAs)

TEBOHO RAKOLOI

The importance of trade facilitation stems from the fact that global trade has grown rapidly in recent years because of the progressive reduction of tariffs and quotas as a result of trade liberalisation.

This implies that more goods are crossing borders and having to comply with customs formalities, putting a strain on the resources of custom officials and other government officials.

The literature shows that there is a positive link between trade facilitation and trade. Modest reductions in trade transaction costs significantly increase trade flows.

This is further supported by the World Bank’s (2008) Doing Business Report which suggests that the trading costs like transport cots, border related trade barriers, retail and wholesale distribution costs and production costs for African countries are about twice as high than as those in high-income OECD countries.

Trade in both rich and poor countries stand to gain from improvements in trade facilitation. However, trade gains are higher in developing countries than in developed countries because of comparatively less efficient customs administrations and ports in developing countries.

It is true that countries that undertake trade facilitation reforms stand to gain substantially from enhanced efficiency of customs procedures. Nevertheless, improves customs procedures significantly increase trade flows.

Trade facilitation has made it easy for trade to be carried out and has made it necessary to avoid the trade costs which are brought about by the inefficient customs procedures.

In the case of Regional Trade Agreements (RTAs) trade facilitation plays a very vital role of ensuring that RTAs increase trade and enhance consumer choice, producers from countries in the RTAs benefit from increase market size and exploitation of economies of scale and countries build cross border production chains by leveraging each other’s comparative advantage and RTAs establish regional economic cooperation.

The issue is whether and to what extent a preferential measure which is supposed to facilitate trade between trading partners under an RTA does not raise a trade barrier against the other trading partners, thus non-members to such an RTA according to World Trade Organisation (WTO) law.

Regional Trade Agreements (RTAs) according to WTO rules are the justification why countries derogate from the WTO Most- Favoured Nation Principle (MFN).

The most-favoured-nation (MFN) principle establishes that when trading, every WTO member shall accord the same advantages, favours, privileges or immunities to like products and/or services of all WTO members. By their nature, RTAs grant more favourable treatment to the parties of such agreements than to other WTO members. Therefore, RTAs represent a departure from one of this core principle of the multilateral trading system.

Examples include some transparency provisions, such as public availability of trade-related laws, regulations and rulings, and the use of international instruments to simplify procedures and documents.

It is more efficient and easier to have one internet portal where all the necessary trade-related information is available in one place for all trading partners, rather than publicizing information on a selective basis for a selected number of viewers only.

Another example might be the creation of a paperless trading environment or a national single window under an RTA, both of which in practice are usually applied equally to trade flows from all trading partners and not only partners under an RTA.

RTAs allow for a preferential treatment among trading partners under RTAs and thereby discriminate against WTO members not parties to the RTA. In other words, when trade facilitation measures are agreed under an RTA, this preferential treatment can be justified under General Agreement on Trade and Tariff (GATT) relevant article.

Between 1995 and 2010, the number of RTAs with trade facilitation provisions has grown remarkably, especially since the launch of trade facilitation negotiations with the Doha Development Agenda at the WTO. Trade facilitation provisions in RTAs may be found as part of general principles.

Initially, RTAs mainly included provisions narrowly focused on customs procedures. More recently, these provisions have expanded to areas as transparency, simplification and harmonization of trade documents, and coordination among border agencies, as well as with the business community.

Provisions dealing with customs matters have also evolved and now cover a wider range of measures including risk management, right of appeal, advance rulings, release of goods, temporary admission and express shipments.