The trade facilitation part is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. It will be a legally binding agreement and is one of the biggest reforms of the WTO since its establishment in 1995. Other agreements struck since then are on financial services and telecommunications, and among a subset of WTO members, an agreement on free trade in information technology products. The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances.
It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.
Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement.
The benefits to the world economy are calculated to be between $ 400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.
The text adopted in Bali was not final, although the substance will not change. It will be checked and corrected to ensure the language is legally correct, aiming for the General Council to adopt it by 31 July 2014.
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Briefing note: Trade facilitation — Cutting “red tape” at the border, 9th WTO Ministerial, Bali, Indonesia, Dec 2013
Traders from both developing and developed countries have long pointed to the vast amount of “red tape” that still exists in moving goods across borders. Documentation requirements often lack transparency and are vastly duplicated in many places, a problem often compounded by a lack of cooperation between traders and official agencies. Despite advances in information technology, automatic data submission is still not commonplace.
The United Nations Conference on Trade and Development (UNCTAD) estimates that the average customs transaction involves 20–30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60–70 per cent of all data at least once. With the lowering of tariffs across the globe, the cost of complying with customs formalities has been reported to exceed in many instances the cost of duties to be paid. In the modern business environment of just-in-time production and delivery, traders need fast and predictable release of goods.
A study by Asia-Pacific Economic Cooperation (APEC) estimated that trade facilitation programmes would generate gains to APEC of about 0.26 per cent of real GDP, almost double the expected gains from tariff reductions, and that the savings in import prices would be between 1–2 per cent of import prices for developing countries in the region.
Analysts point out that the reason why many small and medium-sized enterprises — which, as a whole, account in many economies for up to 60 per cent of GDP creation — are not active players in international trade has more to do with red tape rather than tariff barriers. The administrative barriers for enterprises that do not regularly ship large quantities are often simply too high to make foreign markets appear attractive.
For developing-country economies, inefficiencies in areas such as customs and transport can be roadblocks to their integration into the global economy and may severely impair export competitiveness or inflow of foreign direct investment. This is one of the reasons why developing-country exporters are increasingly interested in removing administrative barriers, particularly in other developing countries, which today account for 40 per cent of their trade in manufactured goods.