2014-03-03 OTN Special Update (The Focus of The WTO MC9)

OFFICE OF TRA DE NEGOTIATIONS
for trade matters
SPECIAL OTN Update

March 3,2014
The Focus of the World Trade Organization th Ministerial Conference (MC9) (WTO) 9
Watershed MomentinWTOHistory 9th Ministerial Conference of the World Trade At the Organisation (WTO) held in Bali, Indonesia in December, 2013, Members concluded an Agreement on Trade Facilitation. There were also a number of Decisions and Understandings covering several other areas such as Agriculture, Cotton and Development. Since the launch of the Doha Development Agenda (DDA) in 2001, the WTO has come under increasing scrutiny and pressure for its failure to deliver a conclusion to the talks. Therefore, the outcome of the Bali Ministerial injected needed momentum into the negotiations. The Agreement on Trade Facilitation could potentially reinvigorate the DDA and ultimately result in the comprehensive global trade deal, which has proven elusive for over a decade. According to (2013), Bali could be seen as a down payment Stewart on a completion of the full DDA, and a demonstration multilateral negotiating function of the WTO is that the alive(evenifdeeplytroubled).1
MinisterialDeclarationonAgriculture
In the area of agriculture, four Ministerial Decisions weremade.TheDecisionscovered:
GeneralServices PublicStockholdingforFoodSecurityPurposes Understanding on Tariff Rate Quota Administration Provisions of Agricultural Products
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org
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ExportCompetition
The current WTO Agreement on Agriculture (AoA) allows for Members to provide domestic support to their agricultural sectors in the interest of food security, rural development and poverty alleviation. The Bali Decisions, however, have expanded the types of measures that WTO Members can provide to support theirdomesticagriculturalsectors. The General Services Decision will allow for WTO to implement programmes related to land Members reformandrurallivelihoodsuchas:
Landrehabilitation; Soilconservationandresourcemanagement; Droughtmanagementandfloodcontrol; Ruralemploymentprogrammes; Issuanceofpropertytitles;and Farmersettlementprogrammes.
The current WTO rules allows for Members to carry out programmes of Public Stockholding for Food Security Purposes provided that food purchases by the government are made at current market prices and sales from public stockholding are made at prices not lower than current domestic market prices. Where the sales are made at prices below market prices, the is counted as a subsidy to the farm sector difference and the total amount of such subsidies are limited by WTO rules. The Bali Ministerial Decision on Public Stockholding for Food Security Purposes allows countries that are close to exceeding their developing allowed limits on subsidies to undertake such programmes provided that the products are basic traditional staple food crops. Until the 11th Ministerial Conference in 2017 when a permanent solution will be found, WTO Members will refrain from legally challenging such notified programmes, which may otherwise run afoul of various aspects of the WTO AgreementonAgriculture. In international trade, a Tariff Rate Quota (TRQ) is applied when the intention is to limit imports to certain quantities. Within a quota, lower import duty rates (or no duty rates) are charged while outside the quota, higher (sometimes prohibitive) duties are applied. As
part of the Uruguay Round of WTO negotiations, which did away with nontariff restrictions, some WTO Members, as part of their scheduled commitments, put in place TRQs as a means of providing a certain amount of minimum access to imports of agricultural products. Currently, 43 WTO Members have a total of 1,425 TRQs in their commitments, Barbados being the only CARICOM country on the list with a total of 36 TRQs. However, many exporters often have difficulty with the administration of these TRQs, whether because they are applied in a nontransparent manner or because they are applied on a seasonal basis, which does not permit exporters to take full advantage of them. According to the WTO, the Understanding on Tariff Rate Quota Administration Provisions of AgriculturalProductstabledinBaliwillprovidefora better implementation of tariff rate quota commitments.2 Improved implementation of the TRQ regime is expected as the new Understanding would allow for underfilled quota licenses to be reallocated to other potential users who can make better use of them. This should make for a more effectiveTRQadministration. IntheBaliDecisiononExportCompetition,Members reaffirmed the commitment made in the 2005 Hong Kong Ministerial Declaration to eliminate all forms of export subsidies on agricultural products, including those measures with the equivalent effect of an export subsidy. Currently, Members are allowed to providesuchsubsidiesuptothelimitsprovidedforin their schedules of commitments. The Decision noted that although the target date of 2012 set at Hong Kong had not been met, Members drew some encouragement from the fact that there had nevertheless been a reduction in the application of suchsubsidiesworldwide. The various Decisions on Agriculture are not likely to have any significant effect on CARICOM countries. The proposed changes are not likely to negatively impact well being nor are they expected to result in significant enhancement of agricultural production and trade. CARICOM countries are not known to stockpile food in the same manner as large
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developing countries such as India. In relation to the various support measures and Export Competition, fiscal limitations have largely prevented CARICOM countries from offering the types of economic support by governments to their agricultural sectors, granted compared to the levels and types of support grated by developed and several large developing countries. As such, the various Ministerial Decisions on Agriculture tabled at Bali are not expected to alter the status quo withinCARICOM. capacity building work of relevant international institutions.
Ministerial Declaration on Development and LDCIssues

The Ministerial Decisions on Development and LDC Issuesencompassedthefollowing:
PreferentialRulesofOriginforLDCs Operationalization of the Waiver Concerning Preferential Treatment to Services and Service SuppliersofLeastDevelopedCountries DutyFree and QuotaFree Market Access for LeastDevelopedCountries Monitoring Mechanism on Special and DifferentialTreatment
MinisterialDecisiononCotton
Since 2003, the issue of cotton has been championed Africancountries.Theirinitiativepointedtothe byfour damage being done to their sectors by subsidies by richer countries and thus the need for provided reformaswellascompensation. Very little progress has been made on this issue since Kong Ministerial Declaration of 2005 which the Hong committed WTO Members to address Cotton ambitiously, expeditiously and specifically within the context of the broader agriculture negotiations. The Bali Ministerial Decision on Cotton committed WTO Members to dedicated discussions on a biannual basis, in the context of the Committee on Agriculture in Special Session, to examine relevant traderelated developments across the three pillars of Market Access, Domestic Support and Export Competition in relation to cotton. These dedicated discussions are to consider all forms of export subsidies for expected cotton (and all export measures with equivalent domestic support for cotton and tariff effect), measures and nontariff measures applied to cotton from least developed countries (LDCs) in exports markets of interest to them. Members also committed to continued engagement in the DirectorGenerals Consultative Framework Mechanism on Cotton to strengthenthecottonsectorintheLDCs. The Bali Ministerial Decision on Cotton also urged the relevant development partners to accord special focus to the needs of LDCs within the existing aidfortrade mechanisms/channels and the technical assistance and
Rules of Origin are those rules, regulations and administrative requirements used to determine the origin of goods in the conduct of international trade. Preferential Rules of Origin refer to the rules that determine whether or not a good qualifies for preferential treatment under a free trade agreement or in the context of nonreciprocal preferential arrangements between developed countries and LDCs such as the Everything but Arms (EBA) initiative which grants LDCs full duty free and quotafree access to the European Union (EU) for almost all goods. The Ministerial Decision on Preferential Rules of Origin for LDCs seeks to facilitate market access for LDCs under nonreciprocal preferential trade arrangements for LDCs by making preferential rules of origin more transparent, simple and objective as possible. The WTO General Agreement on Trade in Services (GATS) requires WTO Members to not apply discriminatory treatment to services and service suppliersofothermembers(MostFavouredNation MFN Principle). However, the eight Ministerial Conference held in Geneva in 2011 made an exceptiontothisMFNPrinciplebyallowingMembers to undertake preferential market access
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commitments on trade in services in favour of LDCs for a period of 15 years. Since the adoption of the services waiver in 2011, no WTO Member has made use of this provision. Therefore, the Ministerial Decision on the Operationalization of the Waiver Concerning Preferential Treatment to Services and Service Suppliers of LeastDeveloped Countries initiates a process aimed at promoting the expeditious and effective operationalization of the LDC services waiver through theCouncilforTradeinServices. The concept of DutyFree and QuotaFree Market Access for LDCs refers to a situation in which the Members of the WTO and those developing developed Members who can afford to do so, permit the entry of goods originating from LDCs into their markets without the application of customs duties or quantitative restrictions. The Ministerial Decision on DutyFree and Quota Free Market Access for LDCs seeks to achieve twomainobjectives,namely: 1. Fordevelopedcountriesthatdonotyetprovide dutyfree and quotafree market access for at least 97% of products originating from LDCs, to improve their existing dutyfree and quotafree coverage for such products within two years; and 2. For those developing countries that can do so, to provide or improve their dutyfree and quotafreecoverageforproductsfromLDCs. The WTO Agreements provide special arrangements developing countries exceptional rights and which give whichalsogivedevelopedcountriestheleewaytotreat countries and LDCs more favourably than developing other WTO Members. For instance, some developing and regions, such as the United States and countries the EU, allow exports from developing countries and LDCs to enter their markets on terms and conditions that are better than those which apply to other WTO members. These are widely known as Special and Differential Treatment (S&DT) provisions. The Ministerial Decision on the Monitoring Mechanism on Special and Differential Treatment seeks to establish a Mechanism to act as a focal point within the WTO to analyse and review the implementation of S&D provisions with a view to facilitating the integration of developing and leastdeveloped Members into the multilateraltradingsystem. HaitiiscurrentlytheonlyCARICOMMemberintheLDC category; therefore, with the exception of the Monitoring Mechanism on S&D, the other Ministerial Decisions on Development and LDC issues are not expected to bring about any significant gains for other CARICOM countries. However, Haiti can realise important gains in its exports of goods and services to developed countries (and some developing countries) if those countries were to accord greater flexibilities to the entry of goods and services into their territories fromtheLDCs.
TheBaliAgreementonTradeFacilitation
Tradefacilitationreferstotheremovalorsimplification of measures and obstacles that restrict the cross border trade in goods. For example, the simplification of customs procedures by implementing a single window system for the clearance of goods is part of trade facilitation. When there are obstacles to the movement of goods across borders, these obstacles increasethetransactioncostsofthosegoodsandmore often than not, these costs are passed on to the consumer. Therefore, according to the International Trade Centre (ITC), trade facilitation is important since it can have a major impact on bringing down trade transaction costs.3 Ultimately, assuming that importers passonthesecostsavingstotheconsumer,thecostof goods could be drastically reduced when trade facilitationisimproved. Current disciplines on Trade Facilitation are covered under Articles V, VIII and X of the General Agreement on Tariffs and Trade (GATT). Article V deals with to Freedom of Transit; Article VIII deals with fees and formalities connected with importation and exportation; and Article X addresses publication and administrationoftraderegulations.
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Freedom of Transit: there are two main obligations in Article V of the GATT 1.) a commitment by WTO Members not to impede goods in transit by imposing undue delays or charges; and 2.) to accord MFN togoodsintransitofallWTOmembers. treatment Fees & Formalities: the existing GATT commitments on fees and formalities seek to achieve three main outcomes: 1.) impose specific binding obligations on WTO Members with respect to the fees and charges whichtheycanapplytoimportsandexports;2.)impose legal obligations on the penalties that Members can apply to breaches of customs procedures; and 3.) secure best endeavour commitments from Members to reduce the number and complexity of import and exportfees andprocedures. & Administration of Trade Regulations: Publication ArticleXoftheGATTessentiallydealswithtransparency aimed at committing Members to publish obligations their trade laws and regulations promptly and to make these publications accessible. Members are also required to refrain from imposing measures or prior to their publication. Article X also procedures obliges Members to maintain tribunals or other mechanisms for the prompt review and correction of administrative measures concerning customs related matters. According to the ITC, the new WTO Agreement on Trade Facilitation seeks to give greater clarity to and strengthens the existing GATT framework. It will be binding on all Members of the Organisation.4 The new Agreement comprises two sections Section I focuses on trade facilitation measures and obligations, while Section II gives effect to flexibility or S&DT arrangements forLDCsanddevelopingcountries. Section I of the new WTO Agreement on Trade Facilitationcoversthefollowingareas: Article 1: Publication and Availability of Information Article2:OpportunitytoComment,Information beforeEntryintoForceandConsultation Article3:AdvanceRulings Article4:AppealorReviewProcedures Article 5: Other Measures to Advance Impartiality, NonDiscrimination and Transparency Article 6: Disciplines on Fees and Charges ImposedonorinConnectionwithImportation andExportation Article7:ReleaseandClearanceofGoods Article8:BorderAgencyCooperation Article 9: Movement of Goods under Customs ControlIntendedforImport Article 10: Formalities Connected with ImportationandExportationandTransit Article11:FreedomofTransit Article12:CustomsCooperation
Publication & Availability of Information: The main obligations in Article 1 are that Member States are requiredtopublish'promptly'anyinformationrelated to the requirements and procedures for clearing goods for import or export.5 These requirements and procedures include forms and documents; rates of duty and other taxes; rules for the classification and valuation of goods for customs purposes; rules of origin; transit restrictions and procedures; penalties; appeal procedures; trade agreements; and tariff quota administration arrangements. WTO Members are also required to publish their information online, especially as it relates to procedures, forms and documentation. National enquiry points must also be establishedandnotifiedtotheWTO. Opportunity to Comment, Information before Entry into Force and Consultation: Article 2 essentially seeks to prevent adhoc imposition of measures and procedures by WTO Members. Therefore, it places an obligation on WTO Members to consult relevant parties (importers and exporters etc.) before introducing new, or amending existing, laws and regulationsrelatedtothemovementofgoods.Border agencies, notably customs departments, traders and other interested parties are also expected to consult onaregularbasis.Theseconsultationsshouldassistin engendering confidence between all the relevant
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stakeholdersandalsosupportjointinitiativestomake the movement of goods more efficient and less onerous. Advance Rulings: Advance Rulings relate to decisions on the classification and origin of goods prior to importation. When carried out properly, Advance Rulings smooth the progress of the declaration and, eventually, the release and clearance process of goods, as the classification and origin of the goods would have been determined in the advance ruling. This advance ruling is then binding on all customs offices for the period of validity of the ruling. The Bali Agreement on Trade Facilitation seeks to strengthen MembersobligationsonAdvanceRulingsby theWTO mandatingthefollowing: Issuing an Advance Ruling in a reasonable and timelymanner; PublishingAdvanceRulings; Publishing requirements involved in the applicationforanAdvanceRuling;and To be bound by the respective Advance Rulings. or Review Procedures: Article 4 gives traders Appeal the right of appeal in relation to any decision or by a customs or border agency which omission negatively impacts the trader in question. Customs and border agencies are also required to provide an explanation of their decisions or omissions upon request. Other Measures to Advance Impartiality, Non Discrimination andTransparency:Itisnotuncommon for some WTO Members to impose stringent border controls and inspections in relation to foods, beverages and feedstuffs. Article 5 of the new Agreement on Trade Facilitation seeks to ensure that WTO Members base any enhanced controls or inspections onrisk;toapplysuchmeasuresuniformly; to withdraw the procedures promptly when the circumstances no longer justify them; and to publish promptly an announcement of the termination of the 6 Any perceived risks should be based on measures. the available scientific evidence and risk assessment should be done in an independent, objective and transparent manner.7 Article 5 also requires the importer or its authorised agent to be informed of any cases where the goods have been detained, and, traders also have the right to pursue a second opinion onallrelevantriskassessments. Disciplines on Fees and Charges Imposed on or in Connection with Importation and Exportation: Current GATT obligations already mandate WTO Members to limit the size of their fees and charges to the estimated cost of the services rendered. The new Agreement has included a publication requirement along with a clause requiring WTO Members to review their fees and charges periodically and not to demand payment of revised charges before the information on themhasbeenpublished.8Newdisciplinesalsoseekto ensurethatpenaltiesimposedforabreachonthepart of the trader are not disproportionate to the actual breach. Traders are also allowed to challenge the decisions of a customs or border agency with respect to penalties and the arbitrary imposition of fees and othercharges. Release and Clearance of Goods: The new Agreement imposes the following obligations on WTO Members, interalia: In order to expedite the release of cargo, WTO Members are required to allow procedures to be handled prior to the arrival of goods (documentationetc.). As far as possible, WTO Members are required to permit traders to make payments for duties,feesandotherchargeselectronically. Where traders have met the necessary regulatory requirements, WTO Members are required to facilitate the movement of goods into or out of a customs territory even before the customs fees and charges have been determined. To the extent possible, Members are required to operate a risk management system which allows low risk cargo to be released more expeditiously than cargo which carries higher risk.
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Withrespecttotrustedtraders,Membersare obligated to provide enhanced trade facilitation support to those so designated. These enhanced measures could include reduced documentation, fewer physical inspectionsandrapidreleaseofcargo. As it relates to air cargo and perishable goods, WTO Members are obligated to adopt or maintain measures which would facilitate the expeditedreleaseoftheseshipments. Border Agency Cooperation: According to the ITC, this article places an obligation on Member States to ensurethatitsauthoritiesandagenciesresponsiblefor border controls and procedures for import, export and transit of goods cooperate with one another and theiractivitiesinordertofacilitatetrade.9 coordinate MovementofGoodsunderCustomsControlIntended for Import: As far as it is possible, WTO Members are required to speed the flow of goods at borders and to allowgoods tobeclearedatinlandposts.
Ensuring that the documentation and procedures for goods in transit are not overly onerous; Ensuring that goods in transit are not subject toadditionalcustomscontrols;and Facilitating advanced filing and processing of transitdocuments.
Formalities Connected with Importation and Exportation and Transit: This article is geared towards lessening the incidence and complexity of import, export and transit formalities and simplifying documentation requirements. One of the most far reaching elements of this Article is its urging of WTO to establish or maintain an electronic single Members window for the submission of documentation and/or data requirements for import, export or transit. The idea of a single window seeks to ensure that all declarations, applications (permits etc.) and customs other documentation (certificates of origin, health certificates, tradinginvoicesetc.)canbesubmittedina singlelocation. Freedom of Transit: The new Agreement reinforces the obligations already enshrined in Article V of the GATT. There are also a number of new proposals aimedat,interalia: Providing separation between goods in transit andothergoodsbeingimported;
CustomsCooperation:Thegeneralaimofthisarticleis to establish the mechanisms for cooperation that mandates WTO Members to share information in order to ensure orderly coordination of customs control. For instance, the article sets out the procedures that WTO Members must follow when a customs authority needs information from the authority in another Member to verify an import or exportdeclaration.10 Section II of the new WTO Agreement on Trade Facilitation sets out various provisions with respect to assistance and support for capacity building to help developing and LDCs to implement their obligations undertheAgreement. According to a Policy Brief prepared by the Organisation for Economic Cooperation and Development (OECD), everyone stands to gain from making the process of trade easier. Governments gain, since efficient border procedures make them able to processmoregoodsandimprovecontroloffraud,thus increasing government revenue. 11 Businesses gain, becauseif theycandelivergoodsmorequicklytotheir customers they are more competitive.1 Consumers also gain because they are not paying the costs of lengthy border delays.12 From this perspective, all CARICOM Member States could gain from implementing the various obligations contained in the new WTO Agreement on Trade Facilitation. While there will be costs involved in implementation, the cost of nonimplementation is high indeed, since unnecessary cost associated with trade can only depress the competitiveness of any economy. As such, the Region is advised to work with its bilateral and multilateral development partners to ensure that enhancing trade facilitation is at the forefront of its agenda.
ENDNOTES
___________________________________________
Stewart, T. (2013). Saved at the Bell The WTO Ministerial Provides Hope that Multilateralism Can Survive and Provides a Needed Boost to Global Economic Growth. Washington, DC: StewartandStewart. 2 2013 News Items, 26 November 2013, General WTO: Council,"We cannot tell the world that we have delivered" Azevdo warnslastpreBalimeeting. 3 International Trade Centre . (2013). WTO Trade Facilitation Agreement:ABusinessGuideforDevelopingCountries.Geneva: InternationalTradeCentre. 4 Ibid. 5 International Trade Centre . (2013). WTO Trade Facilitation Agreement: ABusinessGuideforDevelopingCountries.Geneva: InternationalTradeCentre.
International Trade Centre . (2013). WTO Trade Facilitation Agreement:ABusinessGuideforDevelopingCountries.Geneva: International TradeCentre. 7 Ibid. 8 Ibid. 9 International Trade Centre . (2013). WTO Trade Facilitation ABusinessGuideforDevelopingCountries.Geneva: Agreement: InternationalTradeCentre.
10
Ibid.
11
Organisation forEconomicCooperationandDevelopment. (2005).TheCostsandBenefitsofTradeFacilitation.Paris: OrganisationforEconomicCooperationandDevelopment. 12 Ibid.

13
Ibid.

2014-03-03 OTN Special Update (The Focus of The WTO MC9)

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OFFICE OF TRA DE NEGOTIATIONS

for trade matters

SPECIAL OTN Update

Ministerial Declaration on Development and LDCIssues

Organisation forEconomicCooperationandDevelopment. (2005).TheCostsandBenefitsofTradeFacilitation.Paris: OrganisationforEconomicCooperationandDevelopment. 12 Ibid.

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