Doha's last gasp: how the WTO's dying trade round delivered an unexpected bonus

The Doha Development Agenda (DDA), the World Trade Organisation’s current trade-negotiation round, commenced in November 2001 with the aim of lowering barriers and increasing international trade. However, twelve years of attempts to open up global markets have been labelled a “cycle of failures” by the WTO’s own Director General Robert Azevedo. Although the project never fully recovered from the major breakdown in negotiations of July 2008, it experienced limited success last December by adopting the Bali Ministerial Declaration, a package that involves streamlining customs procedures and providing assistance to poorer nations.

The DDA’s overall future remains uncertain, and it is likely that many issues on the agenda will not be included in any final agreement. However, it is possible that the Bali Declaration itself has achieved more than initially expected. The consensus reached in December on a Trade Facilitation Agreement, containing provisions for faster and more efficient customs procedures and technical assistance and capacity building in this area, is very promising.

Trade facilitation, defined by the WTO as the simplification and harmonisation of international trade procedures, is becoming an increasingly important driver of international trade. Reducing time to market is critical to compete in today’s globalised supply chains, and facilitation enables goods to be moved quickly, cheaply and reliably across borders. The advent of e-commerce has caused a rapid increase in international trade, and facilitation has allowed SMEs to contribute to their local economy while boosting revenue through international trade. A recent study by eBay found that over 95 per cent of small businesses analysed engaged in exporting because of e-commerce. These companies were able to reach up to 40 international markets, regardless of the development level of the country of origin.

Despite this, new barriers have arisen which hamper the growth of trade, such as burdensome customs procedures and import restrictions. Trade facilitation has been known to enhance the productivity of firms by reducing inventory. However, long and unpredictable procedures at the border mean that businesses have to build up large inventories, which adds to the cost of trade. These costs have a large impact on international trade flows, especially regarding regional integration between developing countries, where trade costs are particularly high. In fact, research shows that developing countries stand to gain the most from facilitating trade since they tend to have much higher levels of trade costs than developed countries.

The Trade Facilitation Agreement as concluded in Bali last December is a ground-breaking effort to harmonise rules for international trade and constitutes one of the most important reforms of the WTO since its establishment in 1995. It shows the continued commitment of the members of the WTO to the multilateral trade process and the importance attached to facilitating trade in today’s interconnected trading system. Most importantly, the provisions of the Trade Facilitation Agreement are legally binding on all signatories. The measures in this Agreement could, if properly implemented, lead to significant reductions in the cost of trade.

More specifically, the objectives of the Trade Facilitation Agreement are to facilitate trade by accelerating customs procedures, reducing trade costs, providing efficiency and transparency, reducing bureaucracy and poor governance practices and using technological advances in customs clearance. The agreement guarantees the availability of trade-related information, harmonisation of documents, and streamlining of border procedures. These are all policy measures which entail relatively limited costs for governments but great benefits to businesses and the overall economy.

Standardisation of customs procedures across the world would greatly simplify trade and, according to some sources, could reduce costs by up to 15% if all provisions were implemented. Each member state should therefore ensure to swiftly ratify and implement the agreement to ensure real benefits for traders in the form of speedier customs clearance, enhanced certainty and lower costs. But while proper implementation of the Trade Facilitation Agreement would further integrate developing countries into global supply chains, some problems remain. For instance, several of the important provisions remain voluntary in nature and the initial procedure of the agreement lacks any evaluation and monitoring procedure. It is therefore imperative that all countries, regardless of their development status, tackle these barriers head-on, and implement all articles in the Agreement as soon as possible.

Another issue is that Trade Facilitation Committee will be established to oversee the implementation of the Trade Facilitation Agreement. This Committee is supposed to be replicated at the national level of the signatory countries, but there is no reference to private sector or industry organisations being part of either committee. The businesses involved in trade and customs transactions have the best knowledge in this sector, so dialogue with industry is necessary to also ensure realisation of the agreement’s fundamental objectives.

WTO members have shown tremendous commitment to keeping the multilateral trade process going beyond the Bali agreement. But trade facilitation can only have a truly positive impact if real progress is made on the ground towards making trade less costly. The fundamental question remains as to whether provisions stating “to the extent possible” or “subject to national practices” will be sufficient to achieve the desired provisions of the agreement. These must not be used as a way for countries to avoid implementation of difficult reforms. Every WTO member state must remember that they have committed themselves to supporting trade, helping SMEs grow and expand to international markets and reducing costs, or else the laudable objectives of the agreement risk remaining aspirational. The outcome has been put in the hands of our political leaders, who must now prove their continued commitment to the multilateral trade system.