Trade facilitation within the WTO – a possible approach for transition economies

 

On the occasion of the 6th Session of the Committee for Trade, Industry and Enterprise Development under the aegis of the UN Economic Commission for Europe (29-31 May 2002), on 31 May 2002 it was organized a Round Table on Implementation of Trade Facilitation in Transition Economies.

 

One of the presentations was made by H.E. Mr. Nicolae Ropotean, Executive National SECI coordinator for Romania.

 

 


 

Trade Facilitation within the WTO

- a possible approach for transition economies -

 

Address by Ambassador Nicolae Ropotean

ROMANIA

 

 

I want to start my presentation by expressing my gratitude to the UN Economic Commission for Europe for this commendable initiative and for the efforts deployed. It is a challenging exercise, but very rewarding.

 

The first point to make here with regard to trade facilitation from the standpoint of a transition economy is that economies in transition, due their unique, sometimes odd, unconceivable features, are a stage whose potential for change and improvement is watched closely by key players in the trade world. The World Trade Organization itself recognized at its fourth Ministerial Conference in Doha last November the need for enhanced technical assistance and capacity building in the area of expediting the movement, release and clearance of goods, including goods in transit. Hence, the ministers tasked the Council for Trade and Goods to identify the trade facilitation needs and priorities of Members, in particular developing and least-developed countries, including economies in transition; one might add, in order to start multilateral negotiations thereon after the next ministerial meeting in Mexico, September 2003.

 

To my way of thinking, the idea of trade facilitation has come up because of a plethora of hindering aspects which stop the normal flow of commodities from one country to another, with all the resulting consequences for a healthy economic growth and the ability to fulfill WTO trade requirements.

 

Trade facilitation was thus meant to be the driver or impetus for correction of the problems encountered by traders.

 

Economies in transition expect traders to have full knowledge of other countries’ trade rules and practices in order to take advantage of the trade benefits granted by Members’ WTO commitments. Full, simple and easily accessible information is important for SMEs to do business, and for Governments, a business-friendly design and administration of trade policy reduces trade conflicts.

 

For the transition and developing economies, transparency and predictability in the implementation of trade regulations and procedures are, finally, an important aid to development.

 

According to our practical experience, when deciding to enforce a liberal trade policy and a subsequent trade facilitation framework, Governments should pursue two major goals:

 

- first, to make the economy act in accordance with the multilateral agreed instruments, mechanisms and rules, and

-second, to encourage the development of a competitive environment, capable to foster the enforcement of market rules.

 

There are quite a few risks involved in such an endeavor, no doubt, but we believe risks should be allocated to entities that are most capable of managing each risk, are qualified to transform a transition economy into a market-based economy and have the credentials to ensure that producers act in a competitive environment. In order to attain such objective, due emphasis should been given to the WTO core principles, i.e. transparency of trade policy, national treatment and most-favoured-nation treatment.

 

From a transition standpoint, there is a Decalogue of principles and objectives to be actively sought out by international trade policy makers when establishing the rules that will govern a possible framework on trade facilitation:

 

1)     The aim of a trade facilitation framework should be to the benefit of the developing and transition economies, by encouraging them to implement the best practice that will speed up the customs process, reduce costs, improve collection of revenues and detect illegal transactions.

2)     A WTO framework must provide a clear strategy, based upon the core WTO principles, and avoid trade distortions.

3)     The framework must provide the necessary tools for assuring a degree of assessment and enforcement.

4)     Developing countries should be enabled to assess the consequences of the facilitating measures they are to implement.

5)     Because of their sensitivity, dispute settlement provisions will need special consideration.

6)     The developing countries will always adopt a lower degree of trade facilitation compared to developed economies (the known principle of special and differential treatment, used also in the others WTO Agreements).

7)     The framework should provide for a transitional period of time in favor of the developing economies and support measures from the developed countries (technical assistance and capacity building). US, EU and other developed nations are already doing just that.

8)     Trade facilitation should be negotiated in the formal trade Rounds, possibly in a package with other WTO agreements (“single undertaking” principle). I think this is the only “win-win” solution.

9)     A set of obligations of the developed and developing countries should be clearly drawn up, and a minimum level of trade facilitation to be reached out within, for example, 10 years of signature of the WTO results of negotiations (the usual transitional period in the WTO).

10) The Members should be encouraged to bind their obligations, to define a work program and a review mechanism to assess the performances, under the aegis of the Council for Trade in Goods and the support of the WTO Secretariat.

 

Customs regulations form the major part of such a framework on trade facilitation. There is no single, precise model that ca be offered as representing a standard for restructuring customs regulations and abolishing customs habits, for that matter, in a transition economy. Each of the countries in transition brings their own particular blend of political ambitions and economic hopes in the trade arena. An enforced customs tariff based on the Harmonized System (HS), with all tariff lines bound under the WTO Agreement, is of a major importance. The Import Customs Tariff should strengthen its role and importance and should represent the main instrument of trade policy and protection at the border.

 

There are also other aspects of the trade policy which must be taken into consideration when speaking about trade facilitation: restrictions or quantitative limitations, trade defence measures (antidumping, countervailing measures, or safeguard measures), licensing system. When implemented in an unpredictable and non-transparent manner, they could all generate trade distortions and hamper the normal trade flows.

 

Within the European economic integration, liberalization of trade relations on a regional level is a preparation for the speeding up of multilateral trade liberalization and enhances the enforcement of WTO rules. The EU Association Agreements, as well as the regional free trade agreements, must include provisions stating the legal prevalence of GATT and WTO rules.

  

To all these Romania is no exception. However, the Romanian case is worth taking if one seeks details about the process of change that has occurred and the approach of an Eastern European transition economy to the rules on which a possible WTO framework on trade facilitation might be based.

 

            Romania’s economy and society have developed from an excessively  centralized system to a market economy, from a totalitarian regime to a democratic society. The financial and economic crisis as well as political changes and events which occurred in several parts of the world adversely affected Romania’s foreign trade and increased the already high social costs of transition.

 

On top of it all, Romanian exports have been directly affected by:

-            the disappearance of several traditional markets;

- the observance of the UN embargoes on countries having an important weight for Romanian exports or debts to be reimbursed;

- the intensification of commercial defence measures as a result of turmoil in international markets.

 

Meanwhile, the high degree of export dependence on imports determined the continuous deterioration of the balance of payments, in addition to the increasing demand for imported products from the population and industry, as a result of the country’s liberal trade regime.

 

Consequently, Romania has, indeed, enforced one of the most liberal trade policy, in spite of all these difficult circumstances:

 

-          no export subsidies were granted;

-          import restrictions were eliminated back in 1992, while export restrictions were gradually relaxed and finally abolished as of 1998;

-          no commercial defense action has been taken on a multilateral level.

 

As far as regional integration agreements is concerned, all such agreements concluded by Romania include provisions according to which trade relations between partners are governed by the multilateral principles and rules, each specific provision of these agreements being either a reiteration of those included in WTO legal texts or even a stronger rule.

 

Again, regional projects have set out good examples of how the purpose of trade facilitation can be reached out in practice to the benefit of the transition economies.

 

            A practical example is the project Trade and Transport Facilitation Program in Southeast Europe (TTFSE), promoted in the frame of both the Stability Pact for South Eastern Europe (SPSEE) and South East Europe Cooperative Initiative (SECI), with the World Bank support.

 

A joint supervision mission for TTFSE has recently assessed that while the trade facilitation development component and Customs information system were well advanced, customs reforms and border crossing facilities were still lagging behind.

 

It goes without saying that, in order to improve the implementation of this project, the Romanian Government is contemplating a host of measures, among which:

-          a better coordination and demarcation/division of responsibilities between Customs and Border Police (review of the relevant legislation), and

-          conclusion of the methodological framework concerning risk-based selective and targeted verifications, which is meant to bring about improvement of Customs efficiency.

 

Other international organizations have an important part to play in trade facilitation, too. Take, for instance, UNCTAD technical assistance in this area. ASYCUDA (the Automated System for Customs Data) has been a very successful trade facilitation project in Romania. The system has been introduced in over 100 Romanian locations, and is considered suitable as a model for replication elsewhere assuming the necessary dedication of senior customs officials and government.

 

Also, in keeping with the provisions of the Memorandum of Understanding of the Facilitation of International Road Transport of Goods in the region of the South East Europe Cooperative Initiative (SECI), PRO Committees in Romania and in the neighboring countries meet regularly to discuss topics related to the difficulties and poor performances that disturb the fluidity of traffic at border crossings. Among the results one may count the abolition of visa for professional drivers for Italy as of May 1, 2002 and the advanced stage of introducing the Single Payment Window (One Stop Shop) at pilot sites at a number of border points.

 

Last of all, let us ask ourselves what do the traders themselves think about making the trade facilitation successful? I think this is a question for the WTO negotiating Round to be answered.

 

Our role should be to rely on their experiences in the negotiating process, to take into account their needs and priorities, so as to set up a  multilateral framework on trade facilitation which will answer their problems and concerns.

 

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