Caribbean Trade Law and Development

Tag: DOHA

  • Upcoming WTO Ministerial in Nairobi: Does the COP21 offer any lessons for progress?

    Alicia Nicholls

    Coming on the heels of the successful conclusion of a not perfect but monumental Paris Agreement at COP21 setting the framework for post-2015 global cooperation on climate change, the eyes of the world have now turned to another sphere of international cooperation this week – trade. On December 15-18th trade ministers and delegates from over 160 World Trade Organisation member countries will gather in Nairobi, Kenya, for the WTO’s tenth annual Ministerial Conference.

    The Nairobi Ministerial seeks to be a turning point in the currently deadlocked multilateral trade negotiations. While climate change and trade are two related but separate issues, the success at Paris causes one to wonder whether there are any take-away lessons from COP21 that can be used in achieving a substantive outcome in Nairobi.

    In July Director General of the WTO, Roberto Azevedo lamented the lack of sufficient progress to deliver a work programme on the remaining issues of the Doha Development Agenda (DDA) by the 31 July deadline. More recently on December 11,  he noted while there were no deliverables for Nairobi, there was some hope that hard work could lead to some potential outcomes; a package of measures for Least Developed Countries (LDCs), an agreement on export competition in agriculture, special safeguard mechanisms and public stockholding for food security purposes. Even so, agreement will not be easy. Some states have also been working on plurilateral agreements which include the Trade in Services Agreement (TISA), the Information Technology Agreement-2 (ITA-2) and the Agreement in Environmental Goods and Services.

    The Paris Agreement was finalised after two intense weeks but was twenty years in the making. Like the pathway to the conclusion of the Paris Agreement, the pathway towards what we all hope will eventually be a final Doha Agreement one day has been one fraught with frustration, failure,  missed deadlines and sparse successes here and there.

    The 10th Ministerial will be the sixth ministerial conference to have been held since the Doha Agenda was launched at the 4th Ministerial in Doha, Qatar in 2001. The Doha Agenda encompasses an ambitious set of 21 issues, including agriculture, non-agricultural market access (NAMA), anti-dumping, subsidies and safeguards, cotton, dispute settlement, e-commerce, the environment, government procurement and information technology agreements, intellectual property, LDCs, services and trade facilitation.  Agreement is to be achieved by consensus (agreement by all) and all of the negotiations are to be treated as components of a ‘single undertaking’, although there is also legal provision for an early harvest under Paragraph 47 of the Doha Ministerial Declaration.

    Nearly fifteen years after the start of negotiations, there has been little success to show. The notable exception is the Trade Facilitation Agreement which was concluded at the Bali Ministerial in 2013 and which has only been ratified by 57 of the WTO’s 162 members to date. There are also draft decisions like those on e-commerce and on assisting the integration of small economies to be adopted at the Ministerial this week. LDCs also scored some victory as the TRIPs Council extended until January 2033 the period during which key provisions of the TRIPS Agreement do not apply to pharmaceutical products in LDCs. But when considered against the ambitious scope which Doha had set for itself, these “successes” are not even a tip of the iceberg.

    High level of symbolism

    In both the COP21 and upcoming Nairobi Ministerial there is a level of symbolism attached to the points in time in which they are being held. In Paris, the delegates recognised that now more than ever was the opportunity for an agreement on a framework for climate change cooperation before it was too late to reverse course.

    Turning to the upcoming WTO Ministerial, not only is this the twentieth anniversary of the WTO’s existence but the first time that a WTO Ministerial will take place on the African continent. President Kenyatta’s message sums up well the hopes that African countries, which comprise 43 of the WTO’s member states, have about the significance of the WTO’s first ministerial in Africa:

    “This Ministerial Conference will be the first to take place on African soil, a historic occasion, which will do much to help further integrate the African continent into the global trading system.”

    Less optimistically, the Nairobi Ministerial  comes against the backdrop of a slowdown in global trade growth and within an uncertain global economy. Given the important role of trade in the global economy, any further movement on the negotiations front would be a positive signal.

    Diverse set of countries

    COP21 had brought together 196 countries ranging the gamut from small island developing states (SIDS), landlocked states, to industrialised nations to least-developed countries (LDCs).

    Similarly, the WTO’s membership, which will increase to 164 with the accession of two LDCS Afghanistan and Liberia, comprises a geographically diverse set of states whose varying interests and perspectives can be seen from just a cursory look at the various negotiating groups. This makes achievement of consensus on such a wide range of issues even more elusive. Large developing countries like India and China are now major players in global trade which has compelled some developed countries to object to their continued classification as “developing” countries.

    Developmental thrust but diverging interests

    In the COP21 negotiations there were several thorny issues which at some stage seemed irreconcilable. Compromise was eventually achieved in the final text. Likewise, the paralysis in the Doha Round is due to entrenched positions by both developed and developing countries on politically sensitive issues. In summary, developing nations believe that the demands by developed nations are not taking into account their development levels and objectives, while developed nations argue developing nations are not being ambitious enough in their commitments. An unfortunate consequence therefore is that members have been taking advantage of the issue-linkages by tying outcomes in one area to negotiations in other areas.

    The Chairman of the Agriculture Negotiating Group reported as of December 7 that “[d]espite the intensive consultations and progress made, there is still no appreciable convergence on any of the issues Members are working on, with a limited exception in the case of cotton”.

    Agriculture is one of the most politically sensitive issues for states and the major issues surround public stockholding, export competition, domestic support and access and the special safeguard mechanism. Any binding commitments on these issues are not simply words on a paper but will have implications for developing countries’ local farming industries, their rural poor and food security. The G-33 proposal reintroduced in November 2014 has again argued that public stockholding for food security purposes should be designated as subsidies that cause no or minimum trade distortion, the so-called “Green Box” which are except from ceilings or reductions. The ‘peace clause’, which India was able to secure at the Bali Ministerial, is only a temporary solution.  The G-33 also call for a special safeguard mechanism in agriculture whereby developing countries, with special flexibilities given to LDCs and SVEs, can temporarily raise tariffs on farm goods in response to any sudden import surges or price reductions. However, according to the latest Chairman’s report, other Members are opposed to the “idea of an outcome on SSM at MC10 in the absence of a broader outcome on agriculture market access”. Members are also still unable to come to any form of consensus on the issue of domestic support and market access.

    Another issue of importance to developing countries, including SVEs, is on improved flexibilities for tariff cuts in NAMA. They have been successful so far in having the current draft negotiating text (Rev.4) contain explicit mention of SVEs and specific treatment in market access, domestic support and export competition. However, the Chairman of the NAMA negotiating group reported on December 7 that “real progress on NAMA has remained elusive since the 9th Ministerial Conference in Bali” and that negotiations and ambition in NAMA appear to be linked to the agriculture negotiations.

    There are 48 WTO members which are LDCs, 33 of which are African states. Critically for LDCs would be the completion of a package of measures specific to LDCs which provides duty-free, quota-free market access for LDC cotton and cotton products, DFQF access to 100% of products originating from LDCs and preferential rules of origin which would ensure that LDCs can take advantage of any market access concessions. The Ministerial Conference in Bali in 2013 had called on developed country members, which had not yet done so, to provide DFQF access to least 97% of products originating from LDCs. Most countries provide some DFQF access to LDC goods, including China and India, but these are still far short of the requirement and less than the 100% which years ago Millennium Development Goal 8 had called for.

    For Small Vulnerable Economies (SVEs), besides work on the work programme for SVEs and recognition of their unique challenges through greater flexibilities and longer commitment periods, a key issue is on rules for fisheries subsidies. The fishing industry is important for SVEs as a source of food and nutrition, economic livelihood, community stability and as a contributor to GDP. Africa, Caribbean and Pacific (ACP) countries tabled a proposal which includes areas on fisheries subsidies to be addressed, including IUU fishing. The fisheries subsidies are being negotiated in the Rules Negotiations which also includes the issues of anti-dumping and countervailing measures. The Chairman Report notes that some links have been drawn by Members between outcomes in anti-dumping and fisheries while there is disagreement as to the inclusion and scope of transparency rules as a focus of the negotiating group’s work and as an outcome of the Rules negotiations. Progress on service negotiations has been non-existent for some time.

    Need for compromise

    As shown, there is a wide range of outstanding issues to be discussed at Nairobi and consensus must be reached on all for there to be any agreement. On most fronts, there are wide cleavages between negotiating positions which seem almost impossible to be bridged. Wide divergences existed in the COP21 negotiations as well, particularly on the issue of the target limit for temperature increase, loss and damage and climate finance. However, in the end what made the Paris Agreement achievable was compromise.

    Are WTO members willing to compromise to achieve outcomes? In many cases, it does not appear so. As it stands, there seems to be a splintering of opinion on whether the Doha Agenda should be pursued as the framework for the post-2015 trading agenda. ICTSD Bridges reported developing countries as expressing concern that developed countries have indicated that they “would not join a consensus on a Nairobi declaration that reaffirms the Doha declaration or subsequent ministerial communiques that mention the ongoing Doha Round of talks”.  Moving away from the Doha Agenda, an agenda which is developmental in its outlook, is a move which developing countries should not support. Among other things the Doha Ministerial Declaration reaffirms parties commitment to the objective of sustainable development, confirms that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system, reaffirms that provisions for special and differential treatment are an integral part of the WTO Agreements and agrees to a work programme, under the auspices of the General Council, to examine issues relating to the trade of small economies.

    There has also been calls by developed countries for an expansion of the current negotiating agenda to include the “Singapore” issues of competition policy, investment measures and government procurement and newer issues which take into account the growing digital economy. Developing countries are firmly against the inclusion of any extra issues, especially the “Singapore” issues, out of fears that any binding obligations in these areas would further erode policy space. Others fear that their limited capacity to implement obligations on these areas would put them at risk of having claims brought against them in the WTO dispute settlement mechanism. Moreover, developing countries are also against the widening of the agenda to include any additional areas when developed countries have shown little interest in compromising on existing areas such as on the large agricultural subsidies they give to their farmers.

    Frustration with the deadlock in the Doha negotiations has led to an increase in regional trade negotiations, evidenced by the trend towards ‘mega regional trade agreements’ such as the recently concluded Trans-Pacific Partnership Agreement. While I do not necessarily see these mega agreements as threats to the multilateral trading system, the growing frustration with the current negotiations makes the need for Nairobi to be a turning point even more critical.

    The way forward?

    The Paris Agreement is by no means perfect but has been endorsed by both developed and developing states. The key success factors at the COP21 which led to an agreement were a shared vision that the sustainable future of the world depended on a deal at that moment, a group of States which were prepared to accept nothing less than a deal which put the planet and their survival first, and the political will on the part of all States to put aside narrow political and national interests to come up with a meaningful agreement, even where that necessitated some compromise on politically sensitive issues.

    In the case of the Nairobi Ministerial, some of these factors exist. This year is the twentieth anniversary of the WTO’s existence. There is recognition at least in principle that actions taken at Nairobi will affect the course of the global trade agenda and that the first WTO ministerial conference on African soil is the opportune moment for pushing for outcomes which will go a long way in integrating African countries into the global trading system. Moreover, developing countries, including African LDCs, have insisted and continue to insist that any outcomes must be developmental in focus. The requirement of consensus means that compromise by both developed and developing countries will be necessary to bridge the wide gaps between members’ negotiating positions but not where such compromise defeats development objectives. Any Nairobi outcomes must be ambitious but fair, global in outlook but take into consideration the vulnerabilities and capabilities of developing countries (particularly SVEs and LDCs) and complement the post-2015 sustainable development agenda. In the end, as always, it will all come down to political will.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • The WTO Trade Facilitation Agreement and Caribbean Small Island Developing States: Challenges and Opportunities

    Alicia Nicholls

    Getting raw sugar from a sugar factory in Guyana or Suriname to supermarkets and kitchens half-way across the world involves many different customs processes and paperwork. The World Trade Organisation’s Trade Facilitation Agreement seeks to cut the red tape and reduce the transaction costs and delays in the movement, release and clearance of goods across borders through the harmonisation, simplification and acceleration of customs procedures.

    Trade facilitation, along with investment, competition policy and government procurement, was one of the four “Singapore Issues” which developing countries were opposed to including in the multilateral negotiation agenda at the 5th WTO Ministerial in Cancun in 2003. However, negotiations on trade facilitation were eventually launched in 2004 (pursuant to Annex D of the July Package) with the “aim to clarify and improve” relevant aspects of trade facilitation articles under the GATT 1994″ in order to speed up the movement, release and clearance of goods, including goods in transit.

    After nearly ten years of negotiations, the TFA was concluded at the 9th WTO Ministerial Conference in Bali, Indonesia in 2013. It is the only multilateral trade agreement to be concluded so far out of the deadlocked Doha Development Round and the first since the WTO was established twenty years ago.  A separate Protocol of Amendment was adopted by WTO members on November 27, 2014 to insert the TFA into Annex 1A of the WTO Agreement.

    The TFA will enter into force once two-thirds of the WTO’s 161 states (as at April 2015) ratifies the agreement. So far of the only 52 countries which have already ratified the agreement, Trinidad & Tobago and Belize are the only countries of the Caribbean Community (CARICOM) to have done so, while Mauritius is the only other SIDS worldwide to have done so. A report published by UNCTAD in September 2014 on the status of implementation revealed that though a priority, trade facilitation is a major challenge for developing countries and least-developed countries (LDCs) and that some of the major barriers to implementation are lack of resources and of legal frameworks.

    Caribbean Economies are trade dependent

    Trade facilitation is important for Caribbean economies which have a high dependence on trade. Limited natural resources and lack of scale make most Caribbean SIDS (with the exception of Trinidad & Tobago) highly dependent on imported food, fuel and medicines, while their export profiles are characterised by a narrow range of exports and export markets. They have limited participation in global value chains and face declining terms of trade.

    Smaller Caribbean SIDS have largely diversified from economic dependence on mono-crop agriculture to services trade, mostly tourism and/or financial services. However, the major commodities exporters in the region (Trinidad & Tobago and the mainland countries of Guyana, Suriname and Belize) rely on exports ranging from oil and natural gas in Trinidad & Tobago and Belize, to aluminium, rice and raw sugar in Guyana and Suriname.

    Importance of Trade Facilitation

    Despite market access opportunities created by trade agreements, a major complaint for Caribbean SIDS exporters, especially small and medium sized enterprises (SMEs), have been the cumbersome hurdles they face when seeking to export to foreign markets. These hurdles include not just complex customs procedures but also stringent sanitary and phyto-sanitary standards (SPS) and technical barriers to trade (TBTs), these latter two are covered in other WTO agreements (i.e. the SPS and TBT Agreements).

    Customs procedures vary by country. By standardising and simplifying customs procedures, reforms pursuant to the TFA can enhance access and predictability for Caribbean SIDS exporters in foreign markets and promote export diversification.

    As the industrial action by customs officials in Barbados earlier this year showed, customs delays can negatively impact businesses and consumers. These delays can stem from the time taken to process applications for obtaining import or export licenses to the length of time for barrels and containers to clear ports.The quicker goods clear customs the quicker they can reach businesses and consumers for use as inputs or as final goods. Efficient customs release and clearance is particularly important for time-sensitive perishable products such as fruit and meats. Loss of perishable goods equals lost revenue to businesses.

    Transparent customs procedures and rules can also limit the opportunity for corruption by officials at checkpoints. Moreover, as import duties are still important revenue sources for Caribbean SIDS, modernisation of customs collection procedures can facilitate increased tariff revenue collection.

    The Agreement

    The TFA is divided into 3 sections: general provisions, special and differential treatment provisions for developing country members and least-developed country members (LDCs) and institutional arrangements and final provisions.

    It provides binding obligations in relation to procedures for pre-arrival processing, electronic payment, procedures allowing the release of goods prior to the final determination of customs duties, taxes, fees and charge, a risk management system for customs control, post-clearance audits, establishment and publication of average release times, procedures to allow expedited release of at least goods entered through air cargo facilities and procedures for releasing perishable goods within the shortest possible time.

    Provisions requiring publication and availability of information (such as applied rates and import/export restrictions) on the internet and for allowing traders and “other interested parties” the opportunity for comment and if necessary consultations before introducing or amending laws of general application to trade in goods, aim to promote transparency. While this latter provision may sound like an invasion of policy space, developing countries should take advantage of this provision to have their say on proposed policies by developed countries which might have an impact on their exporters.

    The Agreement also includes some ‘best endeavour” provisions, such as encouraging members to use relevant international standards in their formalities and procedures and to establish a single window for traders. The Agreement further provides for the establishment of a permanent WTO committee on trade facilitation and member states are required to designate a national committee to facilitate domestic coordination and implementation of the provisions of the Agreement.

    Special and Differential Treatment

    The TFA presents numerous benefits for Caribbean SIDS. However, Caribbean governments’ capacity to implement these trade facilitation reforms varies considerably as evidenced by the difference in their Category A notifications.

    The special and differential treatment provisions in Section II of the Agreement take this into account by linking countries’ commitments to their capacity to implement them. Moreover, LDCs will only be required to undertake commitments to the extent consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.

    These flexibilities are based on the modalities that had been agreed in Annex D of the July 2004 Framework Agreement and paragraph 33 of and Annex E of the Hong Kong Ministerial Declaration. Developing countries and LDCs are to receive assistance and support for capacity building to implement the provisions of the Agreement in accordance with their nature and scope.

    Developing and LDC countries are required to categorise each provision of the Agreement  based on their individual implementation capacity, with Category A being those measures they can implement by the time the Agreement comes into force (or within one year after  for LDCs), Category B being those which they will implement after a transitional period following the Agreement’s entry into force and Category C meaning those which require capacity building support for implementation after a transitional period after the Agreement’s entry into force. Most Caribbean SIDS, including Barbados, have now submitted their Category A notifications.

    Trade Facilitation Facility

    A key developmental element of the TFA, the Trade Facilitation Facility (TFF) was established in July 2014 to provide assistance to developing countries and LDCs to ensure “no WTO member is left behind”. The TFF is to provide assistance in helping them assess their capacity to implement the TFA, by maintaining an information sharing platform to assist with the identification of possible donors , providing guidance on the implementation of the TFA through the development or collection of case studies and training materials,  undertaking donor and recipient match-making activities and providing project preparation and implementation grants related to the implementation of TFA provisions in cases where efforts to attract funding from other sources have failed.

    According to the World Trade Report 2015, once it enters into force, the TFA is expected to reduce total trade costs by up to 15 per cent in developing countries.

    Status of Implementation

    At the recently concluded COTED meeting in Georgetown, Guyana, CARICOM members reported on their status of TFA implementation. However, this status information has not been made public. Despite this, the Organisation for Economic Cooperation and Development (OECD) has a ‘compare your country on trade facilitation performance’ portal which allows for comparing countries on trade facilitation indicators.

    Looking at Barbados’ performance for instance, Barbados “matches or exceeds the average performance of high income countries in the areas of fees and charges and simplification and harmonisation of documents”, with performance improving in appeal procedures and automation. However, some ground was lost in information availability and internal border agency cooperation.

    Implementation Challenges

    Trade facilitation reforms can be beneficial to Caribbean SIDS.  This does not mean however that there will not be significant implementation challenges, particularly the infrastructure costs related to technology and equipment, and administrative, human resource and training costs. There will also be costs associated with raising private sector awareness. These costs are not just one-time costs but are recurring.  In light of competing resource demands and their limited access to concessionary loans these costs will not be easy for cash-trapped Caribbean SIDS which already have high debt to GDP ratios.

    The flexibilities in the Agreement allow states  to implement the provisions in accordance with their capabilities and there are aid for trade initiatives such as the European Development Fund of which Caribbean SIDS have been taking advantage in varying degrees.  Other challenges for implementation include limited human resource capacity and the need to reform existing laws and regulations to give effect to obligations.

    Surveys of developing countries and LDCs conducted by the WTO found that trade facilitation remains a high priority for developing countries. For Caribbean SIDS there certainly has been some interesting developments on this front. The governments of several Caribbean states have openly stated their countries’ firm commitment to trade facilitation and their recognition of its potential for economic growth.

    Trinidad & Tobago was recently approved for a $25 million loan from the Inter-American Development Bank (IDB) to help strengthen the country’s Single Electronic Window for Trade and Business Facilitation Project (TTBizLink). With the aim of becoming a logistics hub, Jamaica has recently established a Trade Facilitation Task Force. Technical assistance and aid for trade facilitation are also included in the EC-CARIFORUM Economic Partnership Agreement, which includes a protocol on mutual administrative assistance in customs matters.Moreover, in Barbados’ latest Trade Policy Review 2014 WTO members noted the considerable progress the country made with respect to the adoption of trade-facilitation measures. Recently, the island  also amended its Customs Act to allow for post-clearance audits.

    Taking full advantage of the technical assistance, aid and capacity building assistance under the TFF will be key for Caribbean SIDS in their implementation efforts.

    The Case of Mauritius 

    As the Indian Ocean island of Mauritius was the first SIDS to ratify the Agreement, it provides useful lessons for Caribbean SIDS. Seizing the opportunity to boost its competitiveness, Mauritius has received assistance from the International Trade Centre and UNCTAD, including for the establishment of the Mauritius National Trade Facilitation Committee. One can read about the Mauritius experience here.

    Conclusions

    Despite the high costs and challenges of implementation, trade facilitation reforms pursuant to the WTO TFA have the potential to bring many benefits to Caribbean SIDS. By streamlining the flow of cross-border trade, the ratification and speedy implementation of the TFA by Caribbean SIDS and their trade partners will allow Caribbean exporters to capitalise on the market access openings available in foreign export markets, thereby boosting Caribbean SIDS’ export competitiveness and GDP growth, with spillovers for income and job creation. However, regional exports will still need to meet SPS and technical standards which for many exporters still remain significant barriers to trade.

    Ratification and full implementation  of the TFA by all CARICOM states could also improve Caribbean regional integration by easing transaction costs of exporting across CARICOM states. Implementing these reforms also send a strong signal to the business community of these countries’ commitment to improving their business environment.

    Full realisation of the benefits of the TFA will not be automatic and the degree will largely be contingent on the pace and depth of implementation of the Agreement by  Caribbean governments and their trading partners and on stakeholder buy-in. Stakeholder holder consultation and strong coordination between public and private actors will be crucial for the formulation of implementation plans and the monitoring and assessment of the impact of the reforms. In this regard, lessons can be learnt from the Mauritius experience. Trinidad & Tobago and Belize have already made the step by ratifying  the Agreement. It is hoped that other Caribbean SIDS will soon follow suit.

    The full text of the Trade Facilitation Agreement is available here:

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.