Assessing the implementation of the WTO Trade Facilitation Agreement in landlocked developing countries
Zibanani Kahaka
There are particular economic development challenges faced by Landlocked Developing Countries (LLDCs), resulting from their lack of direct access to the sea. As a result, LLDCs incur high transit costs and delays. These challenges render exports from LLDCs relatively uncompetitive (WTO/OECD, 2015).
Due to the COVID-19 global pandemic, these challenges are likely to have worsened. Governments across the world had to implement measures to combat the pandemic and these included, among others, closing of borders as well as import and export restrictions. Further, some of LLDCs’ trading partners increased sanitary and phytosanitary restrictions and quantitative controls and other associated technical barriers to trade. For LLDCs, this has resulted in a severe reduction in economic activity posing a huge challenge to their already fragile economies, since their participation in international markets depends on access to neighboring countries’ seaports (WTO, 2015; 2021; UN-OHRLLS, 2018).
Already before the COVID-19 pandemic, In an effort to address the above-mentioned trade related challenges experienced by LLDCs, the Vienna Programme of Action (VPoA) recognized international transport and trade facilitation as one of the channels to help reduce the high trade costs borne by the LLDCs, and to ensure the participation of LLDCs in the global value chains. In this context, the VPoA aimed at increasing exports substantially to ensure market and product diversification through value added and manufacturing components (UN-OHRLLS,2014; 2018).
LLDCs Trade Performance
For LLDCs, trade as a percentage of GDP was 69.5 percent on average in 2015. In the same year, the share of these countries’ exports in global exports declined to 0.97 percent, from an average of 1.21 percent between 2011 and 2014. Regarding the LLDCs’ involvement in international trade, the total merchandise exports from LLDCs fell drastically in 2015, by 30 percent, to USD 160 billion. This decline can be attributed to a decline in commodity prices during that period. On the other hand, merchandise imports to LLDCs also declined, reaching an estimated USD 195 billion in 2015 (UNOHRLLS, 2017).
In 2014, the average cost to export and import a single container from an LLDC was USD 3,444 and USD 4,344 respectively. Transit countries, however, incurred much lower average costs for exporting and importing containers (USD 1,301 and USD 1,559 respectively). As recognized by the VPoA, the complete implementation of the WTO Trade Facilitation Agreement is expected to reduce the delays encountered by more than a day and a half for imports and by almost two days for exports (UNOHRLLS, 2017; 2018). This reduction of time will lead to a reduction of costs for traders.
The exports of most LLDC still consist of few low-value-added primary exports. This primary commodity export concentration shows that the LLDCs have not yet permeated the regional and international value chains andit is crucial for their economies to increase their participation. Integration provides a channel for industrial transformation and economic diversification. In addition, it can reduce trade and logistics costs by decreasing the distance to markets, helping LLDCs to diversify their markets (UNOHRLLS, 2017).
Progress achieved in the implementation of the WTO Trade Facilitation Agreement by LLDCs
Trade facilitation is defined as the simplification and harmonization of international trade procedures including activities, systems and procedures used in collecting, presenting, transmitting and handling the data that is important for the movement of goods in international trade (WTO, 2021; UNOHRLLS, 2018).
The LLDCs involvement in international trade is restricted by inefficient processes within the national borders as well as outside national borders (UNOHRLLS, 2018). Governments, businesses, consumers, and the entire economies experience negative trade cost effects resulting from delays at ports of entry and at borders, and also from lengthy procedures and administration inefficiencies. The WTO Trade Facilitation Agreement provides a series of measures to create a global framework that will assist in addressing some of the huge challenges faced by LLDCs. Recent studies by the WTO claim that the implementation of the Trade Facilitation Agreement will lead to a reduction of global trade costs by between 9 and 23 percent (WTO ???).
One hundred and fifty-four (154) WTO members had ratified the TFA by the end of April 2021, including all of the twenty-six (26) LLDCs that are WTO members. These LLDCs have also submitted their Category-A measures and are at various levels of implementation. This reveals high level commitment and importance given of the WTO Trade Facilitation Agreement by LLDCs (WTO TFA Database, 2021). Table 1 below depicts the rate of implementation of commitments by all WTO members and the LLDCs.
Due to the COVID-19 global pandemic, these challenges are likely to have worsened. Governments across the world had to implement measures to combat the pandemic and these included, among others, closing of borders as well as import and export restrictions. Further, some of LLDCs’ trading partners increased sanitary and phytosanitary restrictions and quantitative controls and other associated technical barriers to trade. For LLDCs, this has resulted in a severe reduction in economic activity posing a huge challenge to their already fragile economies, since their participation in international markets depends on access to neighboring countries’ seaports (WTO, 2015; 2021; UN-OHRLLS, 2018).
Already before the COVID-19 pandemic, In an effort to address the above-mentioned trade related challenges experienced by LLDCs, the Vienna Programme of Action (VPoA) recognized international transport and trade facilitation as one of the channels to help reduce the high trade costs borne by the LLDCs, and to ensure the participation of LLDCs in the global value chains. In this context, the VPoA aimed at increasing exports substantially to ensure market and product diversification through value added and manufacturing components (UN-OHRLLS,2014; 2018).
LLDCs Trade Performance
For LLDCs, trade as a percentage of GDP was 69.5 percent on average in 2015. In the same year, the share of these countries’ exports in global exports declined to 0.97 percent, from an average of 1.21 percent between 2011 and 2014. Regarding the LLDCs’ involvement in international trade, the total merchandise exports from LLDCs fell drastically in 2015, by 30 percent, to USD 160 billion. This decline can be attributed to a decline in commodity prices during that period. On the other hand, merchandise imports to LLDCs also declined, reaching an estimated USD 195 billion in 2015 (UNOHRLLS, 2017).
In 2014, the average cost to export and import a single container from an LLDC was USD 3,444 and USD 4,344 respectively. Transit countries, however, incurred much lower average costs for exporting and importing containers (USD 1,301 and USD 1,559 respectively). As recognized by the VPoA, the complete implementation of the WTO Trade Facilitation Agreement is expected to reduce the delays encountered by more than a day and a half for imports and by almost two days for exports (UNOHRLLS, 2017; 2018). This reduction of time will lead to a reduction of costs for traders.
The exports of most LLDC still consist of few low-value-added primary exports. This primary commodity export concentration shows that the LLDCs have not yet permeated the regional and international value chains andit is crucial for their economies to increase their participation. Integration provides a channel for industrial transformation and economic diversification. In addition, it can reduce trade and logistics costs by decreasing the distance to markets, helping LLDCs to diversify their markets (UNOHRLLS, 2017).
Progress achieved in the implementation of the WTO Trade Facilitation Agreement by LLDCs
Trade facilitation is defined as the simplification and harmonization of international trade procedures including activities, systems and procedures used in collecting, presenting, transmitting and handling the data that is important for the movement of goods in international trade (WTO, 2021; UNOHRLLS, 2018).
The LLDCs involvement in international trade is restricted by inefficient processes within the national borders as well as outside national borders (UNOHRLLS, 2018). Governments, businesses, consumers, and the entire economies experience negative trade cost effects resulting from delays at ports of entry and at borders, and also from lengthy procedures and administration inefficiencies. The WTO Trade Facilitation Agreement provides a series of measures to create a global framework that will assist in addressing some of the huge challenges faced by LLDCs. Recent studies by the WTO claim that the implementation of the Trade Facilitation Agreement will lead to a reduction of global trade costs by between 9 and 23 percent (WTO ???).
One hundred and fifty-four (154) WTO members had ratified the TFA by the end of April 2021, including all of the twenty-six (26) LLDCs that are WTO members. These LLDCs have also submitted their Category-A measures and are at various levels of implementation. This reveals high level commitment and importance given of the WTO Trade Facilitation Agreement by LLDCs (WTO TFA Database, 2021). Table 1 below depicts the rate of implementation of commitments by all WTO members and the LLDCs.
Table 1: Total and Category implementation rates of WTO members as of 31
December 2020.
Source: author using data from WTO TFA database
In 2020, LLDCs had implemented 34.7 percent of all notifiable
commitments, and this has since increased to 50.7 percent in 2021. Of these
commitments 14,7 percent will require an extension to allow for implementation,
while 34.7 percent fall under category C, meaning that LLDCs will require
technical support to enable implementation of those commitments. Transit
countries which are important for LLDCs to successfully implement the WTO Trade
Facilitation Agreement have an implementation rate of 60.5 percent, which is
also an increase from 51 percent in 2020 (WTO TFA database, 2021).
Regarding the envisaged beneficial key provisions for LLDCs, progress as well as challenges have been observed. One of these key provisions is Article 11, which covers freedom of transit. This article is inclusive of various commitments that aims at facilitating the movement of goods through the country. [will assist LLDCs to facilitate movement of goods through a country ]and enable the LLDCs to achieve their objective of reducing trade costs and delays at the borders which. These commitments include transit fees, transit infrastructure, non-discrimination, as well as guarantees, among others. For LLDCs, the implementation rate on Article 11 notifications stands at 58.4 percent while that of transit countries is at 56.7 percent (WTO, 2021).
Some of the measures in the Trade Facilitation Agreement might be relatively easy and straightforward to implement. However, some measures such as border agency cooperation, importation formalities, transit, exportation, establishment of a single window, advance rulings, and authorized operators, will require more investment and technical knowledge to undertake. Hence, it is important that LLDCs put a suitable legal framework in place, without which many LLDCs will not be able to maximize their potential in international trade.
In addition, some LLDCs have insufficient resources, infrastructure, administrative framework, limited or no understanding of the different trade facilitation measures, lack of collaboration and support, lack of communication between government institutions and other stakeholders such as the private sector. These LLDCs have realized their constraints and hence have indicated their need for technical support in terms of capacity building and guidance, legislative and regulatory frameworks, as well as information and communication technologies support in order to effectively implement the different areas of these complex measures (WTO, 2021; UN-OHRLLS, 2018).
Further, the WTO and partner agencies also acknowledge the importance of providing technical support to facilitate the implementation of the Trade Facilitation Agreement. As a result, WTO set up a Trade Facilitation Committee to provide a forum to discuss challenges experienced by countries when implementing the Agreement. The committee also reviews progress and notifications and share experiences and information (WTO, 2021; UN-OHRLLS, 2018).
Conclusion
Despite the implementation of the Vienna Programme of Action in 2014, the trade performance of LLDCs has been unstable. LLDCs still depend on a few low value-added primary exports. However, LLDCs have made significant progress in implementing the WTO Trade Facilitation Agreement. To date, LLDCs have implemented 50.7 percent of all notifiable commitments, and have indicated their need for technical support for 34.7 percent of their commitments. The areas needing support include training human resources, legislative and regulatory frameworks, and Information and Communication Technologies (ICTs). The WTO and its partner agencies acknowledge the importance of technical assistance in the implementation of the Agreement, and have put in place a trade facilitation committee, WTO aid-for-trade. These establishments are there to assist in addressing issues and concerns as faced by the LLDCs in the implementation of the WTO Trade Facilitation, and will also certainly address challenges emanating from the COVID-19 global pandemic. In addition to receiving technical assistance,LLDCs can overcome some of their challenges through policy related actions. For example, they can ensure that trade facilitation and the WTO Trade Facilitation Agreement are part of their national and regional policies and plans, and strive as much as possible to have regular and harmonized legal administrations across the region. In addition, ICT connectivity should be given due attention by the LLDCs as it plays a major role in trade facilitation and in addressing some of the challenges faced by the LLDCs.
Zibanani Kahaka
Zibanani Kahaka is a lecturer at the University of Botswana who has experience in teaching economics, carrying out research, and economic development planning. She has also acquired skills in developing teaching materials and developing learning outcomes for digital textbooks. Her research interests are in trade facilitation, trade policy analysis and economic development.
References
OECD/World Trade Organization, (2015), “Implementing the Trade Facilitation Agreement”, in Aid for Trade at a Glance 2015: Reducing Trade Costs for Inclusive, Sustainable Growth: World Trade Organization/OECD Publishing, Paris.
UN-OHRLLS, (2017) landlocked Developing countries: Fact and figures 2017, available online at http://unohrlls.org/about-lldcs/indicators-and-statistics/ retrieved 07/05/2021.
UN-OHRLLS, (2014). Vienna Programme of Action for Landlocked Developing Countries for the Decade 2014–2024. Vienna.
UN-OHRLLS (2018), Promoting International Trade in the LLDCs and enhancing the implementation of the WTO Trade Facilitation Agreement. Ministerial Meeting of LLDCs on Trade and Transport Astana, Kazakhstan, May 2018.
WTO (2015), World Trade Report 2015: Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement. Geneva, Switzerland
WTO (2021), WTO input For UN-SG Report On VPoA 2021, available online at https://www.wto.org/english/news_e/news21_e/devel_26apr21_e.htm , retrieved on 07/05/2021.
WTO TFA Database, (2021), implementation data, available online at https://tfadatabase.org/ , retrieved 06/05/2021.
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