Regional integration through joint trade facilitation reforms
Boosting regional trade with coordinated and harmonized implementation of the Trade Facilitation Agreement
Regional implementation of trade facilitation reforms can bring more significant benefits to regional economic communities (REC) and their member states rather than uncoordinated measures applied by each country autonomously. Regional approaches can ensure that traders in the same region are not burdened by differing customs formalities and cross-border requirements that hinder cross-border trade in the region. Importantly, uniform formalities and procedures conceived and coordinated at the regional level can remove bottlenecks, increase the participation of small and medium-sized enterprises (SMEs) and enhance the competitiveness of regional value chains, thus deepening regional integration.
A healthy business environment and the ease of doing business are critical for thriving regional cross-border trade. A poor cross-border trading environment partly explains why only 14% of total African trade is intraregional compared to approximately 50% for Asia and 70% for Europe. In fact, when shipping goods between two countries in West Africa, it may be cheaper to ship them through Europe than directly. This is partly due to highly cumbersome customs procedures, high transportation costs and poor infrastructure throughout the region, which seriously hamper regional trade and integration.
To overcome these problems, RECs have aimed to coordinate reforms for trade facilitation. A notable example is Association of Southeast Asian Nations (ASEAN) Single Window initiative, which connects and integrates the national single windows of its member states, allowing border documents to be exchanged electronically among countries and expediting the time required for clearance. In Africa, RECs such as the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) are actively developing joint border post initiatives, which eliminate the need for goods to stop twice for border-crossing formalities and should enhance intraregional trade.
By tackling border administration challenges and addressing procedural obstacles to trade, the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) can be instrumental in deepening regional integration. Entering into force in February 2017, the agreement created binding obligations for WTO Members to implement reforms to expedite the movement, release and clearance of goods, including goods in transit. It provides a unique opportunity for countries and RECs to include trade facilitation as a priority agenda item in their regional integration processes or deepen initiatives already in place.
The TFA is an important step forward in harmonizing the trade facilitation environment. It provides an approved legal framework within which neighbouring countries – and RECs – can coordinate and adjust their reform programmes. While the TFA is legally binding and enforceable for individual WTO Members, the agreement recognizes and supports the contribution of regional bodies to implementation, with specific references to regional arrangements, which national governments and RECs should consider. The agreement also allows the flexibility for countries and regions to coordinate reforms according to specific priorities.
Developing countries and least developed countries (LDCs) within RECs not only benefit from a differential timetable to meet their TFA commitments, they also enjoy specific technical assistance and capacity building.
The implementation of TFA may also have an indirect regional dimension. There are many examples of measures with potential regional implementation capacity in the agreement, such as Article 1.1 and Article 1.2 on publication and availability of information through the Internet, which can be implemented in a coordinated manner to provide traders with a common regional platform where to retrieve information. Another is Article 7.7 on trade facilitation measures for authorized operators, whereby if member states within an REC agree on a common set of qualifying criteria, it will support business participation to each national scheme within a REC and create a basis for mutual recognition agreements.
In its aim to help RECs foster a conducive business environment and deepen regional integration, the International Trade Centre (ITC) has developed a toolkit based on a six-step methodology to assist policymakers in designing, implementing and monitoring regional trade facilitation reforms. It provides a comprehensive review of relevant instruments and approaches available to regional institutions and their member states. Its objective is to support RECs in designing regional trade facilitation reforms tailored to their needs and resources. That will deepen the regional integration process by promoting simpler, cheaper and faster intraregional trade transactions for businesses.
The six-step methodology:
1. Consolidate Member States’ needs and identify common requirements;
2. Build consensus on TFA obligations to be implemented regionally;
3. Define the mix of legal and non-legal instruments to support implementation;
4. Outline Member States’ and regional bodies’ implementation responsibilities;
5. Develop a targeted implementation plan based on the selected instruments and allocation of responsibilities; and
6. Establish a regional institutional platform to facilitate regional reforms, such as a regional trade facilitation committee.
The above methodology was applied in the West African Economic and Monetary Union (UEMOA) where ITC supported the establishing of a regional trade facilitation committee (RTFC) with a mandate to design, support the implementation and monitor regional reforms. The committee, still due to be legally established, first identified the common trade facilitation needs of each member state and then selected a set of measures for regional implementation. Based on an analysis of the appropriate mix of instruments and sharing of responsibilities, members of RTFCs – policymakers, cross-border agencies and private sector representatives—built tailored regional implementation plans for three priority measures, with an objective to proceed to implementation in 2019.
As there is no one-size-fits-all regional trade facilitation roadmap, each community must take into consideration its specific mandate, institutional arrangement, procedures, political economic and implementation capacity to design its way forward. ITC encourages policymakers in RECs to make use of this roadmap to implement regional trade facilitation policies and to establish a platform or committee that coordinates and monitors their implementation. The roadmap to regional trade facilitation reforms – if supported and implemented with the commitment of national and regional policymakers – should help reinvigorate regional integration processes by promoting simpler, cheaper and faster intraregional trade.