Session Six:
Trade Facilitation
Grainger, Andrew, “Trade Facilitation: A Review” (2007)
National Board of Trade (Sweden), “Trade Facilitation from a Developing Country Perspective” (2003)
OECD, Working Party of the Trade Committee, “The Relationship Between Regional Trade Agreements and the Multilateral Trading System: Trade Facilitation” (2002)
European Communities—Trade Description of Sardines, AB-2002-3. WTO Appellate Body Report, WT/DS231/AB/R
Australia—Measures Affecting the Importation of Salmon, AB-1995-5. WTO Appellate Body Report, WT/DS18/AB/R
Encouraging Trade Facilitation in international trade is like a game of dare between friends. One person wants the others to do it, but is hesitant when it his turn comes to do the dare. Andrew Grainger considers Trade Facilitation as involving the simplification, harmonisation, standardization and modernisation of trade procedures. Like a game of dare one country wants the rest of the world to facilitate their trade procedures in order to gain an edge. For why make it easier for other goods to come into the borders of your own country which would result into a decreased cost on their part, thus undermining your own goods? It is better if goods coming from your country find it easier to enter the borders of another country and thus reduce the cost of transporting your goods from the seller to the buyer.
Unfortunately for the shrewd country, however, trade facilitation has implications in international trade. Trade facilitation has an important role in trade liberalization because of its effect in increasing or decreasing the cost of goods. Simply put, an increase in the cost of goods would encourage inefficiency on the part of competing goods while the reverse is true if the costs are decreased through trade facilitation. That being the case, trade facilitation has an important role to play in trade liberalization.
The OECD, in analyzing trade facilitation in the multilateral and regional level, maintains that the process involves simplification, harmonization, standardization and modernization. This is similar to Grainger’s point of view. Through simplification (OECD cited as an example the minimization of the incidence and complexity of fees) it makes easier for goods to enter the territory of another country without necessarily going through the maze of custom requirements, fees, etc. Harmonization and standardization makes it easier to predict the valuation of products that an exporter will consider in the payment of fees. Modernization inputs the technological gains in the world to the entry of goods by again making it easier to bring a particular good to buyer and seller. An example would be computerization. It would take a person a few seconds to pay for a good and get the receipt if the receipt issued was a computerized one. On the other hand, if the receipt was written manually, it would take a minute or two. Now imagine if there are a hundred (100) people in line who wants to buy similar goods, a gain of more than fifty (50) seconds per person results in a net gain of more than eighty (80) minutes. That time could be spent in servicing more people. Now, imagine if it is the entry of goods in the ports and customs areas. Modernization simply means that more goods can enter and that it will be easier for these goods to enter the border, and ultimately to the buyer.
The process of trade facilitation begs the question then. Is it in the interest of the Philippines to facilitate its trade procedures? An analysis of the extent of Philippine trade would be mandatory. If the importation of goods far exceed the exportation of goods in the Philippines, then applying a simple cost-benefit analysis would lead to the conclusion that trade facilitation would be detrimental to local trade. On the other hand, if the reverse is true, then trade facilitation would be beneficial.
Unfortunately, it seems that the importation of goods in the Philippines far exceed its exportation of goods. That being the case, then trade facilitation should be far from the agenda of the executive department. At most, the Philippines can facilitate the entry of goods that are vital to multinational industries which have their production facilities here like the computer chip producers. Or the Philippines can establish free zone areas where there is trade facilitation in and out of the country without necessarily going through the border. In entering bilateral agreements, the Philippines can negotiate for trade facilitation of goods and services in order to facilitate the entry of the Philippines number one export, manpower. Ultimately, the cost-benefit analysis needs to be drawn and redrawn if the Philippines want to engage in trade facilitation.
Trade facilitation then, is like a game of dare. The dare, however, may not be a very bad thing if one were to consider the consequences. If the dare is to eat balut (a Philippine delicacy) including the chick inside, then it’s not necessarily a bad thing for a Filipino to do it, but imagine the horror to an American or an Australian. Trade Facilitation then cannot be classified as good or bad until all the relevant factors are considered. Identifying these relevant factors is simply the first step in determining the extent within which the country would facilitate its trade procedures.
Posted by: Anthony Raphael V. Jacoba | March 24, 2009 at 12:54 AM
“As in other government agencies, corruption at Customs has become a malady without the cure. It has become a way of life for many officials and employees of the bureau—systematic and institutionalized.
In fact, no major recent studies on corruption in the government—whether through perception or factual investigation—have excluded the bureau from the list of the most corrupt agencies of the government. In the survey done last year by the Social Weather Stations, the bureau, with the Bureau of Internal Revenue, topped the list. A study by the Asian Development Bank also last year noted that close to 50 percent of the country’s firms regarded the bureau as a moderate to major hindrance to improving the investment climate.” – Annie Ruth C. Sabangan, Senior Reporter, The Manila Times
With its primary goal of reducing transaction costs in the movement of goods across international borders, trade facilitation offers several significant economic benefits to a developing country. A healthy environment for small and medium sized enterprises is fostered through improved capital utilization. A considerable decrease in transaction costs will allow these enterprises to channel limited resources to more meaningful and value-adding phases of the production and distribution chains. Furthermore, trade facilitation encourages international ventures by providing cost-efficient access to emerging markets. Reforms in national border management will minimize the “barrage of regulatory obligations” often deemed as a non-tariff barrier. More importantly, improved access to emerging markets will ultimately be beneficial to end-consumers – enhanced buyer selection through a wider range of consumer goods and improved purchasing capacity through influx of affordable products.
Inter-state cooperation is critical in order to maximize the benefits of trade facilitation. Agreements and understandings on border management reforms and post-entry regulations may be operationalized on a bilateral or multilateral plane. However, there are several factors that deserve due consideration. First, the number of states involved would have significant impact in the negotiation and implementation stages of trade facilitation. Increasing the number of countries participating would entail a more delicate process of balancing potentially overlapping and conflicting interests that are most likely legitimate. Secondly, an effective operational framework would have to address the different economic and geo-political contexts of participating states. Establishing an appropriate set of regulatory standards would entail more than the physical act of aligning with current international standards, for what would meaningfully apply to a particular group of states may not necessarily work for another group of states.
There are several key characteristics of a regional trade agreement that allow it to serve as an effective conduit for trade facilitation. As opposed to a multilateral agreement that have overarching global scope, particularly the GATT/WTO, a regional trade agreement involves significantly lesser number of contracting states. As such, the aforementioned balancing process is less cumbersome as there are fewer interests involved. This directly affects the time-element with respect to the establishment of a concrete working agreement and the intricacy of implementing its various aspects. Furthermore, an equitable trade framework is better achieved through regional integration, given that shared geographical context underlies most regional trade agreements.
It should be stressed that an effective and streamlined facilitation of regional trade requires reliance on the willingness and ability of a contracting party to operationalize and implement the different agreements and understandings affecting vital areas (e.g. customs valuation procedures, import licensing, pre-shipment inspection, publication of rules and regulations). As stated in the Trade Facilitation paper of the OECD Trade Committee, “where the level of regulatory confidence is high, RTAs may provide for mutual recognition of formalities carried out by the competent authorities of the other parties.”
In the Philippine context, compliance with any regional agreement involving provisions on trade facilitation would be a formidable challenge, particularly in the aspect of regulatory confidence. Given that border management is one of the central spheres in the facilitation of the movement of goods into a national territory, the customs bureau of the Philippines faces significant hurdles in terms of structure and governance. According to the World Bank, in its year 2000 report on corruption in governmental agencies, PHP 604 billion was lost in the Bureau of Customs due to corruption from the time of former President Aquino to that of former President Ramos. In addition, it was reported that bonding companies, through the Bureau of Customs, defrauded the government of up to PHP 100 billion in unliquidated export and re-export bonds in the year 2003 alone. It is interesting to note that the common illegal practices in the customs bureau (i.e. misdeclaration, undervaluation, and misclassification) are intricately related with vital areas of trade facilitation. Moreover, according to the Enterprise Survey Philippines 2003 conducted by the World Bank and IFC, it takes an average of more than 6 days to clear direct exports through customs, which is above the average of less than 4 days for the Asia-Pacific region. As regards imports, it takes an average of more than 9 days to clear through customs, which is above the average of less than 6 days for the region. In the same survey, nearly 22% of companies surveyed identified customs and trade regulations as a major constraint to doing business in the Philippines.
As stated by the National Board of Trade of Sweden in its report on trade facilitation in developing countries, a strong political will is a key element to the success of facilitation. In this light, if the Philippines aspire to effectively capitalize on the benefits of trade facilitation, any national government initiative requires a re-orientation and proper understanding of vital areas in the international trade chain. More importantly, an adequate framework, founded on preventive and proactive governance, should be established. The framework should provide agency direction in terms of simplifying rules and procedures and setting-up clear accountability measures. In establishing the said framework, the national government should be guided by a very simple and logical fact – there is positive correlation between the number of requirements and stages involved in trade regulation and the incidence of illegal activities.
Posted by: Gerard Joseph M. Jumamil | February 13, 2009 at 10:10 PM
The World Trade Organization defines trade facilitation as “the simplification and harmonization of international trade procedures”, which include those particular “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.” For the author Grainger, employing a “systems” metaphor, trade facilitation is essentially prescriptive insofar as it seeks regulatory reform between and among different economic key players. Moreover, the National Board of Sweden views it as more than just a development-friendly “economic tool”, but a welfare-enhancing global ideal that consequently brings about the increased economic efficiency necessary to reduce poverty. In sum, both authors are justifiably focused on the positive net gains of a more streamlined supply chain by providing recommendations on the reduction of transaction costs, both direct and indirect, between the government and business stakeholders at the national border. Using the concept of trade and its effects on global growth and progress as a trajectory, it is then much clearer why this relatively overlooked (according, at least, to Grainger) concept matters.
According to Sweden, trade facilitation results in direct benefits for both the government and the business community, such as: (a) economic efficiency; (b) better security; (c) faster delivery of goods; and (d) overall reduced costs. These benefits, however, necessitate a corresponding change in the mindsets of the key participants in international trade.
On the side of governments, Sweden consequently recommends that instead of relying on “magical solutions” such as transferring pre-set trade facilitation schemes from a developed country environment to a random chosen developing country, there should instead be emphasis on bureaucratic and administrative trade processes that focus on transparency, trust and communication. Also noted was while capacity building and technical assistance from developed countries are vital, of equal importance is that such support should be based on the needs and current situation in each developing country.
From a supply-side economic perspective, the questions asked in structuring the supply chain would then shift from a preoccupation with qualifying for advantageous national border treatment to focusing on the improvement of their products. For example, if the questions were: Where is the cheapest port of entry? How do I get around pre-shipment inspections? Or, what are the effects of technical regulations on the importation of my product?; instead, the question becomes, simply put: What is the most optimal way to manufacture a good? This may help improve the capacity of SMEs to stand on its own in relation to large-scale firms when the former is able to trade more efficiently. Conversely, Sweden suggests that governments will benefit directly in terms of increased security and customs revenue.
When all these factors come into play, it is in this manner that products become most cost-effective and more readily accessible for the buying public. With improved trade facilitation, it would then be possible for manufactures to view the world as one big production base because it lessens the manufacturers’ chances in dealing with overly complex trade procedures and demands. Hence, the final consumer gets better quality goods that is of a greater variety, and may possibly be more gentler-priced than they would otherwise acquire in an inflexible, bureaucratic red tape-ridden environment. Indeed, all these potential gains may sound overly idealistic and impossible to ever fully achieve, and this is perhaps why Sweden highly recommends that trade facilitation should be a basic global commitment.
Nevertheless, since trade facilitation involves reducing burdensome and unwieldy bureaucratic procedures – cutting across issues such as, inter alia, customs valuation, import licensing, pre-shipment inspection and conflicting rules of origin – this may be misconstrued as an undue limitation of a country’s capacity for self-protection and a de facto clipping of sovereign decision-making powers. This is particularly relevant in European Communities—Trade Description of Sardines (WT/DS231/AB/R) which concerned an EC regulation establishing common marketing standards for preserved sardines, which Peru, as the complaining state, alleged was unduly trade-restrictive in nature. Most contentious was the prohibition of Peru from labeling sardinops sagax, a type of fish covered by Codex Stan 94 as sardine-type product, as “sardines” since the regulation held that it was apparently for the EC’s exclusive use for a native fish species. However, the Appellate Body determined that the EC Regulation was inconsistent with certain articles of a Technical Barrier to Trade (TBT) Agreement which was primarily intended to harmonize technical regulations. Hence, the case focused on the degree in which a harmonization agreement may encumber domestic regulatory autonomy.
An observation is that foreign trade plays such a vital part of a nation's economy that states may justify the placing of governmental restrictions in the name of national interest. In Sardines, the assailed EC regulation was intended to prevent fraud and the likelihood of consumer confusion between various sardine-type products. Although such barriers are not necessarily administered by a government to purposely restrict trade, this may nevertheless be the end result and can lead to certain unfair advantages among trading nations.
It is in light of such concerns that the facilitation of trade becomes a balancing act: firstly, while certain key changes must be made to harmonize logistical and administrative systems; corollary to this, such measures must be done in such a way that it does not unduly lessen a country’s autonomy and its ability to counter unwanted trade practices. After all, a threatened or antagonistic country will not bother implementing harmonization or simplification programs, especially if the compliance costs and the charges of trade-related services are deemed too high to be worth the initial and subsequent investments. Likewise, the facilitation of trade can only be achieved through the concerted efforts from various governments and businesses, especially when operationalizing expensive technological systems such as trade automation and “paperless” clearance which would improve port efficiency and expediting government processing, among others.
This is not to say, however, that the process of facilitating trade neglects to take into account certain social, political and economic realities that there will always be a need for some form of control and rules-based trading for both governments and businesses. Sweden addresses this by pointing out that the loss of welfare will arise if such overly strict and complex procedures vastly overshadow those necessary and legitimate needs of control. For this reason, trade facilitation amends this situation since there is a collaborative effort in developing a system (or systems) that improve, simplify and facilitate exceedingly bureaucratized practices. The key to achieving this is, ultimately, a strong commitment to a common global project, political will, and a sense of obligation on the parts of all the key actors; and lastly and most importantly, a fair amount of idealism. Whether this can ever come to be, however, remains to be seen.
“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.”
Hans Hoffman, in Search for the Real.
Posted by: Patricia Miranda | February 11, 2009 at 08:03 AM
THE FIFTH INGREDIENT
and The Four Other Ingredients to Achieve Trade Facilitation Objectives in the Philippines
Trade Facilitation and Its Aims.
Trade facilitation is defined by the WTO as “the simplification and harmonisation of international trade procedures,” which are the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade” . It has three principal aims: simplification, harmonization and standardization of trade processes, formalities and procedures, specifically those in customs administrations.
Through simplified, harmonized and standardized Customs procedures, levels of evasion of payment of tariffs and duties, under-declaration of import values, fraud and collusion with Customs officials would be minimized, if not eliminated. Thus, revenues from importation would be maximized and contribute more to national funds.
Such objectives of trade facilitation would however not be achievable without measures relating to political, economic, business, administrative, technical and technological aspects, as well as through the enactment of complementary legislation. In line with this, four key ingredients need to be present: (1) A strong political will and commitment; (2) A clear strategic plan; (3) A close co-operation with the business community; (4) And for developing countries: A well-funded and long-term technical assistance “programme” based on a partnership between donor and recipient . The mix of these ingredients would of course be different in each country and this would lead to customized implementation of trade facilitation objectives, which more often than not still leads to non-uniform procedures in various countries.
Trade Facilitation and the Revised Kyoto Convention.
Procedures would indeed be simplified through trade facilitation. Rationalization and alignment of formats, paper size, contents and numbers of documents in line with UN standards would prove helpful to importers dealing with various customs administrations. The reduction of required documentation is one of most important issues to start focusing upon. Indeed, there is a great need to improve the Customs procedures, to make it simpler and more systematic, without compromising its tariff law enforcement and collection responsibilities. Among the means to accomplish this would be through the accession and implementation of the Revised Kyoto Convention (RKC) on Customs procedures .
The RKC is a legal instrument of the World Custom s Organization (WCO) that aims to simplify and harmonize existing international customs procedures around the world . For countries acceding to the RKC, no reservations are allowed for general annex provisions, while reservations are allowed for recommended practices provided for in specific annexes pertaining to detailed customs procedures.
Benefits, such as providing a foundation for reforming trade efficiency and competitiveness, await countries which accede to the RKC. In the Philippines’case, we will be deemed to be efficient and competitive by the international community because the RKC would be able to help strengthen the Philippine legislative base, which is a very important step in reforming Customs administration in the country. To date, steps are undertaken for the Philippines to accede to the RKC.
The Role of Technical Assistance, Business Sector Partnerships and a Strategic Plan in Philippine Accession to the RKC.
A draft bill amending the Tariff and Customs Code of the Philippines (TCCP) to make it RKC-compliant among other things, and a corresponding draft executive order to which regulations implementing provisions of the RKC in the Philippines, are currently underway. These draft pieces of legislation are fruits of technical assistance programs of donor international institutions such as USAID. Inputs of the business sector through Phil Export and other similar organizations were considered in the drafting process, the developments of which were based on a strategic plan which was outlined early on by the Bureau of Customs in cooperation with donor organizations. However, the most important ingredient towards achieving the objectives of trade facilitation, is causing delays in the Philippines’ accession to the RKC.
Delays Due to Lack of Political Will.
There are however, some major obstacles to accession and even compliance to the RKC. For example, the RKC speaks of the declarant, the person who prepares and signs (and is therefore answerable for wrong declarations) the customs declaration as to the value of an imported good, as a person who has the right to dispose of an imported good . The privilege of being a declarant, therefore is an attribute of ownership. Section 1203 of the TCCP identifies owners of goods as “the person to whom the same (articles) are consigned, and the holder of a bill of lading duly indorsed by the consignee therein named, or, if consigned to order by the consignor, shall be deemed the consignee thereof. The underwriters or abandoned articles and the salvors of articles saved from wreck at sea, along a coast or in any area of the Philippines may be regarded as the consignees.”
However, swayed by persistent lobbying of Customs Brokers groups, the Congress enacted R.A. 9280 or the Customs Brokers Act, which restricted the authority to sign on a Goods declaration to duly licensed customs brokers. This is, of course not the intent of the Revised Kyoto Convention, which entails that the owners of the imported goods be allowed to declare their good’s values, origin and other pertinent details necessary to facilitate trade while keeping sight of Customs regulatory and revenue objectives. The RKC, after all, was designed to make procedures in customs administration more or less uniform in various countries. Sadly, though, due to the lack of political will of our law-makers, it is taking a long time for the Philippines to accede to the RKC. As we speak today, even as the draft bill and the draft EO enabling accession to the RKC has already been finished, there remains a strong tug from the these Customs brokers groups.
As a member of the team that has worked on said pieces of legislation, I am hoping that the political will of our legislators will prevail. Indeed, of the four ingredients towards achieving success in trade facilitation, political will seems to be the most critical. It is what the legislators (and many other leaders) of this country, based on their previous acts (and more) lack the necessary political will to accede to the RKC and thereby implement measures which will greatly increase facilitation of trade in the country.
The Fifth Ingredient.
A fifth, but unmentioned, ingredient towards achieving trade facilitation objectives is the willingness and/or capacity to adapt to change or the ability to change paradigms. This shifting of paradigms may be argued to be subsumed in political will, but for purposes of this essay, I shall consider it as different and will be presenting an example below.
It is no wonder that despite the perceived benefits of trade facilitation as well as across-the-board agreement on the necessity for trade facilitation as embodied in treaties such as the Revised Kyoto Convention, our nation, a developing country, does not seem to be enthusiastic to negotiate a multilateral agreement of trade facilitation commitments . Just like most developing countries, our Customs administrations often argue that it does not have the necessary resources to update their customs procedures to more modern technological standards. What’s more, a lot of Customs officials often make it an excuse that they are not computer-savvy and do not understand computer processes, notwithstanding any kind of training that is given to them. Only a few are trying to be technologically competent. They are also reluctant to take on additional legal obligations that may increase their exposure to disputes.
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In sum, five, not four, ingredients go hand in hand to accomplish trade facilitation objectives. Without these five ingredients, it would be impossible for a country to increase its economic growth while at the same time reducing cumbersome unnecessary bureaucratic demands and procedures. Indeed, it is only through trade facilitation that logistical and administrative systems may be harmonized internationally, while at the same time ensuring and strengthening each country’s autonomous right to defend itself against illegal and unwanted trade practices.
Posted by: Lorybeth R. Baldrias-Serrano | February 11, 2009 at 01:17 AM
Trade facilitation measures seem to be the logical “next frontier” given the already lowered tariffs rates among WTO member countries. While free trade has not yet fully been achieved, there also seems to be no reason why trade facilitation cannot go hand in hand with the continuing and systematic practice of lowering tariffs – after all they are both headed towards the same direction of trade liberalization. Both measures seek the path of least resistance and desire the free flow of goods from state to state. However, they can be differentiated in that as tariffs are systematically approach zero, the same cannot be said for the procedures that govern the physical movement of goods from one state to another. Procedures and regulations are a given that can be minimized and optimized, but not eliminated. As such, transaction costs cannot be totally eliminated and this is evident from the way by which international trade organizations and players have defined trade facilitation. They have used concepts like harmonization, simplification, standardization and modernization – and not absolute and unqualified abolition or elimination. Inherent in the definition is the recognition that legitimate and reasonable transaction costs are part of the equation. What is sought to be done is to reduce or eliminate the unnecessary, the inefficient and the arbitrary. It is important to begin with this in mind so as not to harbor an unhealthy disdain towards regulations that meet goods at the border or even within the context of a supply chain. There is recognition of legitimate regulatory objectives – procedures that indeed add on a cost - but the benefit derived from the regulation offsets it not outweighs the benefits gained and interests protected.
The challenge posed by trade facilitation measures lies in the justification of procedures and in the determination of which procedures remain responsive to regulatory needs. On one hand, it can be argued that the market will take care of an unnecessary procedure. If a regulatory requirement is unreasonable or inefficient and the cost of doing business is no longer commensurate to the returns it creates then the tendency would be to refrain from engaging in that line of business. On the other hand, it can also very well be the case that trade in that line of business would continue and it would be the consumers which will bear the costs of the transaction. Granier submits that an understanding of the wider institutional forces at work is also needed for the development of better trade facilitation provisions. This could include an evaluation of the interest groups that have a hand in the development of a state’s regulatory policy. It is precisely this sensitivity to underlying interests (which are not uncommon for any state to protect) that can sharpen sensitivities in spotting non-tariff barriers prohibited by the WTO rules. The WTO rules are also useful in differentiating between procedures and regulatory measures can be regarded as “technical barriers to trade.” On the flipside, in enacting regulatory measures, it is advantageous to be informed of how dispute settlement bodies determine what constitute “technical barriers to trade,” in order to make their measures judgment-proof. Another institutional force that unnecessarily adds to the cost of trade is corruption. Corruption can be considered as both a direct and indirect cost. It is a direct cost when existing procedures need to be “oiled” in order to get going and an indirect cost when opportunities are ultimately lost precisely because “oiled.” Corruption is one of the areas where trade facilitation measures can (if not should) be adopted unilaterally by a state.
As a further guide in the adoption of trade facilitation measures – whether it be done unilaterally, bilaterally or multilaterally, it is important to keep in mind that trade facilitation measures are not always necessarily infrastructure intensive or technologically driven. What works for one jurisdiction in terms of improving their trade procedures may not necessarily work for another and so blind adoption of the “latest” in customs practices and regulatory techniques is not advisable. Rather, it is through a careful study of the needs and demands of the market that would best be able to identify where there are stumbling blocks, delays and inefficiencies that add to the transaction cost. Looking at the best practices of similar markets provides a good benchmark because it gives the adopting market an opportunity to “preview” the facilitation measures as well as the benefit of learning from the experience of others. The OECD paper suggested that the quality trade facilitation provisions in RTAs are also determined by the relative similarity of the markets of the participants. Perhaps this is an incentive for developing countries to form RTAs or enter into bilateral trade agreements with provisions for trade facilitation as a preliminary step. By banding with a similarly situated party, there is an opportunity to have simplified and harmonious trade procedures. Also, it allows for a more or less even negotiating field when concessions are sought and given because parties are in the same level of development. The best practices that can be learned from the other party are also more likely to address the needs of the other.
In preparing for multilateral undertakings, it is submitted that negotiating trade facilitation measures in the regional level is also a good preliminary step. Any initiative towards trade facilitation and the elimination of unnecessary costs is an advantage because of the confidence it inspires in other parties. Trade facilitation can be viewed as a device to make the market of a developing country both more accessible and attractive. Accessibility is improved when goods can enter another jurisdiction with the least amount of delay and cost. The market becomes attractive because it is accessible. In turn, an attractive market translates to a better chance at getting concessions in the level of multilateral agreements.
Trade facilitation is not a novel concept as has been shown in the readings. With the newfound attention it is getting, the changes to be anticipated are mostly going to be brought about by reexamination of the facility and the needs of the state and the businesses or the advent of new technology that can address the needs better. While the facilitation of day-to-day trade operations can be best addressed by bilateral or regional agreements, the existing legal framework of the WTO provides great insight as to how facilitation measures should be structured to fit the multilateral trading system. There is no harm in keeping the requirements of the WTO at the back of one’s mind in selecting a facilitation measure so as to remain compliant with one’s obligation as a party to the WTO and to not close off relations by adopting an incompatible set of trade procedures.
Posted by: Anna Theresa L. Licaros | February 10, 2009 at 10:22 AM
Corruption thrives in an environment of confusion. The more confusion created the better for corrupt government officials. After all, if the rules and regulations are so convoluted that a simple businessman is unable to understand them, he is prone to offering bribes to more than willing government officials. The businessman is then guided through the maze and labyrinth of the rules with the added bonus of paying less tax.
The various articles point out that there is thus a need to overhaul the system not only in customs tax collection but also in terms of the transport or even financial systems. While the articles were more focused on the changes as they relate to trade facilitation, these changes might just help in finally minimizing, if not totally eradicating, corruption in the area of customs administration. Hence, even if the goal is the improvement of trade flows, the benefit of implementation for developing countries should be huge.
The hallmark of any good system is its simplicity. This is what all systems analysts and practitioners strive for. Simplicity’s added benefit is naturally efficiency. An efficient and simple system coupled with transparency result in less red tape and to minimization of corruption. As pointed out in the various articles assigned, the beneficiaries of a good system are the developing countries essentially because they are the most prone to corruption which necessarily reduces the income and taxes due to their respective government. It is therefore in the interest of national governments to ensure that the system they have in place is not prone to abuse by the very same people who are tasked to enforce regulations.
It is conceded however that the political will of a government is necessary to implement such a simple and transparent system. And this is where the problem arises. A corrupt government would want to maintain the status quo for this is precisely the source of their wealth. This kind of government definitely would not have the kind of political will that will address systemic changes. On top of this is the fact that in most instances the culture of corruption is pretty much ingrained within the government unit. Therefore, for reform to take hold, it is imperative that a change to a more simple and transparent system is accompanied by a reorientation of the personnel.
In the Philippines, for instance, I would posit that the culture of corruption in both our revenue generating agencies may be attributable to the very low salaries that are paid to the employees and, yes, even officials of these Bureaus. Considering the volume and value of business transacted in these offices, one cannot but wonder why we continue to expose these low paid employees to temptation every day. An offer of a bribe of several years’ salary to a poor man working in such a government office would require the virtues of the Virgin Mother to refuse. After all, he has to feed his family and send his children to school. He could always assuage his conscience by saying to himself that the illegal transaction would in anyway be “facilitated” by others. So why not join the bandwagon.
The amount of yearly “losses” attributable to corruption in these Bureaus are in the billions. Yet, the government is unable to institute one basic change. An increase in the salaries of the personnel in the Bureaus to approximate the salaries of those in the private sector would go a long way in finally eliminating corruption. On the whole, the government may even come out on top since the total increase in salary would not even be near the estimated losses. Also, the higher salary would in all likelihood attract more competent people which would translate to higher efficiencies. This would further translate to lower operating costs.
The Philippine situation is most likely replicated in many developing countries. The required government will is thus also absent.
The move in the World Trade Organization to introduce trade facilitation changes among its member states should have twin effects for developing countries. Not only are their trade procedures made uniformed and harmonized (thus more, efficient), the level of corruption should also be reduced. Refusal to follow a change would probably be not an option an all in so far as member states are concerned. Developed countries, on the other hand, need no prodding to adopt a system which could only improve how things are done. Such refusal on the part of the developing countries could result in less trade with most of the developed countries due to incompatibility with the newly introduced processes and procedures. This is a development which developing countries could least afford.
Posted by: Romulo P. Ramirez | February 02, 2009 at 09:52 PM