Saturday,21 July, 2018
Current issue | Issue 1255, (23 - 29 July 2015)
Saturday,21 July, 2018
Issue 1255, (23 - 29 July 2015)

Ahram Weekly

Opting for trade facilitation

When it comes to negotiating the World Trade Organisation’s Trade Facilitation Agreement, Egypt’s interests must come first, argues Magda Shahin

Al-Ahram Weekly

One could claim that the developing countries are latecomers to the multilateral trading system. When the Uruguay Round trade negotiations ended in the mid-1990s, the developing countries made their debut in the system.

They willingly accepted the heavy burden of commitments imposed on them by the Uruguay Round agreements.

Becoming an integral part of the multilateral trading system empowered them to observe the international body’s functioning from within and to fight for their interests.

The World Trade Organisation (WTO) was established to monitor the functioning of the system. Developing countries realised that the global trading regime was highly inequitable and penalised their growth and development by equating trade to market access and promoting the trade liberalisation argument as a one-size-fits-all paradigm.

They were adamant about correcting such imbalances and pushed for a new round of negotiations in which trade would serve development and not be solely designed to enhance market access. The development dimension was elevated to a higher level and the Doha Development Agenda (DDA) was launched in November 2001.

From the very beginning, however, the DDA was doomed to failure. It became obvious that developing countries had little leverage to push for their goals and that the developed economies, having undergone monetary and financial hardships, were reluctant to be more responsive to the developing countries’ demands.

The Bali Ministerial Meeting in 2013 did inject some hope by reaching a milestone agreement on trade facilitation, which brought some life into the DDA and incentivised the WTO barons to set up a final deadline to conclude the round.

While attaining this objective by the scheduled deadline of the tenth WTO Ministerial Conference next December in Nairobi remains highly improbable, the question now is what will happen next.

I ventured upon this lengthy introduction to prove a point: Egypt needs to vigorously pursue its own interests in the WTO, irrespective of the doubtful outcomes of the Doha Development Agenda which, in any case, is probably due to die a death shortly.

Notwithstanding how the WTO barons handle the situation, the 2013 Bali Trade Facilitation Agreement (TFA) is an important way to raise Egypt’s competitiveness, and its implementation need not be held hostage to the conclusion of the DDA.

Egypt may well stray from some other developing country trajectory that continues to raise the flag of “everything or nothing” — India’s request for stockholding for food security purposes, or Brazil’s unwavering position on agricultural export subsidies, for example. These at best are the interests of single nations, however, and they can be dealt with accordingly.

This may sound like heresy, but Egypt’s situation is unique and very sensitive. It will have to pursue first and foremost its own interests and deal with the weak economic conditions in the country as a result of the 2011 and 2013 revolutions.

With growing globalisation and fierce competition at the regional and international levels, developing countries in general, and Egypt in particular, are increasingly interested in becoming integral parts of the global supply and value chains that are becoming the new paradigms for global production and trade.

If Egypt wants seriously to integrate into the global supply chain, it will have to streamline its trade facilitation rules and procedures, which are major determinants of the overall competitiveness of a economy.

Trade facilitation measures are the key to lowering transaction costs and improving the country’s external competitiveness and the efficiency of domestic markets for the benefit of the country’s consumers.

Successful measures range from eliminating administrative delays and simplifying commercial procedures (single-window procedures), standardisation (electronic- or paper-based), increasing the transparency of all kinds of documentation and procedures to harmonise commercial rules.

While there is a broad sense of what trade facilitation is, it is vital at this juncture to emphasise what it is not lest erroneous understanding hinders implementation. Trade facilitation is not a market-access agreement, as some would like to perceive it, to benefit solely the developed countries and undermine the growth of developing countries.

Trade facilitation is neither about reducing tariffs nor about eliminating nontariff barriers. It is about modernising and harmonising procedures and making them more transparent for importers and exporters alike.

By doing away with cumbersome nonofficial and administrative barriers, trade facilitation lowers prices for consumers, which some now estimate to account for between two and 15 per cent of consumer prices.

Trade facilitation does not only favour importers and improve domestic consumers’ welfare. Exporters benefit as well from easier procedures to increase their competitiveness abroad and reduce their investment and operational costs by rendering access to capital and inputs easier and less costly.

Trade facilitation can lead to improving the competitiveness of the economy and help domestic producers join the global value chain and become integral parts of the multilateral trading system.

With the anticipated mega-projects on the Suez Canal, the impact of implementing trade facilitation, in particular in regard to port efficiency and the customs environment, cannot be sufficiently underlined.

With the Suez Canal Development, Egypt hopes to become a regional and international hub and an important transit country for goods and services going in all directions. It will have to become a model in not delaying or restricting or discriminating against traffic transiting through its territory.

Egypt, as an engaged and active member of the Tripartite African Free Trade Area, will have to implement customs procedures and trade facilitation discipline, along with liberalisation commitments.

These measures are the key to boosting Egypt’s intra-African trade. Last but not least, improved trade facilitation will help raise government revenues through the improved collection of import duties, based on the enhanced efficiency of border management.

Though the Bali Trade Facilitation Agreement may have its imperfections and flaws, Egypt needs to follow a similar approach to the one it took years ago when it was keen to liberalise its communications and information technology (IT) sector. The government sought to open the sector up to competition with a view to upgrading and modernising it.

Egypt did not shy away from taking unilateral commitments to open up its IT sector. By the same token, and without being worried about ratification at this point, Egypt should go ahead and implement the Facilitation Agreement in earnest.

Starting to implement the agreement now will help smooth its endorsement by parliament at a later stage. Egypt will not start from scratch either as it has already gone a long way in this respect.

It has taken tangible and laudable steps towards streamlining its customs procedures and introducing automation and standardisation in some of its ports. Egypt will now need to expand this to cover more ports, particularly along the Suez Canal.

The country will also have to be among the pioneers in benefitting from the extra funding commitments allocated to technical-assistance programmes for trade facilitation and capacity building.

The director-general of the WTO recently announced that it stands ready to connect its members with bilateral donors and with projects run by other international organisations, such as the World Bank, to help them implement the Trade Facilitation Agreement.

Egypt needs to pursue its own interests. Even if ideas come from abroad, they need to be assessed on their own merits, in terms of their contribution to improving the welfare of Egypt’s citizens.

In this case, trade facilitation is a win-win approach, and its implementation can benefit from assistance from specialised agencies, both technical and financial.

The writer is director of the Prince Al-Waleed Centre for American Studies and Research at the School of Global Affairs and Public Policy at the American University in Cairo.

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