Context of TF negotiations
Trade facilitation is a new area of the WTO legal system. It was first mentioned at the WTO Ministerial Conference in Singaporein 1996 and later included in the Doha Round of trade negotiations in 2001 and 2004. There are economic and regulatory arguments that underpin the move by WTO Members to draft a new set of global rules on trade facilitation. Trade facilitation had gained importance against a background of changing trade patterns and a deepening of the multilateral trading system. And there was a perceived gap in the existing regulatory framework and international cooperation on trade facilitation.
Changing trade patterns
Trade facilitation gained increasing attention at the WTO in the 90's. Driven by trade liberalization and tariff reduction obtained by the GATT and other economic reforms in the 80's-90's, trade flows expanded (see picture below) and became more global with the integration of many developing countries into the production networks.
Tariff levels and quota systems were no longer perceived as the main barrier to trade and attention shifted to non-tariff measures and domestic policies that impact international trade.
Border controls, administrative procedures and documentary requirements are examples of such non-tariff trade barriers. They can cause significant delays and costs to businesses worldwide. With the emergence of globalized value chains and sub-contracting of production across countries, the supply chains had become more sensitive to cost efficiency, reliable and speedy movement of goods and information across international borders. The costs and delays of administrative procedures had thus become more visible and critical to the integration of countries in international trade flows.
Against this background, a number of WTO members, including the EEC and Japan (*1), pushed for the inclusion of trade facilitation at the WTO.
Closing gaps in existing regulatory framework and work by international organizations
The GATT legal system from 1947 did not adequately address barriers impacting clearance and other trade formalities. Furthermore, those agreements and instruments dealing with trade facilitation that existed by the mid 90’s only addressed partial aspects, did not have a global membership, and lacked an enforcement mechanism. In fact, trade facilitation relevant agreements existed within the WCO, IATA, UNECE and IMO, and even within the WTO legal system (the Valuation Agreement, the Preshipment Inspection Agreement and the Rules of Origin Agreement, contain Customs procedure related provisions), and standards and recommendations relative to trade facilitation were developed by bodies such as UN/CEFACT. But, despite these various instruments, barriers caused by administrative procedures remained high. Hence, multilateral rules were seen as a necessary approach to advance trade facilitation reforms and to provide a binding legal framework of rules.
The European Communities established that a framework of WTO rules is necessary because "...the solutions proposed by UN, WCO and UNCTAD, and indeed other organizations, have not been universally adopted by all WTO members, either due to a lack of political will or because in some cases they have not met specific needs or kept pace with changes in the ways of doing trade or in technology" (*2). Canada, similarly mentioned that gaps in existing work by other organizations could be filled by the WTO, and that this includes "...identifying where the development of WTO rules could provide a framework of binding commitments to facilitate trade and where the WTO can enhance current technical discussions and assistance efforts to the benefit of all Members." (*3)
Deeper integration of the multilateral trading system
Another factor that contributed to the inclusion of the issue in the agenda was the increasing interest of countries in enhancing the multilateral trade system. In fact, with the successful conclusion of the Uruguay Round, the 117 participating members of the WTO created a broad legal framework covering most international trade and a large range of countries, from industrialised to least developed countries. Furthermore, the WTO was set up with a dispute-settlement mechanism capable of giving legal effect to the rules.
Driven by this positive expectation of the WTO system, some WTO members pushed for deeper regulation to address aspects of domestic regulatory regimes, or so-called behind the border aspects. Trade facilitation was seen as an issue of deeper integration, as were the issues of investment and trade, government procurement and trade, and competition law and trade. All four new issues were put on the agenda of the WTO at the Singapore Ministerial Conference, which led to their naming as "Singapore issues". As developing country members opposed the incorporation of all issues together into the WTO system only trade facilitation was included in the negotiating work programme adopted in 2004.
(*1) The group of WTO members that supported multilateral rules on trade facilitation later became known as the Colorado Group. They included WTO members such as Australia, Canada, Chile, Colombia, Costa Rica, EEC (later EC), Hong Kong China, Hungary, Japan, Korea, Morocco, New Zealand, Norway, Paraguay, Singapore, Switzerland, and The US. Note that groups are informal grouping of WTO members and their membership composition can evolve at any time
(*2) World Trade Organization, Communication from the European Communities, 22 September 1998 (G/L/122)
(*3) World Trade Organization, Communication from Canada to the Council of Trade in Goods, 30 September 1998 (G/L/126)