[ Nippon Keidanren ] [ Policy ]

Requesting a Prompt Establishment of
WTO Trade Facilitation Agreement

(Provisional Translation)

April 20, 2004

Nippon Keidanren
(Japan Business Federation)

1. Overview

Now that customs duties are being reduced as a result of WTO negotiations, there is a growing consensus on the need for trade facilitation measures that will reduce costs and time associated with trade procedures, while improving market access.

Establishment of WTO trade facilitation agreement would benefit all people involved in trade. These benefits to trade include: an increase in predictability, stability and transparency in trade; more efficient government procedures; lower customs clearance costs and a stronger international network fostering the efficient division of labor and services for companies. Trade facilitation through liberalized customs procedures would also create synergies promoting both trade and investment, especially for developing countries. Over the last few years, security has become an important issue, but efforts to ensure security should not become a hindrance to trade. Rather, a harmonized approach based on rules is needed to ensure more effective security.

Establishment of trade facilitation agreement is one of the priority issues for Japanese business community. Nippon Keidanren (Japan Business Federation) has strongly called for the launch of negotiations on trade facilitation agreement, in such recommendations as Urgent Recommendations Toward the WTO Cancún Ministerial Conference and Beyond, issued in July 2003, and Towards Revitalizing the WTO Negotiations, issued in January 2004. In this position paper, Nippon Keidanren once more calls for the launch of negotiations, and recommends concrete measures to be included in the trade facilitation agreement. (For more information on recent efforts by the WTO to promote trade facilitation agreement, see Appendix I.)

2. Recommendations Regarding WTO Trade Facilitation Agreement

All Members should join together in drawing up trade facilitation agreement. This would also help revitalize the Doha Development Agenda (DDA). Nippon Keidanren calls strongly on all Members to come to an agreement within the deadlines for the DDA, within the Single Undertaking.

Success of the DDA would improve the global business environment, and thereby improve living conditions in developed and developing countries. Success is also essential for further development of the global economy. It is important that all Members work together in drawing up trade facilitation agreement, which many of them indicate the understanding for its benefits. This will increase momentum toward revitalizing negotiations as a whole.

The Japanese business community strongly urges the rapid launch of the negotiations to draw up trade facilitation agreement, and concluding within the timeframe of DDA, as an essential part of the Single Undertaking.

Japanese business community recommends that trade facilitation agreement include the following concepts.

(1) Principles forming the basis of trade facilitation agreement

WTO trade facilitation agreement should be drawn up with the participation of all Members, should cover broad aspects of trade-related procedures, and should be based on the principles such as transparency, simplicity and standardization. Emphasis should be placed on clarifying and improving relevant aspects of GATT Articles V, VIII and X. All Members should abide by the rules concerning freedom of transit and the publication and administration of trade regulations.

WTO trade facilitation agreement should be drawn up with the participation of all Members. The agreement should, taking note of the provisions of existing WTO Agreements, cover broad aspects of trade-related procedures, including port clearance procedures, quarantine procedures, standard authorization methods, and customs procedures.

In addition, trade facilitation agreement should be based on the principles of transparency (giving clear information on trade-related rules and policies), simplicity (simplifying trade procedures that are more complex than to accomplish the administrative objectives), and standardization (adopting trade procedures that meet international criteria and standards).

Trade facilitation agreement should, as proposed in Appendix E of the Draft Cancun Ministerial Text presented by Chairperson Luis Ernesto Derbez, clarify and improve relevant aspects of Articles V, VIII and X of the GATT.

Under Articles V and X of the GATT, Members already have a certain obligation to ensure freedom of transit for goods and the publication and administration of trade regulations. Therefore, all Members will be expected to abide by the rules concerning these matters. It would also be preferable for Members to be obliged to simplify import/export fees and formalities. However, because some provisions of Article VIII of the GATT only states the recognition of the Members to the need for reducing or minimizing the fees and formalities, one option regarding ensuring simplification of fees and formalities would be to establish rules that promote non-binding efforts.

(2) Capacity building and dispute settlement procedures

Trade facilitation agreement will bring many benefits to developing countries as well, and Nippon Keidanren calls on developing countries to actively promote efforts to establish such agreement. At the same time, there is a need for capacity building in developing countries. Trade facilitation agreement should include provisions for dispute settlement procedures. However, flexibility is required when addressing the question of non-compliance due to a lack of capacity.

Complex trade procedures are often seen in the developing countries. Simplifying trade procedures through rules will bring benefits to the governments and corporate entities of developing countries, and these benefits will be even greater than those enjoyed by developed countries.

For example, unnecessary costs associated with customs procedures push up the cost of products being imported to that market, creating more financial hardship for the citizens of that country. On the other hand, WTO agreement on trade facilitation would bring stability to business activities in developing countries, and this in turn would expand trade and investment there, bringing greater international competitiveness to developing countries.

Ideally, developing countries will acknowledge the advantages of trade facilitation and actively participate in the effort to establish trade facilitation agreement. However, their efforts in this regard need to be encouraged, because of their undeniable lack of adequate infrastructure and human resources. For this reason, developed countries should offer developing countries capacity building assistance, including human resource training programs, while coordinating efforts with international organizations such as the United Nations Conference on Trade and Development (UNCTAD), the World Bank, the International Monetary Fund (IMF), and the World Customs Organization (WCO).

Non-compliance with GATT Articles V, VIII and X is already a matter dealt with through dispute settlement procedures, so trade facilitation agreement established for the purpose of clarifying these Articles should also cover such procedures. However, when enforcing such rules there is a need for flexibility. In the case of countries not adhering to trade facilitation agreement because they lack capacity, the said dispute settlement procedures should not be applied, on the understanding that they will meet their obligations once their capacity is established, or the rules could include the establishment of grace periods lasting a certain length of time.

(3) Examples of matters to be addressed through trade facilitation agreement

With regard to provisions in GATT Article V, the agreement should ensure simplified customs procedures and documentation requirements, the clarification of transport fees and charges, and the promotion of collaboration between landlocked countries and countries through which traffic in transit passes.

With regard to provisions in GATT Article VIII, the agreement should ensure simplified customs procedures and related import and export procedures (e.g., the use of documentation that follows international standards, and use of IT), simplified requests for data and documentation, and the clear specification of fees and charges.

With regard to provisions in GATT Article X, the agreement should ensure the publication and availability of information on laws and regulations, stronger consulting mechanisms, a minimum time periods before new laws, regulations and rules are entry into force, and more effective review and appeal procedures. (See Appendix II for examples of trade barriers impeding the Japanese business community.)

3. Multi-level Efforts toward Trade Facilitation

Efforts are being taken at various levels to facilitate trade. These efforts should be promoted in a complementary and strategic fashion.

Trade facilitation is being promoted through a wide range of efforts at multiple levels, not only within the WTO but also at the multi-lateral, bilateral and regional levels, and in sectoral discussions. (See Appendix III.)

Even so, at the present time there are no binding international rules embracing many aspects of trade facilitation. For this reason, it is critical that the WTO establish agreement that cover broad aspects of trade procedures as a whole. Trade facilitation agreement need to be placed on a common footing, and a wide range of efforts should be promoted in a complementary and strategic fashion - for example, the Asia Pacific Economic Cooperation (APEC) and other international bodies could develop non-binding action programs for more challenging areas, and the World Customs Organization (WCO) and other organizations with specialized expertise could propose more detailed rule content. In addition, consideration should be given to including higher-level trade facilitation rules in economic partnership agreements among individual countries, all the while ensuring that these rules are based on the intent of WTO trade facilitation agreement.

The Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership includes numerous measures promoting trade in goods, including provisions for the simplification of customs procedures, electronic versions of trade-related documents (the promotion of paperless trading), and mutual recognition. When the Japanese government signs economic partnership agreements with other countries in the future, it should ensure that the same types of provisions are included as much as possible, to promote further trade in goods.

4. The Need for Japan To Modernize Its Own Trade Procedures

Further improvement of Japan's own trade procedures would reduce the country's high cost structure and encourage foreign corporations to invest more in Japan.

Nippon Keidanren call on the Japanese government to take the lead in modernizing Japan's own trade procedures, as one way to show energetic initiative in the effort to establish trade facilitation agreement within the DDA.

For example, Japan should simplify its import-export procedures and port clearance procedures by: (1) streamlining and reducing the number of required application forms and items needing authorization; (2) improving the Single Window environment (modifying the clearance system so that all import/export data is input and transmitted only once); (3) establishing an electronic system that conforms to international standards; (4) establishing round-the-clock customs, export-import inspections, and quarantine (CIQ) systems; and (5) making port administration more efficient, in order to permit further reductions in port fees.

Reforming systems and making basic improvements as outlined above would help reduce Japan's high cost structure, and this in turn would encourage foreign corporations to invest more in Japan.

5. Concluding Remarks

Nippon Keidanren will call strongly on the governments of Japan and other countries, as well as on relevant organizations, to work for the establishment of trade facilitation agreement.

It is vital that Members increase momentum toward DDA as a whole, in order not to delay the launch of negotiations aimed at establishing trade facilitation agreement. To achieve these objectives, all Members should build on the results of the Cancun Ministerial Conference, and work flexibly while continuing efforts to promote negotiations. In addition, Members that are keen to establish trade facilitation agreement - mainly developed countries - should explain the significance of such rules to those Members who are not eager for negotiations in this area, in an attempt to gain their consent.

In addition to submitting these recommendations to the Japanese government, Nippon Keidanren will urge officials negotiating on behalf of developed countries, developing countries and countries in transition to communicate these recommendations and work for their implementation. We will also strengthen our ties with business groups that are active in Japan, in the US, EU and other developed countries, and in the developing world, to promote these objectives.

Appendix I.
Recent Efforts To Promote the Establishment of WTO Trade Facilitation Agreement

(1) Since the 1996 Singapore Ministerial Conference, exploratory and analytical work on trade facilitation has been undertaken within the WTO.#1

(2) During the Doha Ministerial Conference, which launched a new round of negotiations, it was decided to begin negotiations on the four Singapore issues, one of which is trade facilitation, with a decision to be taken under explicit consensus at the Cancun Ministerial Conference.#2 As a result, the Council for Trade in Goods has continued to explore this issue. However, negotiations did not begin as a result of the Cancun Ministerial Conference.

(3) At a meeting of the WTO General Council in December 2003, General Council Chairperson Carlos Perez del Castillo proposed that the work of negotiating groups be restarted in the early part of 2004, and that consideration continue to be given to the modalities of negotiations, while separating discussions from the four areas of the Singapore Issues and without predicting the final outcome. Following up on this recommendation, technical discussions on modalities for negotiations were promoted under the initiative of the WTO Director-General and Deputy Director-General.

(4) In January 2004, US Trade Representative Robert Zoellick sent a letter to trade ministers of WTO Members, suggesting that it may be possible to agree on moving ahead with negotiations on trade facilitation.

(5) At a meeting of the WTO General Council in February 2004, Chairs were newly chosen for various negotiation groups, including that of General Council. One can assume that this will add momentum toward DDA as a whole and have a positive impact on the drive to establish trade facilitation agreement.

#1 Paragraph 21 of the Singapore Ministerial Declaration states, in part, "We further agree to... direct the Council for Trade in Goods to undertake exploratory and analytical work, drawing on the work of other relevant international organizations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area."

#2 Paragraph 27 of the Doha Ministerial Declaration states, in part, "...we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. In the period until the Fifth Session, the Council for Trade in Goods shall review and as appropriate, clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 and identify the trade facilitation needs and priorities of members, in particular developing and least-developed countries...."

Appendix II.
Examples of Trade Barriers Impeding the Japanese Business Community

Japanese business community is well aware of problems caused by trade barriers, some of which are detailed below. WTO trade facilitation rules should place special importance on addressing such problems.

The following examples are taken primarily from results of a questionnaire survey of members of a Nippon Keidanren committee in November and December 2003, plus a December 2003 report issued by the Japan Business Council for Trade and Investment Facilitation, entitled Issues and Requests relating to Foreign Trade and Investment in 2003.

1. Issues relevant to Article V of the GATT

* Simplification of customs procedures

2. Issues relevant to Article VIII of the GATT

(i) Use of documentation that follows international standards

(ii) Simplification of requests for data and documentation

(iii) Automation

3. Issues relevant to Article X of the GATT

(i) Greater availability of information

(ii) Minimum time periods before entry into force

(iii) More effective appeal procedures

Appendix III.
Steps Taken by International Bodies To Promote Trade Facilitation

1. Asia Pacific Economic Cooperation (APEC)

APEC's "three pillars" - trade and investment facilitation, trade and investment liberalization, and economic and technical cooperation - form the basis of its activities.

In 1995, the APEC Sub-Committee on Customs Procedures was established under the Committee on Trade and Investment. The Sub-Committee subsequently implemented a Collective Action Plan promoting the harmonization and simplification of customs procedures, and is currently conducting activities aimed primarily at offering technical support to developing countries.

At a meeting of trade ministers in June 2001, APEC Members endorsed the APEC Principles on Trade Facilitation, which guide Members' voluntary efforts aimed at facilitating trade. These Principles include greater transparency in trade-related procedures, harmonized standards, and the use of new technologies. At the APEC Leaders Meeting in October 2001, the leaders adopted the Shanghai Accord, which has objectives to carry out the APEC Principles on Trade Facilitation, and to reduce 5% of the transaction costs across the APEC region by 2006.

A Trade Facilitation Menu of Actions and Measures was approved at the APEC Joint Ministerial and Leaders Meeting in October 2002. The actions and measures were adopted as the APEC Trade Facilitation Action Plan.

In a proposal submitted to the APEC leaders meeting in 2003, the APEC Business Advisory Council (ABAC) called for wholehearted implementation of the APEC Trade Facilitation Action Plan, and urged that negotiations begin on WTO trade facilitation agreement.

2. Asia-Europe Meeting (ASEM)

At the first ASEM summit meeting in 1997, agreement was reached on a Trade Facilitation Action Plan. The Plan was adopted during the ASEM II Summit in 1998. The Plan promotes trade facilitation in Asia and Europe, and sets concrete goals in seven priority areas: (1) customs procedures; (2) standards and conformity assessment; (3) public procurement; (4) quarantine; (5) intellectual property rights; (6) mobility of business people; and (7) other trade activities (including distribution). Electronic transactions have since been added, creating an 8th priority area.

3. World Customs Organization (WCO)

The WCO is an international organization established to contribute to the development of international trade by promoting the harmonization and uniform application of all countries' customs systems, and by offering technical assistance. Some of the activities by the WCO are: (1) draw up conventions related to customs procedures and the classification of goods (e.g., the HS Convention and the Kyoto Convention); (2) conduct technical discussions on WTO agreements (e.g., the WTO Agreement on Customs Valuation and the WTO Agreement on Rules of Origin); (3) promote international cooperation on sharing regional information that can be used to prevent smuggling, and on monitoring and enforcing anti-terrorism measures; (4) offer technical assistance for the promotion of treaty implementation (through regional seminars and the dispatch of specialists).

In 1973, the WCO adopted the Kyoto Convention, which is an international agreement on the harmonization and simplification of customs procedures. The revised Convention, adopted in 1999, strongly promotes the modernization of customs services, including the introduction of information technologies for customs inspections and the use of risk assessment. 40 Contracting Parties must sign the revised Convention before it can enter into force, but as of November 2003, 14 countries, including Japan, had done so. The significant goals of the revised Kyoto Convention revolve around international standardization: (1) modernization of customs procedures; (2) harmonization of customs procedures; (3) transparency of customs procedures; and (4) streamlining of customs formalities for rapid processing.

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