Does Trade Facilitation Matter in the Fight against Corruption?

Governance Improvements Will Make Countries That Adopt the Accord Less Risky Places to Do Business

By Evelyn Suarez

What does the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) have to do with corruption? It has everything to do with good governance and addressing the demand side of corruption at the border.

But in order to understand the relationship one must understand what trade facilitation is and how it addresses public corruption at customs.

The WTO defines trade facilitation as “the simplification and harmonization of international trade procedures” covering the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.”

The main features of the TFA include: required publication of regulations and fees; appeal-and-comment rights when new regulations are introduced; mandatory internet availability of documents and payment options; special procedures for expedited release of air cargo and perishable goods; support for the use of express delivery and air cargo; and requirements for clear procedures to deal with cargo holdups and releases. The TFA also provides for aid to developing countries to implementing the accord’s provisions.

TFA provides a blueprint for customs modernization. Successful implementation will lie in the detailed work that lies ahead.

In spite of the touted benefits, the WTO member countries has been slow to ratify the TFA. Two-thirds of the WTO membership, or 108 members, must ratify TFA before it is implemented. The U.S. and the WTO are encouraging countries to take action before the Tenth WTO Ministerial in December in Nairobi, Kenya.

The Organization for Economic Cooperation and Development estimates that the customs reforms effected by TFA implementation would lower the total trade cost of shipping goods by 10 to 15 percent depending upon the country. Some expect implementation of TFA’s measures to boost global trade by an estimated $1 trillion and global GDP by nearly five percent. “It makes it easier for businesses big and small to participate in trade around the world,” stated the Office of the United States Trade Representative, “and to support jobs through that trade.”

Various aspects of the agreement, such as transparency, automated entry and payment of duties, can serve powerful measures to address corruption at customs. Corruption at the border is undoubtedly a significant impediment to trade and investment in the developing world. Corruption at ports is such a serious problem that the maritime industry has organized a collective action effort called the Maritime Anti-Corruption Network (“MACN”) which seeks to “work toward its vision of a maritime industry free of corruption that enables fair trade to the benefit of society at large.” It goes without question that TFA implementation would aid in this effort.

TFA implementation will also be a test of good governance. Countries will have to make the decision of whether they actually want to avail themselves of the donor assistance for capacity building to modernize their border processes. This can be seen as a test of whether a country is really willing to address corruption at customs. A country’s willingness or unwillingness to adopt measures facilitating trade and reducing the opportunities for corruption at the border may be a powerful indicator of a culture of corruption—more so than any index of perception of corruption.

For companies doing business abroad, especially in emerging countries, a country that undertakes these reforms may be a better bet for business. And hopefully, the countries that take advantage of the assistance will succeed in establishing their places in the global value chain. TFA implementation should be an important tool in addressing the demand side of corruption and making the implementing country a more attractive and less risky place to do business.

Source: http://www.globaltrademag.com/global-trade-daily/commentary/does-trade-facilitation-matter-in-the-fight-against-corruption

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