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Bureaucratic red tape and corruption head the list of targets, says US official

WASHINGTON, DC - 04/23/05 - An industrial robot broke down at a plant run by a US company in another Western Hemisphere country, and the company promptly express-shipped a part the size of a cake box to fix the problem, according to a high level US trade official.

The part sat at the border for ten days while Customs officials in the receiving country debated whether to classify it as a spare part or as a part of the machine itself, said the official, who spoke with the Washington File under the condition of anonymity.

As a result of the delay, he said, the plant was forced to revert to manual production with lost output estimated at close to $500,000.

Now World Trade Organization (WTO) negotiations are reportedly working toward an agreement to prevent such Customs and related barriers to trade at the border.

The WTO calls the issue trade facilitation. WTO member countries launched those negotiations in Geneva in July 2004 at the same time they approved a framework for advancing long-stalled agricultural trade negotiations.

"The proponents of launching negotiations were an interesting coalition of developed and developing countries," the official said.

Developing countries have come to realize, he said, "that if they and their developing country neighbors all reform their antiquated customs procedures, then all sides would gain economically from more trade."

He said the strongest US allies in the negotiations are Chile and Singapore, "countries that have realized the benefits of customs reform from honoring such commitments they made in negotiations of free-trade agreements with the US."

The US has submitted a number of proposals to the WTO negotiations, including one for requiring expedited Customs treatment for express shipments.

Some of the other US proposals submitted so far would require release of goods based on payment of a bond or deposit instead of holding goods at the border until completion of all formalities; mandate Internet publication by each country of its import laws and regulations; require transparent disclosure of border fees; and prohibit requirement of payments to local consular officials of the foreign government to facilitate entry of goods, a practice called "consularization."

"I think the big winners here are really going to be small and medium-sized businesses," the US official said.  "I think the other big winners are developing countries."

WTO Customs procedures rules in place now are those agreed to in 1947 under the General Agreement on Tariffs and Trade (GATT), which preceded the WTO.  At that time many countries' procedures had not changed for 100 years, the US official said.

"Basically what these negotiations are about is the modernization of those rules with the aim of enhancing transparency and the rapid movement of goods," he said.

The negotiators held substantive sessions in February and March while additional sessions are scheduled in May, June, and July. The US official said negotiators are trying to get all proposals on the table by July and then refine them ahead of the December WTO ministers' meeting in Hong Kong.

No deadline is set for completion of all the WTO negotiations.

Describing the trade facilitation sessions to date, the official used words such as "constructive," "practical," and "workman-like." 

He said they have been conducted without the kind of rhetorical exchanges that have stalled progress in some other WTO negotiating groups, adding that the only sign of resistance to the negotiations so far has been caution among some developing countries about taking on any additional WTO obligations.

The official said he had seen no resistance related to bribery and corruption, possibly because developing countries now acknowledge that corruption can drag down economic expansion, he said.

Two ways to constrain corruption at the border, he said, are for a national government to make Customs procedures transparent and fair and to allow for rapid release of goods.
"If the goods are out of the hands of customs and move on," the official said, "then the opportunities for corruption are greatly diminished."

The negotiators keep in mind developing countries' needs for technical assistance for implementing whatever trade-facilitation agreement they might achieve, he said.  For example, the US could help some countries publish their customs laws and regulations on the Internet, he said.

"The important players in these negotiations are the developing countries and, in particular, the least developed," the official said, "so we have worked very hard to engage these countries."

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