The collapse of global trade, murky protectionism, and the crisis:

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VOX Research-based policy analysis and commentary from leading economists Facilitation Agreement emerge? The challenge here is to capitalize on progress in the WTO trade facilitation negotiations to speed up implementation of much needed reforms. While there are many possible variations on the theme there are essentially only two possibilities thus far articulated. The first involves securing agreement to separating trade facilitation from the "single undertaking" requirement of the DDA and treating success in the trade facilitation negotiations as a so called "early harvest". However, the negative reaction among large segments of the WTO membership suggests that such an approach is not politically viable. A so called "early harvest" simply isn't going to happen. A second, arguably more realistic option, would involve speeding up conclusion of the content of a new trade facilitation agreement and then moving rapidly toward effective implementation in advance of a comprehensive Doha deal. Such an approach would front-load the development benefits of the trade facilitation agenda and would capitalize on the fact that many members are already implementing customs and logistics reforms in their own self interest as part of larger programs to improve competitiveness. Moreover, moving toward immediate implementation would test donor willingness to provide adequate technical assistance resources and do much to allay the remaining concerns of developing countries. Progress in implementation would lay the foundation for rapid approval of any Trade Facilitation Agreement as part of a comprehensive Doha deal. This option effectively postpones the need to secure full consensus on the DDA agenda while not postponing implementation of a range of practical measures where the benefits for all Members are not in dispute. As a starting point, and where demand from Members was clearly articulated, donors could assist developing country members to prepare practical implementation action plans to both guide the implementation process and to provide a basis for discussions between recipient countries and donors. Such an approach would of course need to build on existing donor efforts as well as assessments and action plans already in place where they exist. 29 Commitment to support implementation of the needs identified would of course be a matter for discussion between potential donors and recipient countries but would ensure some of the key criteria identified above could be addressed. The development of such implementation action plans would also assist members to better identify and calibrate the timing of binding commitments to their own implementation capabilities. Two objections might surface about this strategy. Some might say that implementing reforms undermines bargaining power of one or another coalition on the single undertaking. However, it is unlikely that that any offensive interests in trade facilitation are so great that a defensive posture would precipitate movement in other, more difficult, parts of the negotiation. More importantly, trade facilitation is one area where the gains transparently accrue to those that implement reforms. It therefore makes no sense for any government to hold important reforms hostage to an agreement in Geneva. This approach would provide a sound framework to guide delivery of trade related 29 A six country case study undertaken in 2006 by the World Bank, the IMF and the WTO noted that none of the countries studied were starting from scratch and that all had reform efforts underway in trade facilitation. In many cases implementation of the measures under negotiation in the WTO could be accommodated by modifying existing donor financed projects. 102
The collapse of global trade, murky protectionism, and the crisis development spending pledged as part of the Aid for Trade initiative. It would also be seen as a vote of confidence in the capacity of the WTO process to deliver positive dividends for the trading nations of the world and would be a very practical demonstration that the "Development" component of the Doha Development Agenda was more than mere rhetoric. What precisely would be the role of the G20? First, G20 members would need to direct their negotiators to give renewed emphasis to quickly concluding the content of a new trade facilitation agreement. While progress to date has been good the negotiations have always been seen as part of the overall Doha process and have therefore lacked a sense of urgency. In this sense the timetable for concluding an overall deal has driven the timetable for the trade facilitation negotiations. If implementation of practical trade facilitation reforms is to have any impact on the speed of recovery from the current economic crisis then a sense of urgency in securing agreement is of the utmost importance. Second, industrial countries would need to make good on their pledges of increased development assistance financing particularly for the Aid for Trade initiative. Summary The sharp global economic downturn should raise the priority given to cutting red tape for traders. Governments everywhere want to maximize the impact of any public investment projects, and trade facilitation measures have already demonstrated they are capable of that. In addition, G20 leaders have committed themselves to keeping borders open to trade and cutting red tape will offset some of the harm done by protectionist responses to the crisis. The benefits of improving trade facilitation are widely accepted, this matter does not divide rich and poor countries. The G20 should capitalize on the positive developments at the WTO on trade facilitation, doing so in a way that accelerates the implementation of practical measures that cut red tape and lower trade transaction costs without waiting for the Doha Round to be completed. Securing agreement on such an approach would deliver a series of practical benefits to traders struggling to cope with the current global economic crisis. About the author Gerard McLinden is a Senior Trade Facilitation Specialist in the International Trade Department of the World Bank. This article is solely the view of the author and does not necessarily reflect those of the World Bank or its Executive Directors. 103
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