Singapore Commits to Agreement on Trade Facilitation

June 20, 2014 Posted by ASEAN Briefing Reading Time: 4 minutes

Last Wednesday, Singapore’s Ministry of Trade and Industry (MTI) announced that it had notified the World Trade Organization (WTO) about the country’s commitment to the Agreement on Trade Facilitation (ATF), a multilateral trade agreement that aims to reduce costs in international trade. This means that Singapore has agreed to the implementation of all provisions of the ATF as soon as it comes into force.

The ultimate goal of trade facilitation is to lower the overall costs of moving goods across borders. In the absence of the ATF, businesses face a number of obstacles that hinder efficiency in their respective trading activities, thereby increasing operational costs. According to a presentation made by Japan’s Ministry of Finance in 2005, the private sector often makes a number of complaints in regards to trade policies, including but not limited to:

Lack of transparency in terms of unclear operation rules, regulations, fees and charges
Lack of certainty in that these rule, regulations and fees change frequently and often without a grace period
Lack of uniformity in operation as different offices follow different procedures and even have an arbitrary administration of tariff classifications, custom valuations or rules of origin
Cumbersome trade-related procedures in which businesses must pass through multiple layers of bureaucracy during operation
Excessive document requirements, such as certifications and registrations

Provisions of the General Agreement on Tariffs and Trade (GATT) that are still effective under the framework of the WTO promise freedom of transit (Article V), simplification of fees and formalities connected to importation and exportation (Article VII), publication of trade regulations as well as uniform, impartial, reasonable implementation of these regulations (Article X).

To address the aforementioned problems in accordance with the GATT provisions, the ATF is intended to secure transparency and simplify trade-related procedures to improve operational efficiency for trade businesses. Specifically, some of the provisions in the ATF, as stated by the Office of United States Trade Representatives, include:

Ensuring the publication of laws, regulations and procedures
Internet publication of practical steps to import, export and transit goods
Information on new laws and regulations before their implementation
Provision of advance rulings
Enhanced right of appeal
Notification of detained goods
Disciplines on fees and charges
Quick release of perishable goods
Reduced documents and formalities
Utilizing common customs standards
Promoting the use of “single window”
Uniformity in border procedures and documents
Simplified transit procedures
Facilitating implementation of these provisions for developing countries

There have been criticisms of this trade facilitation initiative during its period of negotiation, however. One major concern rests in significant upfront costs, such as investments in building or upgrading infrastructures including railways, airports, ports and other transportation facilities. For some developing countries in the WTO, these costs can be difficult to absorb. Therefore, the ATF necessarily requires developed countries to assist other members of the WTO to implement the agreement in order to gain the latter’s approval.

Despite the foreseeable costs of trade facilitation, some policymakers and speculators are optimistic about the future of the ATF. Singapore’s MTI states that, based on a study conducted by the Peterson Institute for International Economics, businesses can expect to see a decrease of between 10 and 15 percent in their trade costs and a US$1 trillion contribution to the global economy when the ATF is implemented.

“One of the changes we have seen in recent years is that customs and regulation agencies are getting a clear message from governments which is ‘we need to grow economically’ and it all comes down to cross border trade facilitation; the true key to economic growth,” said Gaozhang Zhu, World Customs Organization (WCO) Director of Compliance and Facilitation, to the International Chamber of Commerce.

Negotiations for the ATF began at the 1st Ministerial Conference in Singapore in 2004, and the agreement was finalized at the 9th Ministerial Conference in Bali in December 2013. In order for the ATF to come into force after nine years of negotiation, a minimum of two-thirds of WTO members must ratify the agreement. Developing countries in the WTO may choose to implement all or at least some provisions, namely Category A commitments. Developed countries in the WTO are set to implement all provisions of the ATF when it takes effect.

Besides Singapore, some other members of the WTO, including Colombia, Costa Rica, Hong Kong (China), Mexico and South Korea, have announced their support for the ATF. Singapore urges all WTO members to demonstrate their commitments to the ATF as quickly as possible for businesses and economies to truly benefit from the agreement.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email singapore@dezshira.com or visit www.dezshira.com.

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