Those who see no problems if the UK and EU fail to strike a deal regularly claim the WTO’s Trade Facilitation Agreement will come to the rescue. They are wrong.

By Peter Ungphakorn

POSTED AUGUST 16, 2018 | UPDATED JULY 14, 2020

“The new Trade Facilitation Treaty commits members to facilitating trade, not obstructing it.” So wrote Iain Duncan Smith, former cabinet minister, Conservative Party leader and vocal Leave campaigner, in the Telegraph on August 15, 2018.

The argument is made with increasing frequency by “hard” Brexiters, who claim trade between Britain and the EU will not be disrupted, even if there is no agreement between them about their trading relationship when the UK leaves the EU.

Similar claims have been heard from former UK trade minister (1990–92) Lord (Peter) Lilley in the Times the previous day, economic adviser Ruth Lea on Brexit Central, and international economic law professor David Collins, on Brexit Central and in the Spectator.

A number of other arguments have been challenged, particularly on what WTO rules might or might not say about checks on product safety and standards and other issues.

This comment focuses only on the WTO’s Trade Facilitation Agreement because the claims are so wrong we can wonder if those making the claims have actually ever looked at the agreement or a summary.

Basically, the Trade Facilitation Agreement is irrelevant to the question of whether the UK and EU can check each other’s goods or require paperwork for border clearance, all of which increase costs.

It’s not difficult to find. There’s a whole section of the WTO website on the subject, with links to an even better site, the TFA Facility.

What is it?

The agreement is important. The main purpose is to slash the costs of trading by cutting red tape when goods cross borders. So it calls for streamlined procedures, paperwork handled electronically and as simply as possible, and so on. It also breaks new ground by allowing developing countries to promise to reform their procudures on condition they receive aid to implement it.

Because customs and other procedures in developing countries tend to be slow and cumbersome, it’s these countries that stand to gain the most from implementing the agreement.

But it would be wrong to say the agreement is targeted at only or even mainly developing countries. Far from it. There are important provisions that developed countries like the EU and UK have to respect or face legal challenges.

It’s just that the provisions dealing with electronic paperwork and streamlined procedures don’t fall into that category. They are written in a way that only requires countries to do their best to comply. And what “doing their best” means is left up to them.

To see how this works, it’s useful to compare how different parts of the agreement are written. In some parts the compulsory “shall”, meaning “must”, appears frequently. In other parts it’s phrases like “to the extent possible”. Let’s see which they are.

‘To the extent possible’

This is what the agreement’s Article 7 — on the all-important “release and clearance of goods” — says in paragraph 1 on “pre-arrival processing”:

1.1. Each Member shall adopt or maintain procedures allowing for the submission of import documentation and other required information, including manifests, in order to begin processing prior to the arrival of goods with a view to expediting the release of goods upon arrival.

1.2. Members shall, as appropriate, provide for advance lodging of documents in electronic format for pre-arrival processing of such documents.

Note “with a view to” in paragraph 1.1 and “as appropriate” in 1.2. These phrases allow countries quite a lot of leeway in implementing pre-arrival processing, particularly in electronic form.

Phrases like “as appropriate”, “as rapidly as possible”, “within the shortest possible time”, “to the extent possible”, ”wherever practicable”, and “encouraged to” appear throughout this article, all the way down to paragraph 9, which deals with perishable goods:

9.1 With a view to preventing avoidable loss or deterioration of perishable goods, and provided that all regulatory requirements have been met, each Member shall provide for the release of perishable goods:

(a) under normal circumstances within the shortest possible time; and

(b) in exceptional circumstances where it would be appropriate to do so, outside the business hours of customs and other relevant authorities.

9.2 Each Member shall give appropriate priority to perishable goods when scheduling any examinations that may be required.

9.3 Each Member shall either arrange or allow an importer to arrange for the proper storage of perishable goods pending their release. The Member may require that any storage facilities arranged by the importer have been approved or designated by its relevant authorities. The movement of the goods to those storage facilities, including authorizations for the operator moving the goods, may be subject to the approval, where required, of the relevant authorities. The Member shall, where practicable and consistent with domestic legislation, upon the request of the importer, provide for any procedures necessary for release to take place at those storage facilities.

9.4 In cases of significant delay in the release of perishable goods, and upon written request, the importing Member shall, to the extent practicable, provide a communication on the reasons for the delay.

We could also take a look at Article 8 on border agency cooperation. Note “to the extent possible and practicable”, “mutually agreed terms” (relevant for “no deal” between the UK and EU), “with a view to” and “may include”. Again, not exactly compulsory:

1. Each Member shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another and coordinate their activities in order to facilitate trade.

2. Each Member shall, to the extent possible and practicable, cooperate on mutually agreed terms with other Members with whom they share a common border with a view to coordinating procedures at border crossings to facilitate cross-border trade. Such cooperation and coordination may include:

(a) alignment of working days and hours;

(b) alignment of procedures and formalities;

(c) development and sharing of common facilities;

(d) joint controls;

(e) establishment of one stop border post control.

The fact is, developed countries like the UK and EU already implement these provisions, and if anyone is dissatisfied with how well they are complying there’s little they can do about it under this agreement.

But note that the provision on release and clearance of goods doesn’t appear in the agreement until Article 7. That’s a pretty low priority.

What do the previous six articles deal with? Answer: rule-making, decision-making, transparency and the ability to comment. Here’s the list:

Article 1: Publication and Availability of Information

Article 2: Opportunity to comment, information before entry into force and consultations

Article 3: Advance Rulings

Article 4: Procedures for appeal or review

Article 5: Other measures to enhance impartiality, non-discrimination and transparency

Article 6: Disciplines on fees and charges imposed on or in connection with importation and exportation and penalties

In these articles, the compulsory “shall” appears much more often. For example, new regulations must generally be published in advance. Or, if an importer asks for an advance ruling on what the customs category a particular product is — and therefore what the customs duty is — Article 3 begins:

“Each Member shall issue an advance ruling in a reasonable, time-bound manner to the applicant that has submitted a written request containing all necessary information. If a Member declines to issue an advance ruling, it shall promptly notify the applicant in writing, setting out the relevant facts and the basis for its decision.”

The UK and EU will have to (or “shall”) comply with these requirements each time the situation arises in the future. Even then, Article 2 on the opportunity to comment features “to the extent practicable” in its two key paragraphs.

In other words the compulsory bits have nothing to do with frictionless border procedures.

But they are important to help traders understand what each country’s rules are.

See also: Does the WTO require countries to control their borders?

Updates:

July 14, 2020 — minor edit to clarify that the border processes concerned include paperwork for customs clearance as well as physical checks on goods

August 19, 2018 — minor edit for clarity

Photocredit: Port photo by Martin Damboldt, Pexels, public domain (CC0)



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