WHATEVER HAPPENED TO TRADE FACILITATION?

IntroductionA TRADE FACILITATION TOOLKIT

AUDIT, ANALYSIS AND REMEDIAL ACTION

At the turn of the new Millennium international trade“Trade and Transport Facilitation – An Audit Methodology” was published, in April 2000, facilitation, in the relatively restricted sense of simplification of trading procedures, was a pedestrian activity with few political overtones. A few months laterBy the time this basic text was re-issued with additional sections on Analysis and Remedial Action, a year later, a new and elevated level of inter-governmental, and so commercial, interest had beenwas reached in the run-up to the WTO Doha Ministerial Conference and its programmed debate on an additional negotiating “package” of four unfamiliar items including “Trade Facilitation”.

Today, only four years laterToday, in the wake of 9/11, the authoritative, obligatory elements of official national border controls, applied at least twice in every international trade transaction, are being transformed to meet acute political and public concern at threats from global terrorism.

Trade Facilitation, also focused for a quite different WTO set of international economic objectives, on Customs requirements, is the sole survivor of the original Doha Four and has produced an impressive volume of interesting and innovative Communications on a rrange of facilitation topics. A number of World Bank projects are carrying out and acting on facilitation audits have moved the Methodology off the page into practice in several developing countries.

The World Customs Organisation has just produced a Resolution, backed by a Framework for Security and Facilitation that, if put into general application, would bring many radical changes into the working relationships between all their Customs members and between each of them and their trading communities.

Clearly much rethinking, discussion, consultation and related action still lies ahead.

It is still much too early to foresee, much less forecast, the many directions in which anti-terrorist border security, operating through intensified Customs mutual assistance, accelerated ITC applications to origin-destination management of international transport and automated risk-assessment, with such associated concepts as the Authorised Economic Operator can be reconciled with, and assimilated to, new standard, simplified procedures.

While the WTO now accepts Facilitation, attended by essential Capacity Building assistance, as a settled free trade objective, it is still too early to judge the outcome of the all-important focal discussions on such prior issues as market access or agricultural subsidies.

Furthermore, it is already evident that practical border control reforms, stemming from any new or extended WTO Rules, will call for many years of patient effort under the Special and Preferential Treatment arrangements that will be clearly necessary in many WTO Member States.

Nor, as yet, has the World Bank made public, in a collated form, the experience and changes in its own facilitation strategies that might have emerged from collated, assessed and evaluated the relatively modest experience and information to be drawn from trelevant projects it has already put in hand.he relatively small number of initial Methodology applications.

On the other hand, business innovation is constant and tireless.

has not stood still for five years and The rising stridency of vocal and organised opposition to “globalisation” is, perhaps, the best evidence of the extent to which world-wide integrated supply, production and distribution systems, based on competitive application of facilitation techniques, principles and tools, now dominate and underpin economic expansion.

there are fairly reliable indications of the general, broad effects of both anti-terrorist control strategies and potential WTO facilitation regulatory adjustments.

Apart from the WTO Communications and the very useful analyses prepared by the WTO Secretariat, anyone seeking to up-date the Methodology can call on the recently adopted World Customs Organisation (WCO) Framework for Security and Facilitation, a range of US and EU applicable or proposed security regulations and a wealth of other relevant material available through the now very active Global Facilitation Partnership, itself, in effect, the Methodology’s own origin and anchor.

In summary, over the last five years, trade facilitation has made spectacular gains in political status and attention as well as in practical commercial applications. One unhelpful by-product of this success is a noticeable trend to slap the general “facilitation” label on many products and propositions that are either far more extensive or much more limited than the systematic analysis, agreement and activity build up and deployed, over the last half-century to simplify and standardise international trade procedures and associated information flows.

Facilitation is in considerable danger, therefore, of losing effective focus, falling behind business changes and dissolving out into a proliferation of high-level conferences and economic analyses, designed to advance institutional territorial ambitions or support often ill-defined political objectives and priorities.

It may be timely and prudent, therefore, to offer a short reminder of what international trade facilitation was originally about, how it has developed and what important and urgent tasks still lie within its narrow but demanding remit and competence.

This Paper sets out a short history of internationally organised trade facilitation activity, examines its scope and objectives and suggests some immediate pressing responsibilities, focused, for the most part, on the new, very convenient consultative and co-operative mechanism of the World Bank Global Facilitation Partnership.With these resources at hand, but restrained by a very lively sense of the dangers of importing premature political speculation into a prosaic working tool, to be used at the coal-face of day to day international trading, the Methodology has been reviewed and modified to -

Offer a short account of the development of “trade facilitation” as a well-understood, systematic and organised activity.

Describe its scope, objectives and dynamics. This identifies some of the major challenges and opportunities facing the facilitation community in 2005 and adds some suggestions for appropriate action.

Include a new section on Consultative and Co-operative Mechanisms. There is a patent disparity in time-scale requirements between “instant” security regulation and the related commercial and official ability to make the necessary adjustments to often complex operational and information systems and sometimes resistant and poorly trained work-forces.

If the recommendations, in most facilitation guidelines, to establish and maintain national consultative committees are valid for normal purposes of largely voluntary reform and modernisation, they are infinitely more applicable for acute and urgent tasks of adjusting control to capability in circumstances where miss-matches and errors will have serious penal consequences.

Conventional publication of printed Methodology revisions may be desirable, from time to time, but events are moving very quickly and there are many advantages in maintaining and managing a website text, adjusted as frequently as necessary.

At least two elements of change will; be at work and need to be accommodated.-

1.External policy developments at the level of the WTO negotiations, elaboration of the WCO Framework and, eventually, decisions of the Kyoto Convention Management Committee. The GFP will undertake this editorial function.

Practical improvements to the Methodology, as a working tool, based on on-site experience and application. This sort of input will need to be supplied by users, for example, the World Bank, but possibly, also, other similar aid or lending agencies. National consultative committees would be valuable source of information and critical improvement. A suggested basis for comment is attached at Annex A.

ORIGINS AND DEFINITIONS

Origins

Trade facilitation, as an organised, systematic activity, is a by-product ofbegan, in more than one sense, with paper. refrigeration.

In the years immediately following the Second World War forwarders and agents handling the Swedish wood, paper and pulp exports encountered constant difficulties in ensuring a timely supply of an almost infinite variety of individualistic and separately printed and sold Bills of Lading. They managed to produce and secure some useful acceptance of a simplified, standard Bill, with all essential data items in preset positions on the page.

This stimulated a more general Swedish appreciation of the benefitsElectrolux company devised and felt the benefit of identifying certain key internal operational and accounting documents, reducing their information contents to an absolute minimum and then setting out required data items in fixed positions or “cases” within a standard frame or format on A4 size paper.

Swedish Customs, who had been consulted to ensure that their requirements had been met by the simplified Bill of Lading alerted their management to the potential importance of the alignment principle and one of their senior staff was delegated to bring the concept to the attention of the They wanted to be able to extend the advantages of this rationalisation to their external business and sought the support of the Swedish government for national application. The government took the concept to the Nordic Council and the Nordic Council, with the aid of its constituent national delegates took it to the Trade Division of the United Nations Economic Commission for Europe (UNECE[WJK1]) in Geneva.

There a number of serious civil servants delegates, from national trade ministries, including, the USSR and certain satellite states, as well as especially entitled representatives from the USA and Canada, soon saw the practical point of simplified standard trade documentation.

They set to work to apply the Swedish principle and much of its technical content to all possible elements in the documentary sequence of the average international transaction, from order form through all the main transport documents up to invoice and payment. They encountered many difficulties and much, sometimes immoveable, obstruction.

The Bill of Lading, endowed by pious ship owners with obligatory capital letters, was invariably adorned with florid company letter headings and its obverse, referred to in some unconsciously irreverent UNECE documents as the “back side”, was usually full of a mass of detailed special conditions, , highly individualistic reservations and exceptionsoften in unreadable small print. It was therefore a major accomplishment took a decade or so to persuade the members of twhen the Working Party and the International Chamber of Shipping were able to persuade shipping lines that the advantages of uniformity outweighed the satisfaction of individualismty and that all their sacred, often almost illegible contractual small print could be covered, on the face of the form, by a sisimple indication thatngle reference to “Terms and Conditions are available for reference on request”.

The International Air Transport Association[WJK2] had devised its own “standard” aira “horizontal”air waybill for use in early computer systems, but the UNECE lay-outlayout key master document called for several important changes.was inconveniently vertical. The IATA Director General argued that all his airlines had large stocks of the existing forms and that a change shiftto to the required UNECE format would take ten years. In fact it took eight.

Some sectors, notably road transport and a little later the beginnings of the new-fangled containerised inter-modal movement systems, had no central, truly international representative body and a good deal of responsibility for drafting agreeing and promoting relevant aligned documents here fell on, and was valiantly accepted by, the International Federation of Forwarders[WJK3] Associations (FIATA).

While Swedish Customs had been key promoters of the alignment principle and had modified their own documentation accordingly and despite strong Customs Co-operation Council (now World Customs Organisation) support, a number of other national Customs services Customs, however, rrefused to accept any internationally simplified standardised replacements for their often numerous and complicated paper forms.

This meant that the experts[WJK4] convening at the UNECE were never able to produce a comprehensive set of internationally aligned documents. They could only present and promote a number of national series, each based on a standard layout-key and including as many of the available international documents as possible, but each having also to take account of, and deal separately with, a zealously defended and completely non-standard set of national Customs forms.

By 1970, for this and other more positive reasons, most of the major European ECE member states had a national documentary committee to spread knowledge and use of the new internationally standardised and simplified documents and, where possible, to supplement these with simplified, if still individualistic, Customs forms.

In the USA, the recently founded Department of Transportation, charged with general inter-departmental oversight of work on “facilitation” an ill-defined activity with roots in the 1944 Chicago Convention on international civil aviation, and branching out into international standards for road signs, was on very friendly, collaborative terms with an equally new business initiative, the US National Committee for International Trade Documentation (NCITD), working from New York.

Stimulated by joint participation in the work of the ECE Working Party [WJK5]and suffering, additionally, from the consular invoice requirements embedded in the trading systems of many Latin American states, these two US organisations embarked, late in the ‘sixties, on a joint enquiry into the costs of existing documents and procedures.,They saw,seeing, quite correctly, the benefits of attracting official and commercial support for reforms by estimating and publicising associated potential savings.

At about that time, however, relevant work in the ECE, on which both these US entities were represented, entered a completely new phase.

By 1968 the UK government had become uneasy at the incipient problems of adjusting documents, procedures and associated liabilities, based on traditional port to port and supplementary, separate road or rail movements, to the completely different requirements of inter-modal origin-destination through transport, and harboured what turned out to be premature hopes of finding a place in the then Common Market.

They decided to set up an informal, mainly business-manned, committee, under a former Treasury Minister, Lord Thorneycroft, to “study documentation in international trade ” in international trade” a and ”make recommendations to assist the more efficient flow of trade”.

This remit was backednotably assisted by a generous two-year financial grant and a convenient nesting place in the then fashionably influential National Economic Development Office (NEDO).

The process of assembling and then disentangling the rag-bag of intensely individualistic commercial and official practices inherent in every international trade transaction – London and Liverpool ports, for example, had entirely different operational and management practices, so Customs there were similarly divergent – began by an initial focus on paper documents, but soon detected showed up as a perceptible, if confused, pattern on a richly variegated procedural carpet.

The results of two years very practical debate between practising experts were to transformed the overall prospects and perspectives of simplification and harmonisation from a relatively superficial documentary focus to a much deeper and radical analysis of underlying procedures.

The SITPRO[WJK6] investigatory process developedhad the salutary, initially incidental, effect of developing the by then “traditional” and, to some extent, stultifying, process of arranging a minimal set of transactional information requirements, within a standard A4 page layout-key, into a sustained and dynamic analysis of the commercial and official requirements behind the exchanges, transmissions, checks and authentications of information between international trade participants, along the sequential line of an infinite variety of practical transactions.

At this stage of progress on both sides of the Atlantic “facilitation” had been narrowed down from any broad dictionary concept of “making easier”” through by its its inclusion, in the Chicago Convention on International Civil Aviation,[WJK7], in the special sense of “standards in connection with the clearance of aircraft, people and goods through the formalities required at international borders” and systematic “improvement of the necessary control processes and service procedures, to make them both more efficient and more effective.”

Because of US and Canadian participation in the ECE Working Party, and the general currency afforded this definition by the rapidly developing air transport industry, it soon became familiar, in a very loosely understood sense, to European and other the ECE Working Party [WJK8]and among its European memembers.

As late as 1971, when the US Department of Transportation’s Office of Facilitation and NCITD published the results of their cost enquiry in “Paperwork or Profits”, the central if not sole task of reform was seen in the very restricted sense of “the revision [WJK9]of existing or implementation of new documentary requirements to modernise international paperwork practices.

This thesis and thrust could be considered as entirely out of step with the basic conclusion of the SITPRO Report [WJK10]that documentary disorders were simply the outward and visible sign of an inward and procedural disgrace.

In practice, however, these differences of analytical approach and assumption underlined and strengthened the effect of the many similarities that emerged from both sets of recommendations for remedial action taken together and examined jointly.

Furthermore while the SITPRO Report signalled and signposted a radical change in strategy, it had a limited circulation among simplification, afficionados. The US study, however, produced a set of cost calculations that attained world-wide status among a much broader trade and official community, and are still echoing from some facilitation seminar platforms today, long after their sell-by date for any useful credibility.

Definitions

It is significant that there was no mention of “facilitation” in the SITPRO Report and that,while in in “Paperwork or Profits”, the same word appeared only as a Departmental title – Office of Facilitation” – and never as a conceptual description of a technical simplification activity.