Nepal can leverage TFA implementation to attract more investment in the economy – The Himalayan Times – Nepal’s No.1 English Daily Newspaper
KATMANDU, JUNE 22
A joint agency of the United Nations and the World Trade Organization, the International Trade Center (ITC) is implementing the EU-Nepal Trade and Investment Program (TIP), a technical assistance project linked to the four-year trade in Nepal funded by the European Union, in collaboration with the Nepalese government.
Among other interventions, EU-Nepal TIP helps the Nepalese government to improve the national trade facilitation environment, also by supporting national institutional and technical capacities to implement the WTO Trade Facilitation Agreement (AFE ).
Mohamed Said, Senior ITC Trade Facilitation Advisor, shared with Himalayan times the importance of trade facilitation and how Nepal can benefit from TFA implementation.
Why is the concept of trade facilitation important for international trade and what are the key objectives of TFA?
In today’s world, where international trade increasingly takes place in fast-paced global value chains, time is running out. The speed at which a product travels from the factory in the country of origin to the shelves in the destination market is of utmost importance to buyers and consumers, who demand just-in-time delivery and reliable business processes. However, the cost factor is also a crucial element that determines the competitiveness of a product and, therefore, of businesses, especially small and medium-sized enterprises (SMEs).
According to WTO estimates, in developing countries, for every US dollar it costs to make a product, it costs $ 2.19 more to bring it to consumers, compared to developed countries where this cost is reported at $ 1.34. Cross-border inefficiencies, captured by the direct and indirect costs traders must incur to export or import their goods, therefore have a huge impact on the competitiveness of businesses and, in general, on a country’s business environment.
This is where the concept of trade facilitation comes into play to make the difference for efficient and competitive businesses. In its broadest sense, trade facilitation is a comprehensive set of actions aimed at reducing the time and cost of trading across borders. It involves reforms of border and cross-border operations, including the reliability, predictability and efficiency of transport infrastructure and logistics operations, as well as customs and border management regulations and procedures.
The WTO TFA is a historic multilateral agreement that entered into force on February 22, 2017 and which all WTO members such as Nepal are responsible for implementing. The TFA specifically aims to address inefficiencies resulting from long, redundant and outdated border formalities and procedures.
Its main objectives include the simplification, harmonization, modernization and, to the extent possible, the automation of regulatory and administrative procedures at borders, as well as fair and non-discriminatory access to information relating to exports, imports and in transit.
This agreement, which Nepal ratified on January 24, 2017, is a remarkable achievement of the multilateral trading community, which has teamed up to cut red tape at the border and boost global trade by speeding up movement, clearance and clearance. release of goods.
What are the benefits that a landlocked country like Nepal can gain from implementing TFA?
The WTO estimates that full implementation of the TFA could result in an average 50 percent reduction in trade delays and an average 14 percent decrease in trade costs. LDCs such as Nepal expected to see the greatest reduction in these trade costs (around 17%), and therefore to reap the greatest benefits. These estimates also predict that TFA’s trade gains could translate into an annual increase of more than $ 1 trillion in world exports, with developing country trade increasing by 9.9%. Particularly for LDCs, TFA is a path to increased export diversification and opportunities for companies to participate in global value chains.
By making the business environment more efficient, transparent and conducive, Nepal can leverage the implementation of TFA to enable a greater presence of its SMEs, especially those in the agricultural and manufacturing sectors, in chains. global value because they pay disproportionately. the price of the costs and inefficiencies of cross-border trade, and attract more investment into the economy.
Increased efficiency and predictability of export, import and transit procedures, reduced administrative complexity to comply with border regulations and procedures, and reduced delays in customs clearance and release of goods, while protecting the right of the country to apply border controls for legitimate public policy objectives, are all essential benefits that the implementation of TFA would bring to the private and public sectors of Nepal.
In addition, given its landlocked nature, Nepal can gain better market access through better transit arrangements. The TFA not only reaffirms that transit is a right of landlocked countries, but also codifies the discipline to make transit efficient and thereby reduce the time and cost of freight in transit.
Article 11 of the TFA contains detailed provisions to facilitate transit, aimed at minimizing the number and complexity of procedures and documents related to transit, and hence the cost of transporting goods from Nepal to the rest of the world. via neighboring countries.
What are the factors that will determine the successful implementation of the TFA, and what can Nepal learn from other countries that have successfully implemented the agreement?
The cumbersome border procedures are also partly due to the lack of coordination between border regulatory agencies, which sometimes request the same information or documents from traders, and apply unnecessary or redundant inspections at the border. One of the key success factors for a meaningful TFA implementation surely rests on a high degree of inter-agency cooperation between border regulatory agencies that regulate international trade procedures to streamline processes and facilitate compliance with requirements. regulatory and administrative.
Although the customs administration plays a central role in border procedures and the TFA contains many provisions focused on customs, all agencies responsible for border management – the quarantine agency, the police, the The immigration authority and other relevant institutions – play an equally central role in facilitating trade. All of these agencies need to take a coordinated approach among themselves to speed up trade flows, while maintaining a balance with border compliance requirements.
In addition, it is essential that TFA and the resulting trade facilitation reforms are implemented from a ‘whole supply chain’ perspective, in which policymakers design reforms holistically. in a participatory manner, taking into account the bottlenecks faced by all operators – traders, logistics providers, etc. – throughout the supply chain.
Adopting this comprehensive supply chain approach will allow understanding of all possible operations occurring in an international trade transaction, their linkages and potential trade facilitation improvements that can broadly benefit the different operators and stages of trade. the transaction occurring in the supply chain. The involvement of the business community in the trade facilitation reform process is crucial to ensure that these solutions generate widespread benefits for all actors in the supply chain.
As Nepal moves forward on the road to TFA implementation, these are certainly two success factors that many countries in the same process have incorporated into their trade facilitation reforms, and which will determine the degree of success. effectiveness of the reforms adopted.
How can the private sector participate and contribute to the overall process of TFA implementation by the Nepalese government?
Inclusion of business, and the private sector perspective more broadly in policy making, is crucial to increasing the benefits of trade facilitation policy formulation. The success of trade facilitation reforms requires the implementation of a well-designed approach that involves active consultation and involvement of businesses in the policy-making process. The inclusion and participation of the private sector in trade facilitation solutions will enhance the benefits of policy formulation and ownership of the reform process, as the business community can be accountable for the most common procedural obstacles and help to design dedicated solutions.
Public-private dialogue (PPD) is particularly suitable for strengthening public-private cooperation in the implementation of trade facilitation reforms, identifying political priorities, reducing regulatory costs and building consensus on the necessary reforms. The PPD helps to ensure that reforms are demand-driven and in line with the needs and priorities of key stakeholders, including the private sector.
The TFA specifically provides for a reinforced PPD in three provisions of the Agreement: Article 2.1, which gives the possibility of making comments before the entry into force of laws and regulations, Article 2.2, which provides for consultations between border agencies and the private sector; and Article 23.2, which governs the establishment of a National Trade Facilitation Committee (NTFC).
The CNFE constitutes the main platform for public-private collaboration in the field of trade facilitation, ensuring effective participation of the private sector at all stages of policy formulation.
The establishment of the NTFC is an obligation that WTO members must comply with to facilitate both national coordination and the implementation of the provisions of the agreement, and to provide a mechanism that only ensures the inclusion of the voice of the private sector in trade facilitation.
Nepal has already established its NTFC, which represents both the public and private sectors, and in the future, this institutional platform will enable Nepal to improve the enabling environment for trade facilitation and boost trade. cross border of Nepal and its participation in world trade.
A version of this article appears in print June 23, 2021, of The Himalayan Times.