Trade facilitation in APEC

Trade facilitation in APEC

By Mari Pangestu

JAKARTA (JP): The recent reports and emphasis of late on the
progress of APEC have focused on the more "meaty" subject of
trade liberalization. Since the Eminent Persons Group (EPG)
announced their recommendations for achieving trade
liberalization in the area, much of the debate has been on what
is meant by trade liberalization? What are the modalities? Should
liberalization be on an unconditional Most Favored Nation (MFN)
basis or a reciprocal Free Trade Area basis? Should there be a
time frame and should it be flexible according to the level of
development of the member country? These are complex questions
with much at stake in making commitments. Decisions about trade
liberalization involve sensitive sectors and political
implications.

Let us not get the Asia Pacific Economic Cooperation (APEC)
process bogged down by expecting that these difficult issues and
differences in position by members can be resolved by the coming
Bogor meetings. It will require many more meetings to clarify and
agree on the various issues since APEC decision making works on a
consensus basis.

Let us also recognize that this does not mean that APEC is
not making any progress. A lot of progress towards the goal of
enhancing trade and investment flows in the region can be
achieved through trade and investment facilitation programs.

These are agreements to cooperate on technical issues and
policies to "facilitate" trade and investment flows by reducing
transaction costs and technical obstacles. On the surface such
cooperation is less contentious as it involves agreeing on
standardizing or harmonizing technical standards, definitions and
procedures, as well as minimum acceptance of some universal
principles. The acceptability of such programs lies in voluntary
participation by countries.

Such cooperation as harmonization of technical standards may
sound trivial, but in reality these nuts and bolts issues are
what lead to a more predictable and open trading system. Most of
the trade facilitation issues are covered in various Uruguay
Round agreements and will be an important feature of the World
Trade Organization (WTO) work agenda. However, implementation of
these agreements is of course another issue and many gray areas
remain which could hinder the smooth flow of trade by being
misused as protectionist measures.

Therefore APEC could play a key role in ensuring
implementation and in certain areas APEC might even agree to go
beyond the Uruguay Round commitments.

Under the official APEC program, there are at present three
facilitation programs that have been under serious discussion.
One is the non-binding investment principles (discussed in Bora's
piece on page 12). The other two in the trade facilitation area
are the customs and customs procedures harmonization and
harmonization of standards. While the outcome and progress are
not known yet, the essence of the trade facilitation programs can
be described as follows.

Customs harmonization in the first instance requires
agreeing on the same customs classification to reduce search
time. Other issues relate to harmonizing inspection and reporting
procedures, pre-inspection and valuation of imports and
corresponding duties, agreeing on classification of new products
and so on.

The Pacific Business Forum (PBF), the group of eminent
business people asked to provide input to APEC, has also
recommended specific programs such as electronic documentation
and processing of entry documents, training and education of
customs officers, and development of an APEC electronic database.

Settling these issues in a substantive way could lead to the
development of an APEC customs code as recommended by PBF.
Whereas harmonization of standards and conformance testing has
harmonization of product safety, health and systems standards as
a long term objective. In the short run, some limited agreement
on harmonization can be achieved, but it is likely to take a long
time to achieve the long run objective. Under the new Uruguay
Round commitments transparency of use of standards and technical
regulations and APEC can certainly contribute to the
implementation of this agreement and not use standards and
technical barriers for protection purposes. Mutual recognition of
testing facilities and conformity assessment procedures would
also facilitate trade and reduce the cost of product testing for
small and medium-scale enterprises.

Other than these two areas which are already under
discussion in APEC, several other trade facilitation measures
have been recommended by the EPG, PBF and researchers. There
measures could be in the future APEC program.

In brief they are, first ensuring transparency and
discipline in use of anti dumping measures. Improper application
of the new anti dumping rules and procedures under the new WTO
can still lead to trade diversion. Furthermore this
recommendation is important given the increase in anti dumping
investigations and actions by some developed country members of
APEC, namely the United States, Canada and Australia.

Second is the recommendation to create an APEC Dispute
Settlement Mechanism to resolve trade disputes arising in the
APEC region. The idea being that member countries in a dispute
can try to mediate in the APEC forum before bringing it up to the
WTO. This recommendation can be useful for trade disputes that
lie outside the scope of the new WTO or reflect the wish of APEC
members to settle the specific disputes within the region rather
than at the GATT level. However, there is the danger of rendering
the GATT dispute settlement mechanism useless and also put
smaller countries in APEC at the mercy of larger countries; the
very reason that the arbitration through WTO was created.

Therefore, one must design the mechanism very carefully to
avoid all these pitfalls.

Third is to relax visa requirements to facilitate the flow
of people between the countries in the region. This is not simply
because of the rise in tourism, but also due to business needs,
such as in the services sector. While control of entry for
safety, security and other reasons are still needed, much can
still be done to simplify and relax visa requirements, granting
of multiple entry visas or a smart card systems for frequent
travelers, and to make it easier to obtain temporary work permits
and visas for business and training needs.

Fourth is harmonization and simplification of rules of
origin. Rules of origin are used to identify the origin of goods
from a customs territory or country. There has been a
proliferation of rules of origin due to the creation of free
trade areas, preferential schemes and efforts to prevent
circumvention and anti-dumping penalties. Misuse of rules of
origin stands out as a possible source of technical barriers to
trade. The long term objective of any work on rules of origin
would be to ensure the adoption of as minimal and transparent as
possible rules of origin. APEC can contribute to ensuring
discipline in this area should participate actively in the GATT
three year work program to harmonize rules of origin. However
GATT harmonization only covers trade on an MFN basis and not
trade under regional or preferential agreements, so that APEC can
also complement efforts by the WTO by looking at rules of origin
in the latter context.

Admittedly much more work and thought still needs to go into
developing these various trade facilitation programs. Its
voluntary, and often non-binding nature has also been criticized
as reducing the effectiveness of such agreements. The optimistic
response is that the fact that APEC countries are attempting such
an exercise in itself is already a sign of progress. APEC is a
process; who knows how and what will be the process of evolution,
but in the final analysis it is hoped that there is a realization
that progress achieved in the area of trade and investment
facilitation could lead to substantial tangible benefits and will
enhance the credibility of APEC.