CONTROVERSY REGARDING WTO's NEW TRADE

FACILITATION AGREEMENT
SUBMITTED TO:
Mr. Atif Khan
(FACULTY: WTO)

SUBMITTED BY:
Rajat Agrawal
ROLL No. 106
SEMESTER- X

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR (C.G.)
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ACKNOWLEDGMENT
At the outset, I would like to express my heartfelt gratitude and thank my teacher, Mr Atif Khan
for putting his trust in me and giving me a project topic such as this and for having the faith in
me to deliver well. Thank you for an opportunity to help me understand and learn something
new.
My gratitude also goes out to the staff and administration of HNLU for the infrastructure in the
form of our library and IT Lab that was a source of great help for the completion of this project.

Rajat Agrawal
Semester X

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TABLE OF CONTENTS

Acknowledgement....3
Introduction..4
Research Methodology.6
Objectives.6
Trade Facilitation: Background....7
Special And Differential Treatment For Developing (Sdt)
And Least Developed Countries (Ldcs) ....10
Tfa And The Controversy Surrounding It..................11
India Us Deal: A Breakthroughwith Permanent Peace Clause........13
Conclusion...14
References...15

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INTRODUCTION
Trade facilitation became a topic of discussion at the WTO at the Singapore Ministerial
Conference in December 1996, when members directed the Council for Trade in Goods to
undertake exploratory and analytical work on the simplification of trade procedures in order to
assess the scope for WTO rules in this area (Singapore Ministerial Declaration (paragraph 21)).
After several years of exploratory work, WTO members formally agreed to launch negotiations
on trade facilitation in July 2004, on the basis of modalities contained in Annex D of the socalled July package. Under this mandate, members are directed to clarify and improve GATT
Article V (Freedom of Transit), Article VIII (Fees and Formalities connected with Importation
and Exportation), and Article X (Publication and Administration of Trade Regulations).
Hundreds of proposals made by members, individually or through groups or alliances, were
submitted for consideration by the Negotiating Group. After months of painstaking streamlining
and revisions, the proposals became part of the final text of the Trade Facilitation Agreement
agreed by members at the Bali Ministerial Conference in December 2013.
Concluding the Trade Facilitation Agreement the first multilateral trade agreement successfully
negotiated in 18 years and the first such accord concluded by the WTO marked a decisive
turning point in several ways. Beyond achieving the agreement itself, no small matter for an
organization which has often struggled to advance its long-running Doha Round of global trade
talks, the Trade Facilitation Agreement broke new ground in the decentralized, bottom-up way
the negotiations were structured, in the manner the capacities and resources of developing

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countries were explicitly addressed, and in how the Agreement has shifted the systems focus
beyond the software of trade policy barriers towards the hardware process frictions .
The developing countries would have a problem with the solutions offered by the developed
countries as without the subsidies the food security of the developing nations could be seriously
harmed. India agreed to the TFA in Bali only under the condition that interim relief would be
provided to the developing nations. It said no legal actions or sanctions would be imposed on the
developing nations till 2017, by which time a solution would be worked out among the nations.
However, this interim relief would not be applicable if such subsidies would lead to trade
distortions, by which one means, that prices of exports and imports cannot be affected by this.
The controversy lasted for over a year when refusal by India to ratify the agreement stalled it.
The project report will present a study from the very beginning to the agreement as it exists now.

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RESEARCH METHODOLOGY:
The methodology adopted in this research work is doctrinal in nature. It is largely based on
secondary and electronic sources of information. The present research work contains a study on
the articles, cases and other available writings. This research work consists of elaborated
theoretical research, an overall study of the topic and in depth web browsing. The researcher, in
the study, has tried to make use of the available resources to the best of her capability. Mode of
writing herein is descriptive in nature.

OBJECTIVE
To give a background of the trade facilitation agreement as concluded in Bali in December 2013
and throw light on the controversy surrounding it.

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TRADE FACILITATION: BACKGROUND

Targeted efforts to launch Trade Facilitation discussions began in the mid-1990s. The 1996
Singapore Ministerial Conference gave the WTO an initial and modest mandate under a separate
conceptual heading. Paragraph 21 of the Ministerial Declaration directed the Council for Trade
in Goods to undertake exploratory and analytical work, drawing on the work of other relevant
international organizations, on the simplification of trade procedures in order to assess the
scope for WTO rules in this area.2 This language reflected a compromise between those who
already wanted to negotiate a new multilateral trade agreement and those, particularly from the
developing world, who were more skeptical about prospects for negotiations and preferred a
much more limited work programme. Less than two years after the end of the Uruguay Round
and still occupied with implementing its results, many developing and least-developed Members
felt not ready for yet another global trade accord. Concerns about not having the capacity to take
on any additional commitments were widespread.
Members agreed that the negotiations shall aim to clarify and improve relevant aspects of
Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement,
release and clearance of goods, including goods in transit.
Negotiations also aimed at enhancing technical assistance and support for capacity building in
this area, and at developing provisions for effective cooperation between customs or any other
appropriate authorities on trade facilitation and customs compliance issues. The results shall
take fully into account the principle of special and differential treatment for developing and leastdeveloped countries. It was further agreed that these countries would not be obliged to
undertake investments in infrastructure projects beyond their means.
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On 12 October 2004, the Trade Negotiations Committee established the Negotiating Group on
Trade Facilitation and appointed Ambassador Muhamad Noor of Malaysia as its Chairperson.
Soon thereafter, the newly established Negotiating Group agreed on a Work Plan and a schedule
of meetings at its first meeting. When agreement was finally reached at the Bali Ministerial
Conference in December 2013, WTO members had achieved a consensus text with 13 articles
and a special section dealing with special and differential treatment provisions.
Among the issues addressed in the Agreement were:

norms for the publication of laws, regulations and procedures, including Internet
publication

provision for advance rulings

disciplines on fees and charges and on penalties

pre-arrival processing of goods

use of electronic payment

guarantees to allow rapid release of goods

use of "authorized operators" schemes

procedures for expedite shipments

faster release of perishable goods

reduced documents and formalities with common customs standards

promotion of the use of a single window

uniformity in border procedures

temporary admission of goods

simplified transit procedures

provisions for customs cooperation and coordination

III. Trade Facilitation Agreement back to top

The Trade Facilitation Agreement has three sections:

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Section I contains provisions for expediting the movement, release and clearance of
goods, including goods in transit. It clarifies and improves the relevant articles
(V, VIII and X) of the General Agreement on Tariffs and Trade (GATT) 1994. It also sets
out provisions for customs cooperation.

Section II contains special and differential treatment (SDT) provisions that allow
developing and least-developed countries (LDCs) to determine when they will implement
individual provisions of the Agreement and to identify provisions that they will only be
able to implement upon the receipt of technical assistance and support for capacity
building.

To benefit from SDT, a member must categorize each provision of the Agreement, as
defined below, and notify other WTO members of these categorizations in accordance
with specific timelines outlined in the Agreement (see below).

Category A: provisions that the member will implement by the time the Agreement enters
into force (or in the case of a least-developed country member within one year after entry
into force)

Category B: provisions that the member will implement after a transitional period
following the entry into force of the Agreement

Category C: provisions that the member will implement on a date after a transitional
period following the entry into force of the Agreement and requiring the acquisition of
assistance and support for capacity building.
For provisions designated as categories B and C, the member must provide dates for
implementation of the provisions, as outlined in the following factsheets:

Section III contains provisions that establish a permanent committee on trade facilitation
at the WTO, require members to have a national committee to facilitate domestic
coordination and implementation of the provisions of the Agreement. It also sets out a
few final provisions.

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SPECIAL AND DIFFERENTIAL TREATMENT FOR

DEVELOPING (SDT) AND LEAST DEVELOPED
COUNTRIES (LDCS)
The Agreement will enter into force when it has been ratified by two thirds of the WTO
Membership. However, the SDT provisions allow each developing and least developed
country to determine when they will implement each of the individual provisions as well as
those provisions for which they will need technical assistance and support for capacity
building in order to implement.
To take advantage of these SDT & LDC, flexibilities a Member must place each provision of
the Agreement into one of three categories (A, B or C) as defined below. They must notify
WTO Members of these categorizations in accordance with specific timelines outlined in the
Agreement. They must also provide indicative, and later definitive, dates for implementation
for the provisions they have designated in categories B and C.

Category A: provisions that a developing/least developed country Member designates for

implementation by the time the Agreement enters into force

Category B: provisions that a developing/least developed country Member designates for

implementation after a transitional period of time after entry into force of the Agreement

Category C: provisions that a developing/least developed country Member designates for

implementation after a transitional period of time following the entry into force of the
Agreement and the provision of assistance and support for capacity building.

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Additional Flexibilities:
The Agreement also provides additional protections for Developing country Members such
as:

Early Warning Mechanism: whereby a Member can request an extension from the
WTO Trade Facilitation Committee if it experiences difficulties in implementing a
provision in Category B or C by the date it had notified. The extension will be automatic
if the additional time requested does not exceed 18 months. In case of least developed
countries, the additional time cannot exceed 3 years.

Expert Group: where a requested extension has not been granted and a Member lacks
capacity to implement, the TF committee will establish an Expert Group to examine the
issue and to make a recommendation

Shifting between Categories: Members may shift provisions between Categories B and
C

Grace Period: Following entry into force of the Agreement, developing countries will
not be subject to the Dispute Settlement Understanding for a period of 2 years and least
developed countries for a period of 6 years for Category A provisions.

TFA AND THE CONTROVERSY SURROUNDING IT

India's Food Security Act, which is binding on the government by law now, implies that the
government will provide very cheap food to the most vulnerable part of the population at
extremely low prices. Apart from providing subsidies to the consumers, through the public
distribution system, it also provides subsidies to the producers of food grains. So it buys food
grains from farmers at a minimum support price, and subsidies inputs like electricity and
fertilizer. The first problem is with the 10% cap on subsidies which will not be possible for
India to achieve. Adding to the woes is the fact that the 10% cap is calculated based on 198688 prices when the prices of food grains were much lower. So the cap had to be updated
taking into account the present prices of food grains.
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Peace clause available to India under the Bali agreement that says no member can take action
against another on the food subsidy issue till a final agreement is reached on the issue, the
deadline for which is the 11th ministerial in 2017. The peace clause would have ended in
2017, and the new impositions might have turned unfavorable to India.
Without a permanent solution, public stockholding programmes in India and other
developing countries would be hampered by the ceiling on domestic support which is pegged
at 10 per cent of the value of production and is wrongly considered as trade-distorting
subsidy to farmers under existing WTO rules. The existence of such a subsidy element was
determined by comparing present day administered prices with fixed reference prices of the
1986-88 period which was unrealistic.
The problem is a very real one. Developing countries are finding themselves hamstrung by
the existing rules in running their food stockholding and domestic food aid programmes. The
developed world too had market price support programmes and was able to move away from
such support though not fully even now because of their deep pockets. This is not
possible for developing countries. It is important for developing countries to be able to
guarantee some minimum returns to their poor farmers so that they are able to produce
enough for themselves and for domestic food security.
Developed countries continue to have large entitlements to provide support to farmers. These
would have been cut in the Doha Development Round which unfortunately remains
unfinished. Had this Round, which has development at its core, concluded as per the agreed
timelines and its development agenda, the world would have had an outcome in a single
undertaking in which competing interests could have been balanced. Today, developing
countries are fighting to keep the negotiations focused on development against the singleminded mercantilist focus of most of the rich developed world on market access
issues.Overall balance is important even in a limited package of outcomes. The Bali
outcomes were negotiated as a package and must be concluded as such.
India, therefore, took the stand that till there is an assurance of commitment to find a
permanent solution on public stockholding and on all other Bali deliverables, including those
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for the Least Developed Countries (LDCs), it would be difficult to join the consensus on
the Protocol of Amendment for the Trade Facilitation Agreement. It did not ratify the
agreement as on the proposed date, 31st July 2014.

INDIA

US

DEAL:

BREAKTHROUGHWITH

PERMANENT PEACE CLAUSE

India and the US have finally reached an understanding on working out a permanent
solution to the issue of public stockholding for food security purposes at the World Trade
Organisation (WTO). The deal is seen as a breakthrough, ending the impasse that had stalled
the implementation of a landmark Trade Facilitation Agreement (TFA) hammered out at the
WTOs ministerial conference in Bali last December.
It allows countries such as India to continue to freely procure and stock grains for the public
distribution system even if subsidies resulting from these breach limits under the WTOs
Agreement on Agriculture (AoA). The original peace clause proposed at the Bali ministerial
conference provided only a four-year reprieve, during which no country would be penalised
for any excessive expenditures on food security programmes. The India-US agreement
which has to be endorsed by the WTOs general council replaces this temporary peace
clause with an open-ended one until a permanent solution to the issue of farm subsidies
linked to national food security is arrived at.

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CONCLUSION
Bali was without doubt a critical success for the multilateral trading system. As pointed out
by Director General Roberto Azevdo at the closing ceremony For the first time in our
history: the WTO has truly delivered. By avoiding failure, Bali contradicted those
dismissing the multilateral trading system as a negotiating forum and has, to some extent, put
the WTO back on track. The package itself is substantive with a comprehensive agreement
on trade facilitation which might significantly reduce red tape and the cost of doing business.
In a world increasingly dominated by global value chains, achieving such a result will surely
reinvigorate business interest in multilateral negotiations. Beyond trade facilitation, however,
achievements under agriculture, development, and LDCs issues are rather limited, if not
disappointing. The success of Bali also needs to be put into perspective. Clearly it provided
some much needed breathing space for the system but much more still needs to be done to
effectively rehabilitate the WTOs centrality in global trade governance.

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REFERENCES

https://www.wto.org/english/news_e/news15_e/fac_24mar15_e.htm
https://www.wto.org/english/res_e/reser_e/ersd201406_e.htm
http://unctad.org/en/Docs/dtltlb20102_en.pdf
http://poldev.revues.org/1744

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