Shyamal Krishna Shrestha
Programme Officer
South Asia Watch on Trade, Economics & Environment
(SAWTEE)
Kathmandu
1. Objectives
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To provide a background on trade facilitation (TF) as
part of a ‘single undertaking’ under the ongoing
Doha Round trade negotiations, launched in 2001
To present Nepal’s situation on TF from a civil
society perspective
To examine current debates on TF based on studies
by international organizations such as World Trade
Organization (WTO), The World Bank and
Organisation for Economic Co-operation and
Development (OECD)
To identify main challenges with respect to TF
2. Background
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WTO defines TF as: “the simplification and
harmonization of international trade procedures”,
whereas trade procedures are the “activities,
practices and formalities involved in collecting,
presenting, communication and processing data
required for the movement of goods in international
trade”
The Doha Declaration (paragraph 27) limits the TF
agenda to GATT 1994 Articles V (freedom of transit),
VIII (fees and formalities connected with
importation and exportation) and X (publication and
administration of trade regulations)
2. Background (contd.)
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TF negotiations aim to simplify customs procedures
and cut commerce-related red tape, as well as to
enhance developing countries' ability to participate
in international goods trade. The July 2004
Framework – in Annex D – specified that
developing countries and LDCs would not have to
implement future TF obligations unless they
received the technical assistance necessary to do so
Negotiating Group on Trade Facilitation (NGTF)
formed on 12 October 2004. It has met several
times to further improve and clarify Articles V, VIII
and X
Some progress reported despite North-South
divisions
3. Nepal
1. Nepal became the 147th member of the WTO on 23
April 2004. It is the first LDC to join the WTO
through the full working party negotiation process
2. Trade profile:
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GNP per capita
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Trade per capita
04)
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GDP to trade ratio
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Share in world total exports
(both merchandise & services)
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Share in world total imports
(both merchandise & services)
US$ 260 (2005)
US$ 122 (200250%
0.03 (2004)
0.04 (2004)
3.1 Article V
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Nepal, being a landlocked country, requires transit
facilities from India for trading with the rest of the
world
The treaties of trade and transit between India and
Nepal govern the rules and regulations pertaining to
transit (barring the ‘economic blockade’ episode
during 1988-90)
Department of Customs collects for more than 50%
of Nepal’s total tax revenue
Transit facilities disrupted occasionally due to
domestic political instability such as bandhs and
strikes over the past few years
3.2 Article VIII
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Fees and levies charged are large in number,
undertaken by individual industry associations.
Customs clearance requires filling 83 documents
with 102 copies and 113 signatures, totaling 22
days.
UNCTAD supported ASYCUDA (Automated Systems
for Customs Data) and ACIS (Advanced Cargo
Information System) for reducing documentation
requirements in Bhairawa, Birgunj, Kathmandu and
Biratnagar, covering 90% of Nepal’s trade
Single Administrative Document (SAD) introduced
under ASYCUDA
Customs reforms on the anvil, dealing with
governance, institutions and infrastructure. Nepal
has committed in its Working Party Report to comply
with international standards on documentation
procedures by 2007.
3.3 Article X
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Nepal publishes all trade-related measures and laws,
regulations in which it is a party in the Nepal
gazette. Plans to introduce an official website.
No known mechanisms for advance rulings, no
single enquiry points and consultative mechanism
Appeals can be made to the Ministry of Industry,
Commerce and Supplies, within 35 days
3.4 Nepal’s situation
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Trade transaction costs (TTC) remain high despite
unilateral, bilateral, regional and multilateral
liberalization
Characterized by poor physical infrastructure, high
transport and communication costs, inefficient
customs and administrative delays at borders and
ports, and inefficient payments system
The ratio of the total length of all roadways to area
in Nepal is 0.11 km per sq. km.
Poor programme implementation, lack of
coordination among and between countries,
inadequate skilled manpower and lack of a multisectoral approach to TF
Country is not able to export major products,
including perishable goods, due to procedural delays
4. Overall South Asian scenario
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Chart 1 shows that companies in mostly developing
countries perceive border procedures as a serious
impediment to growth. Two-thirds of companies in
South Asia perceived customs and foreign trade
regulations to be a major or moderate obstacle for
their business
As small and medium enterprises create most new
jobs in low-income countries, surveys show that they
are more negatively affected by inefficient customs
procedures than are multinational enterprises
India plans to build 13 trade centres along its
borders at a cost of US$ 185 million to boost
commerce with its South Asian neighbours. Eight will
be developed along India’s border with Bangladesh,
four along the border with Nepal, and one with
Pakistan
5. Economic impact of TF (see
OECD, 2005)
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On trade flows: positive link between trade
facilitation and trade, significantly increased
trade for even modest reductions in TTC, esp.
for developing countries
Improved customs procedures – especially in
ports – increase trade flows,
All trading countries stand to gain, viz.,
exporters and importers
Underscores the need for unilateral action
5. Economic impact of TF (contd.)
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On government revenue: Raising efficiency of weak
customs administration has a positive impact on
revenue collection
Curbs smuggling, narrows the gap between ‘actual’
and ‘potential’ revenue
On FDI: Insertion into global production networks
rely on timely delivery of imports and exports
Efficient TF reduces hassles and red-tape and
determines investment decisions
6. Challenges
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Technical assistance and capacity building required,
especially for LDCs
Required from developed WTO Members and
international agencies under ‘aid for trade’ package
Bilateral and regional cooperation is also necessary
Individual countries must also address supply side
bottlenecks and allocate resources in an optimal
manner for development priorities
7. References
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Thennakoon, J; and D. Weerakoon. 2006. Trade
Facilitation in South Asia: Doha Round and Beyond.
Briefing Paper. No. 2. Kathmandu: SAWTEE
Engman, M. 2005. The Economic Impact of Trade
Facilitation. Trade Policy Working Paper 21. Paris:
OECD (http://www.oecd.org/trade)
His Majesty’s Government of Nepal. 2004. Nepal:
Trade and Competitiveness Study. Kathmandu:
Ministry of Industry, Commerce and Supplies
Wikramasinghe, U. 2004. A Multilateral Approach to
Trade Facilitation in South Asia. Discussion Paper.
Kathmandu: SAWTEE
World Trade Organization (WTO)
THANK YOU!