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Operational Guidelines

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Executive Summary

  1. The new WTO Trade Facilitation Agreement Facility (TFAF or the Facility) was created at the request of WTO developing and least developed country (LDC) Members.  The goal of the Facility is to contribute to the implementation of the Trade Facilitation Agreement (TFA or the Agreement) in developing and least developed country members. The purpose of the facility is to complement existing support efforts and enhance their effectiveness, and to make support available in instances where potential recipients have earlier failed to secure assistance from other donors.
  2. The Facility will carry out its functions through a range of activities.  Examples of potential activities are set out in Annex 2 of this document.   Their implementation will require not only the support of WTO donor Members but also cooperation from development partners operating at international, regional and national levels.

Background

  1. After nearly 10 years of talks, WTO Members concluded the negotiations on the WTO Trade Facilitation Agreement at the Ninth Ministerial Conference held in Bali, Indonesia in December 2013[1].  On 27 November 2014, the Protocol of Amendment that will insert the Agreement on Trade Facilitation into the WTO Agreement was officially adopted and opened for acceptance by Members.  The Trade Facilitation Agreement will enter into force once this Protocol of Amendment is officially accepted by two-thirds of the Membership.
  2. The purpose of the new WTO Trade Facilitation Agreement (TFA) is to expedite the movement, release and clearance of goods, including goods in transit.  It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
  3. It aims to reduce the delays and costs incurred by importers and exporters due to inefficient control and clearance procedures of customs and other border authorities, unnecessary border formalities and documentation requirements, and opaque administrative fees and charges; all of which can add significant costs to traders, in particular the small traders that do not have the same resources to cope with these barriers. 
  4. Implementation of the WTO Trade Facilitation Agreement has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the 2015 WTO World Trade Report. Significantly, the Report also found that developing countries will benefit significantly from the TFA, capturing more than half of the available gains. OECD studies find that implementation of the TFA could reduce worldwide trade costs by between 12.5% and 17.5%. Countries which implement the TFA in full will reduce their trade costs by between 1.4 and 3.9 percentage points more than those that do only the minimum that the TFA requires.   The opportunities for the biggest reductions in trade costs are greatest for low and lower middle income countries.
  5. The benefits are evidenced by case studies that were completed in connection with the 2015 Aid for Trade Global Review[2] that show that implementation of various provisions of the TFA brought about significant reduction in time and costs for import, export and transit transactions.   These studies also report wider economic impact to the economy and development through increases in: the volume of trade, foreign investment, export market diversification, government revenue, domestic investment, and employment. With other side benefits such as increased women’s employment, increased overall employment, increased consumer welfare, increased per capita income and reduction in incidence of absolute poverty.
  6. The TFA also contains special and differential treatment (SDT) provisions for developing and least developed countries (LDC) that link the implementation of the trade facilitation measures with the capacity to do so.   It allows each developing and LDC Member to self-determine when it will implement each measure, and the measures for which it needs assistance.   
  7. To benefit from these provisions a developing or LDC Member must classify each measure in one of three categories, as defined below, and it must notify its A,B,C categories by the time the Agreement enters into force; LDC Members have an additional year.  The categories are as follows:
  •   Category A: provisions that the Member designates for implementation upon entry into force of the Agreement.
  •   Category B: provisions that the Member designates for implementation on a date after a transitional period of time following the entry into force of the Agreement.
  •   Category C: provisions that the Member designates for implementation on a date after a transitional period of time following the entry into force of the Agreement and requiring the acquisition of implementation capacity through the provision of assistance and support for capacity building.
  1. The Agreement contains several provisions that aim to ensure that developing and LDC Members receive the assistance they need to acquire the capacity to implement the measures. Article 21 of the Trade Facilitation Agreement provides that donor Members will facilitate the provision of assistance and support for capacity building for developing and LDC Members, and will help them build capacity to implement the provisions of the Agreement.  Article 22 of the Agreement requires donor Members to make information on their implementation support programs available through notification to the WTO.  The Agreement also invites international and regional organizations to provide information on their support programs.
  2. Extensive trade facilitation-related assistance is already being provided by regional and multilateral agencies, public and private entities, bilateral donors and other stakeholders through a broad range of different programs.  Some of this is carried out by donors who have a field presence and implementation capacity, while others provide grants or budgetary support in order to respond to expressed needs.  Yet many developing countries and LDCs expressed concern about potential difficulties in accessing TFA support.[3]  For this reason, some developing and LDC Members were concerned about committing to implementation of the TFA measures without assurance that sufficient donor support will be available to all WTO Members that need it.  
  3. The WTO Trade Facilitation Facility was created at the request of the African, LDC and ACP groups to address these concerns.  The WTO Director General worked with the coordinators of these groups to develop the terms of the Facility.    The Facility was formally launched on 22 July, 2014, by WTO Director-General Roberto Azevêdo and became operational on 27 November 2014, when Members adopted the Protocol of Amendment.

Goal and Purpose

  1. The goal of the Facility is to contribute to the implementation of the Trade Facilitation Agreement in developing and least developed country members. The purpose of the Facility is to complement existing support efforts and enhance their effectiveness, and to make support available in instances where potential recipients have earlier failed to secure assistance from other donors.
  2. A results framework is available here:

 

  1. The Facility will act as a platform for efforts to implement the TFA and will help ensure the best possible conditions for the flow of information between donors and recipients on their needs, as well as on the available options to help in the implementation of the TFA provisions. In short, the TFAF will facilitate a better understanding of the TFA and provide a more structured platform for information exchange.  While a key objective of the TFAF is to disseminate information in a manner that will foster alignment of support with needs in relation to the implementation of the TFA, it will in those circumstances where no other TF funding source is available, offer two types of grants.  The first type is a project preparation grant in an amount up to 30,000 USD and the second is a project implementation grant in an amount up to 200,000 USD. 

Management

  1. The Facility is operated, managed, and monitored by the WTO Secretariat.  The Secretariat will provide regular reports to the WTO Trade Facilitation Committee (currently the Preparatory Committee until the Agreement enters into force giving effect to the permanent committee).
  2. The Facility is serviced by staff in the Market Access Division.  Additional staff could be needed to ensure demands and deadlines can be met.  In this case, a temporary staff member(s) may be hired using the fees assessed to administer the Facility trust fund.  In addition, interns may be funded by the trust fund to support the work of the Facility.
  3. Successful operation of the Facility will require the cooperation of other international organizations, namely the so-called Annex D + group[4]; regional organizations, i.e. the regional development banks; national aid programs; and private sector.   The WTO Secretariat will continue and intensify cooperation with Annex D+ organizations and donor Members.   It will also conduct outreach to develop cooperative relationships with other relevant organizations throughout the world that provide trade facilitation-related support.

Operation

  1. In fulfilling the goal and purpose of the Facility the Secretariat will undertake activities following the Paris Principles and according to the following:
  • Needs driven – The Facility will focus its resources in line with its goal and purpose;   
  • Demand driven – The Facility will plan activities in consultation with Developing and LDC Members;
  • Efficient and Effective – The Facility will focus on those activities where it has a comparative advantage;
  • Non duplicative – The Facility will put in place processes to prevent unnecessary duplication of activities or funding available from other sources;
  • Non disruptive – The Facility will operate in a manner that does not disrupt or burden in-country assistance mechanisms;
  • Open and transparent – The Facility will promote coherence through stakeholder engagement and a robust communications strategy.
  1. Work undertaken by the TFAF will be conducted in three phases:
  1. Phase I began on 27 November 2014 and will continue until the Trade Facilitation Agreement enters into force. 

The three priorities in this phase will be:

a)       Assisting countries to find the implementation support they need through information sharing.

b)      Assisting Members, through needs assessments and national activities to prepare their category A, B and C lists of provisions so they can provide their ABC notifications and indicative dates for implementation by the time the Agreement enters into force, as required by the special and differential treatment provisions of the Agreement.  (To note: The deadline is different for LDC countries.)

c)       Assisting Members with preparations to officially accept the Protocol of Amendment so that the Agreement will enter into force as quickly as possible.

  1. Phase II will be the period between entry into force of the Agreement and the deadline for notifications for Categories A, B and C for LDC Members; or receipt of all notifications. 

The priorities in this phase will be:

a)       Assisting countries which have notified provisions under Category C but have encountered obstacles in securing the implementation support they need.

b)      Assisting LDC countries to prepare their category A, B and C notifications.

c)       Ratification of the Protocol of Amendment by Members that have yet to do so.

  1. Phase III will begin after all Members have provided their category A, B and C notifications to the WTO and run until the TFA is fully implemented by all WTO Members.  

The priority in this phase will be:

a)       Assisting countries which have notified provisions under Category C but have encountered obstacles in securing the implementation support they need.

  1. The following implementation themes will provide the framework to achieve the results in each phase of activities.
  1. OVERALL ACTIVITIES
  2. SUPPORT/ASSISTANCE (Ratification, Scheduling and Identification Implementation Support)
  3. ASSISTANCE IN IDENTIFICATION OF POSSIBLE DEVELOPMENT PARTNERS
  4. OUTREACH
  5. PROMOTE COHERENCE
  6.  FUNDING 
  1. The table below provides examples of the types of activities foreseen in each phase, set out by theme.   The activities therein are not prescribed. The Secretariat will draw on this list in preparing its work plans, while retaining the flexibility to amend or append the activities listed in order to more effectively and efficiently fulfil its scope and purpose and the principles outlined in paragraph 19. Work plans will be prepared on an annual basis during phases I and II and on a biennial basis thereafter.  By November each year, the Secretariat shall provide members with a work plan and a budget for the upcoming calendar year(s).

Monitoring and Evaluation

  1. The WTO Secretariat will conduct a review of progress in implementing the Facility by the end of June of each year starting in 2016. 
  2. The secretariat shall provide members with an annual report by June each year. The annual report shall consist of a narrative report and a financial report covering the previous calendar year. The first annual report will cover the period from start-up of the TFAF until December 31, 2015. The narrative report will include:
  1.    A statement on how activities in the reported period conformed to the principles outlined in paragraph 19.  
  2.    A presentation and assessment of achieved outputs and outcomes compared to the results framework.
  3.    An estimation of impact.
  4.    An outline of the risks identified prior to and during implementation of TFAF activities since the last report, and how these risks have been handled.
  1. The financial report will describe the use of funds in the Facility since the last report and be set up in accordance with WTO financial rules and regulations. The TFAF shall be subject to the regular audit procedures of the WTO.  Work plans will be prepared on an annual basis during phases I and II and on a biennial basis thereafter.  By November each year, the Secretariat shall provide members with a work plan and a budget for the upcoming calendar year(s).
  2. An independent review will be commissioned to evaluate the Facility’s operation within five years of entry into force of the TFA.
  3. It is important to note that there may not be a linear relationship between inputs, outputs, outcomes and impacts.  No single input may necessarily correlate with a particular output, outcome or impact.  For some inputs there may be a strong correlation between a specific input through the results chain to an impact; for others there may be only a contribution that can be claimed.  In reporting of the operation of the Facility, close attention will be paid to reporting using this results chain.
  4. As TFAF implementation evolves the Annex D+ group will be invited to contribute analysis on the impact of TFA implementation and changes in trade costs datasets (e.g. Logistics Performance Indicators).

Risks and Assumptions

  1. Internal Risks:
  1. Insufficient sustainable predictable funding throughout the life of the Facility.
  2. Insufficient supply of consultants with necessary legal expertise to assist with drafting of national legislation. 
  3. There is insufficient experience at the national level with the scoping of projects.
  4. Lack of demand by developing and LDC members for activities offered by the Facility.
  1. External Risks:
  1. An unexpectedly heavy burden on the Facility exceeds operational funds.
  2. Discontinued engagement of partners.
  3. Lack of demand by developing and LDC members for activities offered by the Facility.
  4. Technical training does not convert to political commitment.
  5. Lack of commitment by recipient countries because of:
  • Change of government;
  • Change of national priorities;
  • Change of economic strategy.
  1. Political challenges– i.e. trade facilitation is a national priority but Parliament does not ratify the Protocol.
  2. Inability of countries to express demand for assistance.
  3. Matchmaking risk- coherence efforts prove disruptive or duplicative to the efforts of national governments to secure agreements with donors.

Mitigating Risks

  1. Use of performance feedback tools, i.e. evaluations of training participants, surveys on website.
  2. Develop a community of practice and follow-up.
  3. National activities are predicated on national commitments.
  4. Close engagement with Donors and Annex D+ Agencies to ensure that the Facility operates in a non-duplicative manner
  5. Establishment of procedures to ensure no other funds are available before issuing grants. 

Funding Needs

  1. The activities set out in this Operational Guideline will be funded by a multi-donor multi-year trust fund that will be managed under WTO rules and procedures.  Cost of permanent WTO staff and their overhead is funded through the regular WTO budget.  A fee of 13% of the donation will be charged to cover administrative overhead for conducting activities under the Facility and hiring of temporary staff, if necessary, to carry out these activities.       
  2. The needs assessment and capital based official programs each operated under a separate trust fund.  At the end of 2014 the total remaining balance of the two funds was CHF 1.5 million. Donors with funds remaining in these two trust funds were invited to roll over their balance into the new TFA Facility Trust Fund.   (The donors and amount of funds are shown in the chart below.) 
  3. Not all donors have accepted to roll forward their balances.  It is expected that approximately CHF 1.0 million will ultimately carry forward once all donors have indicated their intention.

 

Trade Facilitation National Needs Assessments (TTFNA)

 

2010

2011

2012

2013

2014

Australia

 

 

 

392,120

 

European Union

 

 

 

443,520

 

Ireland

 

 

 

61,600

 

Norway

 

 

 

99,108

    1,300,954

Sweden

 

 

 

283,300

 

Chinese Taipei

 

 

93,900

 

 

New Zealand

 

 

 

 

78,130

United States

 

 

140,850

 

 

Total Contributions Received & Pledges

-

-

234,750

1,279,648

1,379,084

 

Trade Facilitation Negotiating Group (TTFNG)

 

2010

2011

2012

2013

2014

European Union

241,280

206,720

241,460

246,400

 

Norway

330,743

144,655

163,639

152,474

144,550

Sweden

143,909

 

183,067

 

 

Total Contributions Received & Pledges

715,932

351,375

588,166

398,874

144,550

  1. The activities carried out under this trust fund will be dependent on demand from developing countries and LDC Members and supply of donor funding.   The estimated funding needs for the next two phases are as follows.  These estimates will be updated and described more accurately in the yearly budgets to be submitted by the Secretariat.

Phase I activities (including 2015)

3 million CHF

Phase II activities

5 million CHF

  1. More detailed costings will be provided in the annual and biennial work plans. (see Paragraph 23).  

 

Contact Information

For information concerning the program please contact:

WTO Trade Facilitation Agreement Facility

E-mail:  TFAF@wto.org

www.TFAfacility.org

Disclaimer

These Operational Guidelines have been prepared exclusively for the information of WTO members. They may not be interpreted or otherwise used as the basis of any legal obligation or liability for the WTO vis-à-vis any WTO Member or other entities or individuals.

 


 

[1] Members subsequently conducted a legal scrub to correct grammatical errors and inconsistent use of terms and formatting, etc.   The final version of the TFA was issued on July 15, 2014 (WT/L/931).

[2] The Aid for Trade Global Review was held on 30 June - 2 July 2015 at the WTO.  The case studies are available on the WTO Aid for Trade webpage as well as on the WTO Trade Facilitation Agreement Facility website

[3] Information provided as part of the Aid for Trade Global Review monitoring exercise shows that developing and LDC Members have problems accessing information on funding opportunities, ensuring TFA implementation is a national development planning priority, mobilizing political will for TFA implementation, differing priorities of national donors and other constraints.

[4] The Annex D + group is comprised of the following organizations: IMF, ITC, OECD, UNCTAD, UNECE, World Bank, World Customs Organization.