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6WTO TRADE FACILITATION AGREEMENT IMPLEMENTATION IN UKRAINE
Igor Guzhva
PhD, Vice-rector for Research and International Relations, Ukrainian State University of Finance and International Trade, Kyiv
Abstract. The article deals with the features of global value chains formation and their impact on the development of international trade at the present stage. General background and main causes of the large spread of global value chains in recent decades are outlined. The essence of the "trade facilitation" concept in accordance with current international practice is discovered. The relationship between the participation in global value chains and trade facilitation is revealed. The basic goals, objectives and structure of the WTO Agreement on Trade Facilitation and its stipulations in the context of enhancing the participation of national economies in the global value chain are analyzed. Special features of WTO Agreement on Trade Facilitation ratification and entering into force are revealed. A differentiated approach to implementation of the WTO Agreement on Trade Facilitation in domestic legislation is suggested. Current achievements and future prospects of Ukrainian economy development on the way towards implementation of the WTO Agreement on Trade Facilitation are revealed. The necessity to maintain a balance between speed of implementation of the WTO Agreement on Trade Facilitation and economic security in foreign trade is outlined.
Problem definition. Analysis of the current state of Ukraine's foreign trade and investment inflows dynamic to the Ukrainian economy in 2010-2014 reveal the existence of significant shortcomings in the development and implementation of National Foreign Trade Policy. Elimination of negative trends resulting in decrease in exports, losses of a number of trade positions in global markets, slowdown of foreign investment inflows require immediate actions of the state authorities as well as, certainly, pro-active role of the business community.
These issues become more important taking into consideration the concluding of the Deep and Comprehensive Free Trade Area (DCFTA) Agreement between Ukraine and the EU, the negotiation process completion to join the WTO Agreement on Government Procurement, the prospects of entry into force of the WTO Agreement on Trade Facilitation etc.
Recent studies and publications. Studies publications of leading national research institutes [1] and recognized scientists and economists, including Mazaraki A. [2], Yushin S. [3] Vasilenko Y. [4], Puzanova I. [5] and others are dedicated to studies-on trade-related aspects of Ukraine's integration into the international economic space. Studies of the mentioned scientists make an important basis for a detailed study of foreign trade aspects of involving domestic economy into the global economic complex.
Definition of Unsolved problem. However, the dynamic development of international economic integration and international division of labor have actualized the shaping of a new outlook and approaches on intensification of the national economies participation into the global economy that were recognized at the global level with the signing of the package of agreements at the Ninth WTO Ministerial Conference, held in Bali in December 2013. This
implies a need of carrying out of further studies on mechanisms to ensure the effective participation of countries in international trade.
Aim of the article is to identify new approaches on the building-up of modern international trade and economic cooperation on the basis of integration into the global value chains and to analyze the WTO Agreement on Trade Facilitation provisions as a mechanism to strengthen the participation of Ukraine into the global value chains.
Studies results. The main trend in the world economy, on which Ukraine must urgently react, became the building-up of the global value chains and supply chains in international trade. The global value chains (GVC) is a phenomenon of the last twenty years, but only in the last ten years this process obtained a global significance and today has a determining influence on the global economic development.
Meanwhile, it should be noted that approximately 80% of the world trade falls on the supply chain. According to estimation of the World Bank and the World Economic Forum, the reduction of high-valued transactions and bureaucracy faced by commercial operators, will provide significant growth of the global GDP, including simplifying procedures for export and import operations can ensure the growth of world trade by 3-5%, while tariffs reducing followed by the results of the WTO Uruguay Round led to the world trade growth at 2-3% [6].
According to the WTO Secretariat's statistical analysis of the relationship between the participation into the global chains and economic growth a significant positive interdependence of these processes was denoted not only for the most developed countries, but also for the developing ones. Thus, thirty developing countries which were the most integrated into the global chains during the past 20 years (1990-2010) had an average economic growth rate at 3.3%, while the economy of thirty countries which were minimally integrated into these processes grow annually by an average of 0.7% [7].
A striking example of this is China's active participation into the global chains that allowed to this country to develop high-technology export-oriented production including export volume of knowledge-intensive goods and services for the past 13 years has increased 8 times. In Costa Rica the result of a major project on the foreign investment attraction was the rapid "jump" from trade in raw materials to high-technology exports. Poland also has substantial growth performance due to the effective integration into the global chains, particularly in industry and commerce, especially nowadays Poland is 30% integrated into the GVC (53th place in the international ranking of value chains development), and Ukraine being integrated less than 10% respectively holds the 79th place in the rating [8].
Thus, it is evident a correlation between participation of countries into the global value chains and implementation of the trade facilitation procedures.
In this context, the extraordinary progress in the world trade development was made by adopting the new multilateral WTO Agreement on Trade Facilitation singed on November 27, 2014 (hereinafter - the TFA). According to the United Nations Economic Commission for Europe (UNECE) definition a trade facilitation is "the simplification, standardization and harmonization of procedures and associated information flows required to move goods from seller to buyer and to make payment" [9]. Automation of the trade procedures and information flows, which is becoming increasingly important, should be also added. Thus, the new WTO
agreement is aimed at creating favourable conditions for export and import operations in the shortest time and the most convenient way. It is also expected that trading costs will decline more than by 14% in low-income countries and more than by 13% in upper-middle-income ones, by optimizing the trade flows process across the border.
The importance of the agreement also lies in the fact that it is the WTO first multilateral agreement, adopted after the Organization's establishment in 1995.
The majority of the TFA provisions concerns the customs procedures simplification (including the documentary and trade procedures simplification). Current border crossing procedures may include a huge number of steps. Customs procedures vary widely mostly depending on the importers and exporters countries. For example, in 2014, customs procedures included 2-11 documents for export operations taking 6-86 days and 2-17 documents for import ones taking 4-130 days [10]. The given agreement establishes a series of measures to accelerate the goods movement process across borders using the best world practices.
It is obvious that all WTO member states are looking for the improving of the foreign trade efficiency and, accordingly, are at different stages of application of the trade facilitation provisions. The new WTO Agreement is an additional legal instrument regulating standards and regulations at international level for implementation of export and import operations. Accordingly, synchronous implementation of all TFA provisions by Member States is unrealistic.
In this regard, it is admitted to use a differentiated approach as to implementation of the Agreement provisions that provides A, B and C categories. Each category determines the readiness of the country to implement the Agreement provisions, namely:
1) category A means that implementation and administration of a country's export and import operations is going in accordance with the TFA provisions or these provisions will start operated (get started) since the date of entry into force of the Agreement;
2) category В provides the opportunity to a country to implement the TFA provisions during a transitional period;
3) category С provides the opportunity to a country to implement the TFA provisions during a transitional period and requires resources of technical assistance.
The member states should inform the WTO Secretariat concerning their readiness to the TFA provisions implementation submitting a clear schedule of the Agreement provisions implementation.
In this context it is important to note that the TFA enters into force after a ratification by two thirds of the WTO members (108 countries) and automatically becomes binding for the other members. Today, more than 60 WTO member states have already identified category and informed the WTO Secretariat and 6 countries have ratified the Agreement on Trade Facilitation [11].
As to Ukraine, it should be noted that significant progress was achieved in the framework of the "single window - local solutions" project in the Southern customs area and maritime ports of Odessa region and this is a significant operational experience for the whole country. In addition, according to the competent bodies experts, the majority of the TFA provisions are reflected in the Ukrainian Customs and Tax Codes. In this regard, Ukraine has submitted the category A notification.
In practical aspect it can be argued that this is not true, because there are many critical issues regarding export and import operations in Ukraine, and the current improvements, obviously, are not sufficient to meet the obligations of Ukraine under the new WTO Agreement. And the failure of any member country in implementation of the WTO obligations in the framework of this organization may lead to disputes and the relevant trade sanctions.
Speaking about the TFA implementation, it should be taken into account that the export and import operations simplification should take place at the national level and provide the border crossing procedures simplification and the integrated customs control at all checkpoints (sea, rail, road, air, etc.).
Taking into account the TFA provisions and a notification made by Ukraine for the category A it is considered appropriate to concentrate executive power in solving a complex of issues at the national level, namely:
1) agreement ratification. According to the TFA provisions, for countries belonging to the two thirds of the WTO member states, having ratified the Agreement and being classified to the category A, it is provided the 2-year preferential period, and till the end of this period it is not allowed any initiation of disputes;
2) establishment of national committee with participation of public authorities, science and business representatives;
3) development of the national trade facilitation strategy and the relevant action plan for its implementation;
4) bridging cooperation with relevant international organizations competent to trade facilitation issues;
5) attracting international technical assistance to ensure substantial and financial support in implementation of the given measures.
The most difficult among these measures are elaboration and implementation of the national strategy. Thus, according to the best world practices and the UNECE recommendations, the strategy should include clearly defined measures and a timetable for its implementations. Among the main tasks within the trade facilitation it is worthwhile to underline the following measures:
1) improving the inter-agency cooperation, in particular an increase in efficiency and transparency of export and import operations and elimination of functions redoubling;
2) establishing the public and private partnerships which has to be really an effective forum under the aegis of a national body aiming at joint development of practical solutions as to legal, institutional and procedural framework for implementation of export and import operations;
3) establishing mechanisms for gathering and sharing information on subjects and objects of economic activity, volumes and trends of trade, etc. at the national and international levels;
4) automation of certain processes of export and import operations, including the creation of automated databases of subjects of foreign economic activity and the data personalization, allowing under the conditions of a proper registration to obtain permits and preliminary decisions.
Overall, the implementation of a set of reforms at the national level in Ukraine in public administration of export and import operations will provide a solution of a wide range of issues, especially for producers, exporters, importers, transport and logistics companies and other compatible industries and types of economic activities.
At the national level exist such important benefits from implementation of the WTO Agreement on Trade Facilitation as the international trade intensification, particularly expanding of the geography and international trade nomenclature, increasing in international trade volumes and foreign investment, as well as other benefits.
Thus, according to the expert's estimates, the implementation of the set of measures regarding the Agreement on Trade Facilitation implementation in Ukraine, under the condition of an active position of national business, can provide a growth of 10% of the Ukrainian export [12].
Achievement of this indicator depends on the successful elimination of excessive bureaucracy and corruption factors in the exercise of export and import operations, reducing the time and costs with conducting these operations.
Conclusions and suggestions. The TFA implementation in Ukraine will ensure a coordinated work of the state authorities, in particular the efficiency and transparency enhancement in administration of the export and import operations, that will result in the creation of favorable conditions for the international trade intensification and the foreign investment attraction into the Ukrainian economy. Being aimed at eliminating unnecessary barriers to the international goods and services movement, the TFA is the main and most effective tool for enhancement of the Ukraine's participation in the global value chains.
Therefore, the Ukrainian Government should urgently take a number of measures:
- accelerate the TFA adoption and implementation process;
- publish the official translation of the TFA as soon as possible;
- include the TFA implementation to the strategic priorities of the national economic
policy;
- strengthen a coordination and cooperation between the public authorities and the private sector in the field of trading operations, paying special attention to forms of activity of the public councils at the public authorities;
- accelerate the creation of a national committee on Trade Facilitation in accordance with Article 23 of the TFA, having considered the possibility of nomination of a public body serving as a leading public institution in a national committee;
- consider the possibility to review the terminology used in the trade procedures legislation, in order to bring more precise definitions in accordance with internationally recognized standards and practices
- take measures in order to improve the development and approval procedures of subordinate legislation in the field of trade regulation to ensure its transparency and effectiveness;
- accelerate the introduction of the electronic document circulation and the creation of a single information portal for publishing information on customs and trade issues (in
accordance with the provisions of paragraphs 1 and 2 of the TFA Article 1), having used, among other things, the public and private partnerships opportunities;
- reform the relevant legislation in order to improve the system to appeal against the State Fiscal Service's decisions in order to ensure the uniformity in practice of the state trade regulation (in support of Ukraine's implementation of the Article 4 of the TFA);
- strengthen the international cooperation of the Ukraine's State Fiscal Service and other regulatory agencies of Ukraine in the field of trade with customs and regulatory agencies of other countries (to facilitate the implementation the provisions of the Article 8 the TFA by Ukraine).
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