Barrier To Trade

Bringing Down the Trade Barriers

Helping small exporters in developing countries adapt to new global trade condition. How to overcome the difficulties of small to medium-size enterprises (SMEs) taking up global market opportunities on the WTO issues, where two key messages emerged.

The first was the need for the WTO to engage the private sector by keeping pace with the evolution of business practises; the second was the critical role the WTO can play in providing transparency, predictability and legal certainty to SMEs in developing countries.

Views from the private sectors of developing countries and the WTO Secretariat were obtained on the WTO’s role in dealing with emerging issues, in particular the many private standards and non-tariff measures, facilitating trade in services, as well as, growing regionalism and bilateralism.

Buyers’ Market

The market has changed drastically over the years, from a suppliers’ market to an extreme buyers’ market. Suppliers are under increasing pressure from large retailers to meet various private and highly stringent standards while at the same time being forced to accept restrictive commercial terms. While lead times are being reduced, penalties for late deliveries are getting har-sher. Furthermore, it is increasingly common for payment options to include 90 days’ open-credit terms, and insurance cover is getting higher and more difficult for SMEs to obtain. While the proliferation of private standards is difficult to address, the WTO – through the Agreement on Technical Barriers to Trade – provides a good basis for raising the issues and resolving disputes. In addition, Aid for Trade can assist the development and expansion of productive capacities and the reduction of trade costs. Regional development banks can also work with SMEs to upscale their certification, packaging and labelling standards. But it was agreed that the mounting market dominance of large retail chains may need to be addressed through effective cooperation and implementation of competition and anti-trust regulations.

Trade in Services

Liberalizing trade in services was also a major issue, characterized by a recent survey in the developing countries that identified the need for domestic policy reform to create the right regulatory framework. Some of the Chamber of Commerce in developing countries emphasized, ‘We are already open but we are not ready to open’, meaning some developing countries are open to foreign service-providers but are reluctant to make legally binding multilateral, regional and bilateral commitments, because it lacks the enabling regulation, as well as, the awareness, expertise, public prioritizing and private sector willingness to engage in the WTO process. Many other key and typical challenges were identified in the developing countries. Four of these – difficulties in obtaining travel documents; regulatory and licensing barriers in foreign markets; market access barriers in foreign markets; and lack of market information – can be addressed within the WTO.

Responding to Regionalism

Also reviewed was the role of the WTO in the face of growing regionalism, following debate about whether bilateral and regional agreements serve as ‘building blocks’ or ‘stumbling blocks’ for an open international trading system. The plethora of regional agreements establishes a patchwork of commitments and creates systemic frictions between the bilateral/regional agreements and the WTO agreements. It was accepted that the scope of the WTO dispute-settlement mechanism (DSM) should be strengthened to apply its rules to regional agreements; that, in the face of this growing regionalism, the WTO had a critical role in building analytical capabilities and negotiating skills in developing countries; and that the WTO could establish an advisory centre to provide direct assistance and training on bilateral and regional negotiations.

Under a new transparency mechanism adopted, the WTO Secretariat has a mandate to prepare factual reports on all bilateral and regional trade agreements. While these reports cannot form value judgements, they alert other WTO members of the rules and practices in bilateral and regional trade agreements that adversely affect non-parties to the agreements. It was acknowledged, however, that the WTO might need to take a more proactive approach in future in addressing these issues.