1. Time for an Indian trade facilitation committee

Time for an Indian trade facilitation committee

Not only is such a committee now a requirement for WTO members, it could also streamline trade processes for maximum efficiency

Published: January 19, 2015 3:25 AM

With the WTO’s Trade Facilitation Agreement (TFA) finally in the rule books, it is now vital for India to get cracking on its execution. For this, the first step would be to expedite the formation of an empowered National Trade Facilitation Committee (NTFC), with a clear and demonstrable mandate.

A National Trade Facilitation Committee is a “permanent non-profit organisation, established with the objective of simplifying and automating procedures and information exchange in administration, commerce and transport”. The government has often mooted the idea of forming a NTFC and the process has reportedly been initiated. It is time to put it on high-priority given there is a binding requirement for all WTO members to create a Trade Facilitation Committee “to facilitate both domestic coordination and implementation of provisions of the TFA”.

An NTFC is important as it acts as the vital communication channel between government and the private sector as well as helps avoid turf wars among the numerous government agencies involved in cross-border trade. Also, the “presence of a NTFC, along with the evidence of political will, is regarded as a crucial determining factor when donors prioritise technical assistance efforts”.

The tasks entrusted to NTFCs typically include, among others, drawing up and implementing a national trade facilitation plan; assessing barriers to trade facilitation and making policy recommendations for their reform; providing a national focal point for the collection and dissemination of information; reviewing and evaluating progress of negotiations and making timely recommendations for adjustments.

Even though the WTO requirement is recent, several NTFCs have already been established in the last 30 years under technical assistance projects executed by various international institutions like the United Nations Conference on Trade and Development (UNCTAD) and the Economic Commission for Europe (ECE). Developed countries, such as UK and Sweden, have successfully operated TF committees. Many developing countries are also increasingly using this method for streamlining their trade and transport operations. In South Asia itself, Nepal had established a NTFC in 1997 and Pakistan in 2001. China also established one in 2004.

A review of these operational NTFCs by UNCTAD showed that such committees have not only been instrumental in maintaining coordination and communication but also help in implementation of concrete projects and ensuring a good WTO negotiating position. While forming India’s trade facilitation body, the existing examples could be studied in detail to assess the factors that would determine the success of such a committee.

For one, India can draw lessons for conceiving the committee’s structure and membership. Existing NTFCs generally have representatives from all concerned government agencies (mostly ministries of trade/ commerce, transport, and finance, including customs); trade and transport service providers (such as carriers, freight forwarders, multi-modal transport operators, customs brokers, commercial banks, and insurance companies) and traders (exporters and importers).

A number of countries have set up joint trade and transport facilitation bodies, which could be the suggested structure for India’s national trade facilitation committee. The body could take the form of a public-private partnership and comprise representatives of all organisations involved in international trade and transport.

This committee could have both regulatory and advisory functions, and be empowered to implement facilitation measures. For this, commitment and representation from the highest level of government would be essential. The Chairmanship of such a joint body is usually vested with senior officials from the ministries of trade/commerce, transport or customs; or is rotated between them. In India’s case, a feasible option could be a Joint Chairmanship between the Ministry of Commerce (responsible for implementation of the TFA) and the Customs

Department (responsible for final clearance of traded goods at the border). The offices of the NTFC can be set up within the ministries that chair the bodies, while an independent Secretariat can be established in a separate office.

While such a structure would mean that the government will exercise a dominant role in the facilitation of international trade and transport, a significant representation from the private sector is very vital. The committee should not only have representatives from trade and transport related government agencies, but also from trade and transport service organizations of the private sector.

Another important consideration while setting up the NTFC would be to ensure the inclusion of some members who are directly involved with facilitation of cross-border movement of goods via the land ports that are used for trading with India’s neighbours in South Asia. This is essential because these land ports at India’s borders with countries like Pakistan, Nepal, Bangladesh and Bhutan continue to be less efficient than the sea and air ports, and often get left out of the trade facilitation agenda.

Apart from devising an inclusive structure, other factors shown to drive the success of NTFCs should also be incorporated. For example, the committee’s work Programme must be linked to government and business priorities, there should be an effective review mechanism, adequate funding should be ensured, the terms of reference must be flexible and there should be a fair degree of institutionalisation.

Once the national trade facilitation committee has been established along these lines, it will be in a position to effectively implement the obligations of the Trade Facilitation Agreement. This would enable India to secure a fair share of the $1 trillion that the deal is estimated to generate annually for the world economy.

By Nisha Taneja & Shravani Prakash
Authors are with ICRIER

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