Customs Duty

WTO: World Trade Statistical Review 2017

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On 28 July 2017 the WTO issued the latest annual statistical report World Trade Statistical Review 2017. This publication examines trends in trade in goods and services and trade policy developments including restrictive trade practices.

World merchandise exports have risen by around 32% in value since 2006 to USD 16 trillion in 2016, and exports of commercial services have increased by around 64% in the same period, reaching USD 4.77 trillion in 2016. However trade growth in terms of volume of merchandise showed its lowest growth since the financial crisis, at 1.3% in 2016. This was half the growth rate of the previous year. This is due partly to low growth of world GDP at 2.3%, down from 2.7% in 2015. Growth in world trade is expected to rise slightly in 2017 to 2.4%.

In recent years the ratio of global trade growth to GDP growth has fallen to around 1:1 from an average of around 1.5:1 since 1946. In 2016 the ratio was 0.6:1, falling below 1 for the first time since 2001.

International trade is still concentrated within a few countries with the highest ten trading nations accounting for more than half the global trade in merchandise and commercial services. The share of developing countries in world merchandise trade is 41% and their share of trade in commercial services is 36%. Trade between developing countries is rising and accounted for more than half their total exports in 2015. However those countries classified as least developed countries (LDCs) still have a share of less than 1% in exports of merchandise and commercial services.

Digital trade

The increasing use of new technologies is expected to have a positive impact on digital trade in future with opportunities for entrepreneurs and small businesses. To analyze these trends and formulate good policy in the area improved statistics are necessary. The WTO and OECD have therefore put together an inter-agency task force to take the issue forward.

Trade policy trends

From mid-October 2016 to mid-May 2017 WTO members implemented 74 new trade restrictive measures, a decrease on the amount recorded in the previous annual report. Trade restrictive measures include new tariffs on import or exports; increases in existing tariffs; import bans or quantitative restrictions; more complex customs regulation or procedures; or restrictive changes to local content requirements. The measures could be temporary or permanent.

In the same period WTO members introduced 80 measures to facilitate trade. However the trade coverage of the import-facilitating measures is more than three times the amount in value of the estimated trade coverage of the import restrictive measures. Trade facilitating measures include the elimination or reduction of tariffs on imports or exports; simplified customs procedures; elimination of import or export taxes; or elimination of quantitative restrictions on imports or exports.

Trade facilitation agreement

The report notes that the WTO’s Trade Facilitation Agreement (TFA) entered into force in February 2017. The agreement aims to save trade costs for WTO members by simplifying and standardizing customs procedures and facilitating the flow of goods across borders.

Developing countries are permitted to set their own timetable for implementation according to their capacity. They can also obtain access to capacity-building resources to enable them to implement the agreement. The WTO has established a Trade Facilitation Agreement Facility to assist developing countries in assessing their needs and finding potential development partners. Developing countries are requested to set out the provisions of the TFA that they can implement immediately, the provisions that will require more time for implementation and those that may require capacity building support. The various commitments therefore provide a road map for the full implementation of the agreement by all WTO members.

WTO and OECD: Aid for Trade monitoring report

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The sixth aid-for-trade monitoring report has been published by the WTO and OECD under the title “Aid for Trade at a Glance: Promoting Trade Inclusiveness and Connectivity for Sustainable Development. The Aid for Trade initiative, launched in 2005, aims to help developing countries participate in global trade by assisting with the supply side and addressing trade-related infrastructure constraints. The report notes that more than USD 300 billion has been devoted to programs and projects since the initiative was launched.

The focus of the latest edition is on physical and digital connectivity. Trade connectivity is essential for inclusiveness, sustainable growth and reduction of poverty. Digital networks are essential to trade and are interlinked with the physical trade infrastructure. Without an affordable internet connection the market place of the world-wide web cannot be accessed. The report points out that around 3.9 billion people remain offline.

As a result of digitalization a larger number of low-value transactions and small shipments cross national borders, and goods are increasingly combined with services. Services therefore represent a growing share of exports of manufactured products.  New technology lowers the cost of supplying cross-border services and facilitates connections between parts of the supply chain. This does not eliminate comparative advantage or other constrains from information symmetries and trade barriers; but many of the constraints of international trade are being overcome and new business models are being created.

The 2030 Agenda for Sustainable Development has set targets for universal, affordable access to the internet. Although mobile broadband networks are available to more than 50% of people in the less developed countries (LDCs) the devices and network connections are still expensive and coverage is limited. The high costs of digital connections can be seen as trade costs that exclude firms and consumers from the online market for goods and services.

Measures are required to improve the supply side of digital connectivity including ICT infrastructure and availability of network coverage; and the demand side such as affordability and internet usage. This involves mobilizing additional finance to develop infrastructure, ICT services markets and regulatory environments. Aid for Trade supports governments in their efforts to bridge the digital divide.

There is also a digital trade policy divide. Developing countries must consider the trade policy aspects of digitalization. Digital connectivity alone is not sufficient without additional policies to develop the potential of e-commerce, including technical and financial assistance to develop human, institutional and infrastructure capabilities.

Commerce is hindered by border clearance delays and inadequate physical infrastructure. Digitalization of customs services can make the customs and border agencies more efficient. The report emphasizes the need to streamline customs services for micro, small and medium enterprises (MSMEs). Many of these concerns will be addressed by the WTO Trade Facilitation Agreement.

The Trade Facilitation Agreement aims to simplify and harmonize international trade procedures, speeding up the movement and clearance of goods. Complete implementation of the agreement could lower trade costs by 16.5% for low income countries and 17.4% for lower middle income countries. The TFA covers a range of trade facilitation measures including customs cooperation, customs procedures, freedom of transit, formalities, appeals procedures and fees and charges. Countries self-assess and declare their ability to implement each measure.

Services trade is important in growing connectivity as services support trade in goods, supply chains and manufacturing activities. They are also involved in the infrastructure enabling e-commerce and online services. Governments need to help promote the development of e-commerce strategies supporting trade logistics, development of e-commerce skills, adequate legal frameworks, online payments and access to finance. These combined with an increase in connectivity can increase e-commerce possibilities, generating economic growth and employment.

E-commerce can raise productivity in developing countries across all economic sectors, including MSMEs and enterprises owned by women, by connecting to customers and suppliers worldwide. Governments need to promote internet access and training to ensure that existing inequalities of access do not increase. The private sector is also important in supporting MSMEs and individuals to become connected to the global economy.


US: Department of Commerce finalizes sugar trade compromise with Mexico

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The U.S. Department of Commerce has finalized an agreement on the suspension of anti-dumping and countervailing duties on Mexican exports of sugar.

The agreement, which reworked a 2014 pact, averts steep duties on U.S. imports of sugar from Mexico, the top foreign supplier to the lucrative 11-million-tonne U.S. market. It also prevents the risk of retaliation from Mexico just as the two countries and Canada are ready to renegotiate the North American Free Trade Agreement (NAFTA) this year.

The two countries had reached a provisional agreement at the beginning of June 2017 following intensive negotiations. This agreement included measures to prevent dumping of Mexican sugar, with the US alleging that Mexican sugar was being sold into the US market at below the cost price in Mexico.

EU and Japan reach agreement in principle on trade deal

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An agreement in principle has been reached on a free trade deal between the European Union (EU) and Japan. The deal includes sizable tariff cuts, co-operation on standards and regulations and opening up of public procurement markets.

The EU and Japan together account for 19% of global gross domestic product and 38% of goods exports. Around 10% of Japanese exports go to the EU. This is more than double the proportion of EU goods exported to Japan.

The EU estimates the agreement will save it EUR 1 billion in customs duties each year and increase exports to Japan from more than EUR 80 billion to more than EUR 100 billion a year.

Tariff reduction and elimination

Japan’s main objective is to reduce or eliminate EU import duties on its automobile sector. This is very important because the EU is the world’s largest importer of road vehicles. The EU has agreed to gradually phase out all tariffs on cars imported from Japan, with some safeguards in the event of a sudden large rise in imports.

For the EU the most important goal was to reduce Japan’s tariffs on imports of European meat, wine, and dairy products. The EU agricultural sector will be subject to much lower tariffs on exports to Japan. Currently, Japan’s import duties on food are high, ranging from 15% on wine to 30-40% on cheese. After the agreement is effective some tariffs will fall to zero immediately and others will be phased out over 15 years. For some very sensitive products, the zero tariff will only apply up to a certain volume of imports.

Non-tariff barriers

Both sides will benefit from removing non-tariff barriers, such as incompatible product standards. The agreement includes provisions for greater harmonization of standards. The EU considers that this will help its manufacturers increase their exports to Japan.

Investor protection

Before the deal takes effect the EU and Japan must agree on the issue of investor protection. The EU does not want to use “investor state-dispute settlement” tribunals. These tribunals have been widely criticized by campaign groups as offering a way for multinationals to undermine environmental and labor standards. The alternative could be investment courts but Japan may object to this option.

Effective date

According to the European Commission president, the deal could take effect in early 2019. This will however depend on the outcome of negotiations on the remaining details of the agreement. Some further time will be required to turn the agreement in principle into the final text of a free trade agreement.

US: Government confirms duty-free access for some goods from Nepal

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The US government has confirmed that 66 Nepali goods now eligible for duty-free entry into United Nations through Trade Preferences Act (TPA).  The confirmation was made during the third joint council meeting of the Trade and Investment Framework Agreement (Tifa) on 20 April 2017.

A total of 66 Nepal-made items, including carpets, headgear, shawls, scarves and travel goods, can now enter the US market without being subject to any form of duty. The US government has authorized this Nepal-specific program until 2025.

US: President launches investigation into steel dumping

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Donald Trump has initiated a wide-ranging antidumping duty (AD) and countervailing duty (CVD) investigation into countries that export steel to the US.

The investigation is aimed at stopping countries from flooding the U.S. with artificially cheap steel that is undercutting local suppliers. Under the investigation ten countries are subject to AD investigations including Belarus, Italy, Korea, Russia, South Africa, Spain, Turkey, Ukraine, the United Arab Emirates (UAE), and the UK. Only Italy and Turkey are subject to CVD investigations over unfair subsidies.

The alleged dumping margins for Belarus are 161.75 percent to 280.02 percent, Italy 18.89 percent, Korea 33.96 percent to 43.25 percent, Russia 214.06 percent to 756.93 percent, South Africa 128.66 percent to 142.26 percent, Spain 32.70 percent, Turkey 37.67 percent, Ukraine 21.23 percent to 44.03 percent, UAE 84.10 percent, and the UK 147.63 percent.

Vietnam: Imposes anti-dumping tax on steel imported from China

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On March 30 2017, the Ministry of Industry and Trade officially decided to levy anti-dumping duties on imported coated steel from mainland China including Hong Kong and the Republic of Korea.

Therefore, Bazhou Sanqiang Metal Products will be taxed 26.36%, BX Steel POSCO Cold Rolled Sheet 38.34 %, Bengang Steel Plates-27.36%, Tianjin Haigang Steel Coil – 26.32%, Hebei Iron & Steel Co Ltd, Tangshan Branch – 38.34%, Wuhan Iron and Steel – 33.49%.

However, Chinese Yeih Phui Technomaterial was taxed at the lowest rate of 3.17%. South Korean POSCO of the RoK will be charged 7.02% anti-dumping tax while other RoK exporters will be taxed 19%.

The decision takes effect after 15 days after the signing and will be in place for five years.