Nigeria’s trade facilitation commitments are shallow. It must do more

Last week, I professed myself pleased that Nigeria ratified the WTO Trade Facilitation Agreement (TFA). This is clearly an opportunity for the country to transform its border and customs procedures as well as the administrative, regulatory and policy frameworks within which international trade takes place. However, as I argued, ratification alone doesn’t tell us much about the seriousness of Nigeria’s reform intentions. We must also look at the nature of its commitments. And, here, my view is that Nigeria’s current undertakings are weak. But don’t take my word for it; let’s examine the agreement and Nigeria’s commitments under it.
Well, as trade aficionados know, the TFA is the first major WTO agreement since the conclusion of the Uruguay Round in 1993. It is widely seen as a “win-win” deal for developing and developed countries, because of its potential to bring down trade transaction costs, increase customs productivity and revenue collection, help to attract foreign direct investment, and help make supply chains work well. Trade facilitation issues always feature in the World Bank’s Ease of Doing Business reports, and, thus, any country that successfully implements trade facilitation measures is likely to have a higher ranking and reap huge reputational benefits.
Yet, many developing countries were sceptical about a trade facilitation agreement. Among other issues, they expressed concerns about its implementation costs and its impact on their policy space. As I pointed out last week, Nigeria was one of those citing policy priorities as a reason to “move very cautiously” on the negotiations. However, thanks to compromises, such as flexibilities in implementing the agreement as well as promises of technical assistance and support for capacity building by the developed countries, the TFA was concluded at the 9th Ministerial Conference in Bali, Indonesia, in December 2013.
Now, the TFA comprises two main sections: the first sets out the trade facilitation measures and obligations; the second contains the flexibilities, known as special and differential treatment, for developing and least-developed countries. Specifically, section 2 requires developing country members to designate theTFA commitments in section 1 into three categories. Category A commitments are those they will implement immediately the agreement enters into force. Category B measures are those they will implement on a date after a transitional period. Category C obligations are those that a developing-country member will only be required to implement if it needs technical assistance and receives it; in other words, no technical assistance, no implementation!
These categorisations put the onus on each developing country to decide how far and how fast it wants to implement the agreement. But how a country uses this flexibility will have powerful signalling effects. Surely, a developing country that accepts substantial commitments in Category A is saying that it will implement meaningful reforms to improve the climate for investment, business and trade.
So, what are the TFA commitments? Well, section 1 has twelve articles, each containing a number of paragraphs. Articles 1 to 5 essentially focus on transparency issues. These are requirements to publish and make availablethrough the internet information about import and export procedures and requirements (article 1), to fully consult traders and other interested parties before introducing new laws or regulations and ensure regular consultations between border agencies and traders(article 2), to provide binding advance rulings to traders upon request to enhance the certainty and predictability of trade transactions (article 3), to provide for appeal or review procedures (article 4) and to introduce other measures to enhance impartiality, non-discrimination and transparency (article 5).
The final set of articles, 6-12, relates to fees, charges and formalities for import, export and transit. Specifically, article 6 says that the size of fees and charges should be limited to the cost of services rendered and should be published, and that penalties imposed should be proportionate to the breach. Article 7 calls for the simplification of the procedures for the release and clearance of goods through, for instance, pre-arrival processing, electronic payment, risk management and post-clearance audit. Further, members are required to publish average release times and have “authorised operators” schemes, which allow “trusted” traders to be given light-touch inspections so as to reward and incentivise good behaviours. Article 8 requires members to ensure that border agencies cooperate and coordinate their activities in order to facilitate trade. Articles 9, 10 and 11 relate to formalities for cross-border trade, and essentially require members to reduce and simplify documentary requirements, e.g. through automation and a single window. Finally, article 12 obliges members to cooperate with one another on customs matters.
I have bored you, dear reader, with these details so you can judge whether, as I said, Nigeria’s current commitments are shallow, or not. At a minimum, any developing country that is serious about reforms should designate the transparency requirements and those relating to fees, charges, advance rulings, appeals procedures and border agency coordination as Category A commitments. Any country that can’t commit to swiftly addressing these basic issues either suffers from acute institutional deficiency or lacks the political will to reform its customs and border procedures.
In November 2014, Nigeria notified the WTO of its Category A commitments. So, how deep or shallow are these commitments? Well, Nigeria accepted no transparency commitments under Articles 1 to 5. It accepted no commitment in relation to either general or specific disciplines on fees and charges, except penalty disciplines. Further, it accepted only two out of nine commitments on release and clearance of goods, and no commitment on border agency cooperation. Nigeria also designated only two of the nine measures on the simplification of formalities and documentation on import and export. The country’s Category A commitments mainly relate to freedom of transit, and even then it didn’t accept any commitment on fees and charges in respect of transit. What’s more, Nigeria did not accept any Category A commitment in relation to customs cooperation.
Nigeria’s scanty Category A commitments suggest an extreme cautiousness about fettering its policy discretion on trade and customs matters. It is particularly striking that Nigeria did not accept immediate commitments on transparency issues, charges and fees, advance rulings, appeals procedures and border agency cooperation, especially given the problem of multiple border agencies. These are essentially governance and rule of law issues that require mainly behavioural and administrative changes. Tackling them would reduce corruption and abuse of power and have significant impacts on trade transactions.
In fairness to the Buhari government, Nigeria’s Category A commitments were notified under the Jonathan administration, but this government could have revised them if it wanted to. When presenting Nigeria’s ratification instrument to the WTO recently, the minister of industry, trade and investment, Okechukwu Enelamah, said that the ratification was evidence of President Buhari’s commitment to “rapidly” implement the government’s initiative on creating an enabling environment for business. Well, Honourable Minister, Nigeria’s current TFA undertakings simply do not cut the mustard; they fall short of a credible commitment to fundamental reforms.
Nigeria must now designate its Category B commitments, that is, those it will implement on a date after a transitional period. Within one year after the agreement enters into force, Nigeria must also notify the WTO of its definitive dates for implementing the commitments. But would the country’s Category B commitments also be shallow? Secondly, given that it falls to Nigeria to determine when it implements its Category B commitments, would it kick their implementation into the long grass by specifying some distant future dates? Furthermore, Nigeria is required to establish a National Committee on Trade Facilitation to ensure smooth implementation of the agreement. Assuming the current Ease of Doing Business Committee will serve this purpose, would the committee, or any other one, be a government-only affair, excluding private sector stakeholders?
Trade transaction and logistics costs are very high in Nigeria due to a “mediocre” customs and trade facilitation regime, according to the Logistics Performance Index. The TFA has the potential to change this. But Nigeria must do more to make its TFA ratification meaningful. That certainly requires significant institutional and cultural shifts, and political will!