Recent congressional hearings on trade policy produced more fireworks than usual, including criticism from senators and representatives of the Biden administration’s approach to its signature trade initiative, the Indo-Pacific Economic Framework (IPEF). Despite congressional complaints about a lack of transparency and engagement with Capitol Hill, the administration’s witness, U.S. Trade Representative Katherine Tai, was unflinching in her response.
In a nod to transparency, USTR issued a three-page text summary for IPEF’s trade pillar on the eve of the hearings. While leaner on market-opening specifics than the business community may like, they are not without promise. In that regard, the document touched on agriculture, good regulatory practices, services domestic regulation, and customs and trade facilitation.
That last item in particular is encouraging because the objectives it outlines are well-aligned with U.S. business priorities. Trade facilitation — the streamlining of administrative processes and procedures by which goods move across borders — has long been a priority for U.S. officials and businesses. All U.S. trade agreements over the past two decades have included trade facilitation commitments because cutting trade costs enhances economic growth and jobs.
Trade Facilitation in IPEF? Agreements to which the United States is not a party, such as the Comprehensive and Progressive Agreement on the Trans-Pacific Partnership (CPTPP), also have trade facilitation obligations. Separately, the 163 members of the World Trade Organization brought into force the organization’s new Trade Facilitation Agreement (TFA) in 2017. The results have been noteworthy: Red tape and its associated costs have been cut, and exporters can more easily sell to foreign customers.
With a high level of ambition in this area, IPEF could achieve quite a lot. Last year, the Chamber put forward policy recommendations to help the Framework reach its potential. At a minimum, the IPEF can press for effective implementation of the TFA — and build on that foundation.
What Exactly Is Trade Facilitation? Essentially, it’s a set of policies to streamline procedures and ease logistical impediments to the free flow of goods and services.
Examples include:
- Posting customs and other border information online, including practical steps for import, export, and transit;
- Developing expedited customs procedures for express shipments;
- Accepting electronic documents and using electronic systems for traders to submit required documentation;
- Ensuring consistent customs treatment from port to port;
- Expanding customs cooperation, including sharing best practices and lessons learned from the pandemic;
- Revolutionizing the customs clearance of lower-value e-commerce shipments whose volumes grew substantially since the pandemic’s onset;
- Digitizing the customs declaration and payment of any duties, fees, and taxes.
What’s the Payoff? The WTO estimates that the TFA has the potential to increase global merchandise trade by up to $1 trillion annually once it’s fully implemented. This could also bring further benefits, including:
- Reducing costs, red tape, and delays associated with border procedures;
- Making it easier for businesses of all sizes to participate in global trade;
- Raising living standards by cutting costs, thereby supporting jobs through trade expansion;
- Enhancing competition;
- Preventing corruption through greater transparency and regularity in customs.
Through IPEF, countries could raise their commitments under the TFA and expand upon it to seize more of these benefits. While many countries have made a lot of progress, the resulting landscape is a bit of a patchwork. Now is the time to finish what the TFA started.
What’s the Next Step? The next gathering of IPEF negotiators will reportedly be held in Singapore in the second week of May. The timing will be opportune for the administration to press hard and obtain practical and commercially beneficial trade facilitation commitments from IPEF partners.
Previous bilateral, plurilateral, and multilateral agreements have demonstrated that this is an area that enjoys broad support. There is no reason why these commitments cannot be included, and built upon, in the IPEF.
About the authors
John Goyer
John Goyer is executive director of Southeast Asia at the U.S. Chamber of Commerce. Goyer focuses on issues of market access, investment barriers, regulatory and other issues that pose challenges for U.S. business in Southeast Asia.
