FACILITATION: PROGRESS AND CHALLENGES IN ASIA 7
2. Progress made in Priority 3 of APoA
Th e progress made in implementing the APoA Priority 3, international trade and trade facilitation, can be reviewed in terms of progress on (1) accession to the WTO; (2) market access including through preferential trade agreements and other agreement; (3) trade facilitation; and (4) establishment of national trade and transport committees.
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2.1 Accession to the WTO
Five (Armenia, Lao PDR, Kyrgyzstan, Mongolia and Nepal) out of 12 LLDCs in Asia-Pacifi c region are now members of the WTO. Except for Turkmenistan, other LLDCs in the region are WTO observer8 and at diff erent stages in the negotiations of their accession to the WTO. Lao PDR became the 158th member of the WTO on 2 February 2013, while Tajikistan became 159th member on 2 March 2013. On the other hand, despite the APoA’s calls for easier accession especially for those with both LDC and LLDC status, not much progress has been made. However, since limited progress has been made in the Doha Development Agenda (DDA) negotiations, these countries could still get in a position to infl uence their multilateral trade system should they accession be facilitated.
2.2 Market access through preferential trade agreements and other arrangements
LLDCs have increasingly been entering into preferential trade agreements (PTAs) with other developing and transition economies in Asia and the Pacifi c. According to the Asia-Pacifi c Trade and Investment Agreements Database (APTIAD)9, although three-fourth of LLDCs are not WTO members, they all belong to more than one PTAs (Table 1). Only Mongolia, a member of WTO, is not yet party to any reciprocal PTAs, although it started negotiations of a bilateral
free trade agreement with Japan and accession to the Asia-Pacifi c Trade Agreement (APTA).
Table 1: Participation of LLDCs in preferential trade agreements and trade coverage under PTAs (average 2008-2010) Economy Number of
Afghanistan 4 4 0 3 0 81.00 51.24
Armenia* 10 9 1 0 8 27.20 32.03
Azerbaijan 10 10 0 1 3 8.63 45.89
Bhutan 3 3 0 2 0 94.90 77.24
Kazakhstan 11 11 2 1 6 19.64 44.09
Kyrgyzstan* 11 11 0 1 8 46.98 56.78
Lao PDR* 12 10 2 5 1 72.90 89.45
Mongolia* 2 0 2 0 0 0 0.00
Nepal* 3 3 0 2 0 57.48 56.46
Tajikistan 9 9 0 1 3 42.72 45.42
Turkmenistan 7 7 0 1 4 15.37 40.08
Uzbekistan 11 10 1 1 3 54.25 46.87
Note:* denotes WTO members
Source: derived from Asia-Pacifi c Trade and Investment Agreements Database (APTIAD)
Th ere are however stark diff erences in how much of total national exports and imports are captured by the agreements.
On the high end of the spectrum are Bhutan and Lao PDR, who trade essentially with the countries with whom they have signed PTAs. On the other end, for example, less than 10% of national exports are directed to partner countries in the signed PTAs in the case of Azerbaijan; and about 15% in the case of Turkmenistan.
Although the high number of agreements could potentially lead to more market access, the LLDCs have not been able to fully exploit this due to generally low levels of export diversifi cation. Figure 6 shows that LLDCs’ exports are mainly concentrated on a small number of products.
8 Th e observer governments must start accession negotiations within fi ve years of becoming observers.
9 According to APTIAD, the total number of agreements involving economies of the Asia-Pacifi c region is estimated to be well above 200 (147 in force) as of early 2013. More information is available at http://www.unescap.org/tid/aptiad/.
Figure 6: Export diversifi cation of selected Asia-Pacifi c countries
Source: ARTNeT Policy Brief 19, 2009
2.3 Trade facilitation
High trade transaction costs and ineffi ciencies associated with importation and exportation requirements and transport continues to be a stumbling block to integration of LLDCs into the global economy by impairing export competitiveness or the infl ow of foreign investment. As shown in fi gure 7, LLDCs’ trade costs are up to 7 times higher than the costs of other developing countries.10
10 Please refer to the ESCAP-World Bank bilateral trade cost database for the latest estimates, available at: http://www.unescap.org/tid/artnet/trade-costs.asp.
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Figure 7: Trade costs (TC) and TC excluding tariff (NTC) between selected economies and the United States of America (2007-2010)
Source: ESCAP Trade Cost Database Note: NT-CTC: CTC excluding tariff costs
Development of trade facilitation of LLDCs can also be refl ected by the Logistics Performance Index (LPI)11. Figure 8 shows that many Asian LLDCs are far behind the global top performers such as Singapore and Hong Kong, China.
11 More detailed information is available at http://go.worldbank.org/88X6PU5GV0
Figure 8: Logistics Performance Index (LPI) of LLDCs in Asia
Source: World Bank, LPI 2012 Note: No data on Turkmenistan
2.4 National trade and transport committees
Th e increasing importance of reducing trade transaction costs has led to a search for integrated ways to implement trade and transport facilitation measures. Establishment of national trade and transport facilitation committees have received particular attention in this regard, as countries realize the need for national institutional mechanisms able to bring together the numerous government ministries, agencies, authorities and business entities involved in international trade in order to develop and implement trade and transport facilitation measures that take into account their diverse requirements.
Some LLDCs in Asia (such as Lao PDR, Mongolia and Nepal) have established national trade and/or transport committees. However, these bodies often face challenges in sustaining their activities due to funding constraints and lack of operational capability. In this respect, ESCAP recently published “Guidelines on Establishing and Strengthening National Coordination Mechanisms for Trade and Transport Facilitation in the ESCAP Region” to help countries in Asia-Pacifi c region, including LLDCs, to establish sustainable trade and transport committees.