Understanding Trade Rules in the Digital Age
How technology can facilitate user engagement with trade agreements
Clinic: Queen's/UOttawa, Spring 2019
Trade agreements are often written in language that users cannot understand without guidance from trade experts. This language creates a knowledge-based trade barrier. The objective of this TradeLab project is to explore how technology can be used to make trade agreements more accessible so that those with and without expertise can more effectively engage with them.
This report assesses the state of cross-border trade of goods in Africa and recommends specific technology that can be applied to lower transaction costs. Each type of technology that is discussed addresses at least one of the following issues identified in African trade:
1. Overlapping Trade Agreements: 39 out of 54 countries in Africa are members of more than one of the eight AU-recognized RECs. These RECs operate in conjunction with other trading arrangements (e.g. regional agreements that are not AU-recognized, bilateral agreements, etc.) and further complications can arise by virtue of the fact that trade agreements are negotiated internationally but implemented domestically. This overlapping membership and distinction between international and domestic law can make it difficult for users to know their respective trading rights and obligations. For example, traders in some countries may need to navigate different sets of rules with regard to the same product when exporting to certain destinations. Technology could help to address these problems by giving users effective tools for identifying the rules that apply to their respective trade-related activities.
2. Lack of Transparency in Trade Facilitation: Manually enforcing customs processes at individual border agencies can lead to unequal treatment of similar goods and increase the risk of corruption. Traders need to ensure certainty before crossing the border. This point is especially true for small firms that cannot afford to pay unexpected customs fees or bribe border agents. Automation can help reduce these risks through improved recordkeeping, auditing and online preclearance platforms. This, in turn, will limit discretion in border regulation and allow all parties in the trading process to have access to all the same information.
3. Slow & Redundant Customs Processes: In Africa, document requirements are disproportionately time-consuming and expensive by comparison to the rest of the world. Regional trading blocs, different customs regimes, and expensive procedures all contribute to this inefficient and slow system. Digital tools can help to eliminate redundant administrative tasks (e.g. multiple and similar paper forms filled out by hand) and, by extension, help to increase the flow of goods across borders.
4. Technology Restraints: Telecommunication infrastructure in Africa varies greatly from country to country, and the prevalence of high speed broadband internet varies geographically as well. However, the rate of cell phone ownership across the continent is consistently very high. This means that technology which uses or can be adapted to use cell phones should be strongly considered, and internet-based programs (which allow for greater connection and user-interaction) can be explored for the future.
We separate our recommendations for digital tools based on three types of users that interact with trade agreements: traders, border agents, and policymakers. Each of these users have different purposes for interacting with trade agreements, face different challenges, and in turn, require different technology to solve them. For each category, we have identified several use cases and digital tools that can offset the four issues listed above.
a. Traders: Traders need to understand their rights and obligations under trade agreements (whether multi- or bilateral) to be able to benefit from them. Digital tools can be used to help clarify the rules set out in agreements, but the use of these tools is dependent on the technological infrastructure of any given country. Technology such as M-Pesa (mobile banking) and BitPesa (currency exchange/remittance using bitcoin) have disrupted conventional banking in many African regions, and their technology could be transferable for trade purposes. If current web portals such as the Canada Tariff Finder could be modified to work with USSD and SMS technologies (that do not require mobile data), trade information could be more easily accessible to traders.
b. Border agencies: Trade agreements are negotiated at the international level; however, the rules for trade are implemented domestically by way of domestic legislation. Thus, individual agencies need to understand how to facilitate trade under a national legal mandate and domestic regulations. The automation and standardization of customs platforms can increase efficiency, ensure uniform treatment of customs regulations, and involve all parties (e.g. traders, border agents, regulatory ministries) in a single window format. In addition, the use of blockchain and codification of agreements has the potential to take automated facilitation one step further and decentralize the regulation process.
c. Policymakers: When negotiating new trade agreements, policymakers must consider a multitude of factors for the benefit of their national economy. One such factor is the impact of previous agreements. To assess this impact, policymakers must work with, research, and distill large amounts of complex text. Tools that enhance policymakers’ ability to analyze these texts in preparation for trade negotiations and to help predict the impact of possible negotiated outcomes could both improve quality of work and reduce preparation costs. These tools can range from websites that enable users to compare text across agreements, to AI that can be taught to answer specific questions and make predictions about the economic impact of new agreements.
The recommendations made in this report revolve around current and growing digital infrastructure. In the short term, it would be most beneficial to create trade programs that use SMS/USSD technology because of the existing infrastructure of cell phone towers and feature phones. However, as smartphones become increasingly popular in African markets, digital trade programs should be incorporated using internet- and blockchain-based technology.
The full report can be read here.
* Image Credit: https://www.japantimes.co.jp/opinion/2019/05/21/commentary/world-commentary/risks-unilateral-governance-digital-trade/#.XbfzfpozbIU