How the WTO’s Trade Facilitiation Agreement May Reduce Bribery

I argued in my last post that the WTO is not well-suited to directly addressing bribery and corruption; even though bribery impedes trade, it would be a mistake to recognize bribery (or failure to suppress bribery) as an actionable violation of international trade law. But that does not mean the WTO should not take action to deal — indirectly — with the problem of corruption. A good example of productive measures the WTO can implement to reduce the impact of bribery and corruption in trade is the Trade Facilitation Agreement (TFA), which was negotiated in December 2013 (but has not yet entered into force).  The TFA aims to reduce transactional obstacles to trade, focusing mainly on border transactions; in doing so, it may indirectly address some of the most significant contributors to bribery in international trade, even though the TFA is not about corruption as such. The agreement provides a nice example of how the WTO system can take positive steps to combat corruption, even though the system is not equipped to tackle corruption directly.

The TFA has the potential to contribute to reducing trade-related bribery in three main ways.

  • First, it may reduce opportunities to falsely classify goods. The TFA obliges Member States to guarantee the availability of timely advance rulings (written decisions made prior to the border transaction and importation of the good regarding to the good’s tariff classification and origin). Given that false tariff classifications are a major source of bribery in trade, the guaranteed availability advance rulings may help to reduce this.
  • Second, the TFA could reduce bribery in trade by reducing the number of border transactions. Specifically, Article X of the TFA encourages Member States to establish single-custom windows, enabling traders to engage in a one-time transaction when importing or exporting goods. As interactions between border officials and traders are reduced, so are opportunities for corrupt behavior.
  • Third, the TFA requests Member States to increase monitoring of fees and charges imposed in connection with imports and exports. Increased monitoring of these border fees may help reduce bribery, because bribes are often covered up as “fees.” One reason for this is that border officials are aware that firms covered by the FCPA are no longer able to pay bribes; border officials get around this by imposing bogus fees (or fines), which the officials then pocket.  Increased scrutiny to these matters may make it more difficult for border officials to get away with this.

While these provisions may be promising in reducing bribery, they are also limited. Requiring transparency is not the same as outlawing corruption and bribery. And the ability of new rules to prevent rule-breaking behavior is limited. Corrupt actors will try to find ways around the rules, even in a more transparent environment. This is particularly the case given the amount of money border officials can make in bribes. With more transparency and less transactions, border officials will just need to become cleverer. All that said, there are good reasons to predict that when the TFA enters into force, it will reduce bribery in border transactions.

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