1 WFSGI Session at the 2017 WTO Public Forum: TRADE BEHIND THE SCENES: A SPORTING GOODS INDUSTRY PERSPECTIVE The session hosted by the WFSGI provided a glimpse Behind the Headlines into the practical impact of trade for a truly globalized sector such as the Sporting Goods Industry. The session s focus was on trade facilitation, highlighting the opportunities trade offers but also the challenges arising for private businesses operating in a globalized world with a global value chain. M. Robbert De Kock, WFSGI President/CEO, started the session by welcoming the attendants and introducing the panelists: Mr. Petros C. Mavroidis, Edwin B.Parker Professor of Law, Columbia Law School, NYC Ms. Marina Carvalho, President, APICE (Brazil) Mr. Marc-Ivar Magnus, Vice President, CR, Legal and Trade, WFSGI Mr. Jeffrey Whalen, Senior Counsel, Customs and International Trade, Nike Inc. WFSGI Panel: From the left Jeffrey Whalen (Nike), Petros C. Mavroidis (Columbia Law School), Robbert de Kock (WFSGI), Marina Carvalho (APICE) and Marc-Ivar Magnus (WFSGI). WFSGI 2017 Mr. Petros C. Mavroidis, Professor of Law at the Columbia Law School in New York City, began the session by setting the scene and explaining what was meant by trade facilitation. He indicated that
2 in a wide sense, trade facilitation could be defined as anything facilitating trade liberalization and cutting down on deadweight losses, meaning that all the WTO s activities could be considered as trade facilitation. On the other hand, and in a narrow understanding, trade facilitation would rather consist in referring to the WTO s Trade Facilitation Agreement (TFA) itself and focus on the improvement of three provisions concerning 1) the goods in transit 2) the customs fees upon importation 3) and the transparency regarding importations procedures. Then, Mr. Mavroidis clarified why the TFA was indispensable by highlighting two reasons: first, he mentioned that the existing framework either did not address in detail the GATT + elements or did not manage to live up to expectations (e.g. Pre-shipment Inspection, PSI) and secondly, he stressed the fact that empirical studies showed that trade costs were particularly harmful to developing countries which are the prime beneficiaries of the TFA. Against this background, Mr. Mavroidis explained how trade facilitation was put in place, indicating that a narrower agreement was privileged, mentioning that an all-encompassing agreement would have been hard to negotiate and would have led to the risk of becoming part of the Doha malaise. With this approach, the chances of conclusions increased, and it also sent a positive message about the potential of the WTO to still conclude agreements. The focus on the 3 provisions (V, VIII X) was deemed to be reasonable since they were underregulated in the GATT, and there was still a possibility to add features in the future. According to the panelist, the GATT + brought several major innovations like the use of internet, the advance rulings, the single windows, the reduction of the number of documents needed, the enquiry points and the border cooperation. Finally, Mr. Mavroidis concluded by insisting on what the TFA did different from the classic GATT format and pointed out that the TFA was linking implementation and technical capacity. Ms. Marina Carvalho, President at the Brazilian Association for Sporting Goods Industry and Commerce (APICE), continued the session by showcasing the practical impact of trade facilitation in Latin America countries. She started her presentation by briefly presenting the Brazilian Association for Sporting Goods Industry, APICE, which represents the sector of sporting goods businesses before the government and groups of interest in Brazil. She mentioned that the Brazilian market for sport articles corresponded to approximatively USD $1.6 billion and that 35% of this amount were taxes collected by the Brazilian government. The panelist also observed that the sport sector created more than 20 thousand jobs in production in Brazil and counted more than 10.000 points of sale within the country. Furthermore, she stressed the fact that the average income for the employees of the Sporting Goods Industry were usually higher than the average income in Brazil, due to the fact that those employees were highly qualified. According to her, We [the SGI] are good employees, we are good employers and we have good employees. And that is a very good reason to keep the SGI in a country because we promote the transfer of technology to local work force. Practically speaking, Ms. Carvalho noted that the TFA provided 3 categories of provisions that should be implemented by countries when this Agreement enters into force (Category A), or following a transitional period (Category B, C). When comparing the implementation of the agreement in Latin America Countries, Argentina, Brazil, Chile, Columbia and Uruguay have already more than 90% of the TFA implemented, unlike Paraguay and Peru with a little more than 50% of the agreement executed.
3 Ms. Carvalho explained in detail three initiatives that Brazil put in place regarding this trade facilitation: 1) the establishment of a National Committee on Trade Facilitation (Confac) which is cochaired by the industry ministry (i.e. import licenses) and ministry of finance (i.e. customs and clearance) and which organizes all trade facility measures/initiatives in Brazil 2) the creation of a Single Window which is a single database putting in contact the 22 agencies that are taking care of the clearance from different sectors and 3) the regime of Authorized Economic Operator (AEO) which aims to bring companies to cooperate with the Brazilian Federal Revenue (BFR) and invite them to have a transparent procedure of import, leading to expedite clearance at ports of entry. Ms. Carvalho concluded her presentation by underlying the benefits of the trade facilitation for the SGI, indicating that the Brazilian authorities expected to reduce by 40% the average time of customs clearance and to increase the GDP of 2.52% in 2030 ($75 billion). Mr. Marc-Ivar Magnus, Vice President, CR, Legal and Trade at the World Federation of the Sporting Goods Industry (WFSGI), presented the activities of the WFSGI and especially its role in helping the sport sector engaging in trade discussion. He firstly recalled that the SGI was a globalized industry with cutting edge global value chain, creating jobs and adding value all over the world (i.e. production model: R&D, design, raw material sourcing, manufacturing, logistics, distribution, marketing/branding, consumer sales). Mr. Magnus highlighted the fact that this statement was reflected within the WFSGI s composition including brands, retailers, manufacturers and federations and representing in 2014 a global industry turnover of approximatively USD 378 billion. The panelist then described the main tasks entrusted to the Federation such as its role of liaison with various organizations like the Olympic committee (IOC), FIFA, or the norming institutes (ISO/CEN), its facilitator role in managing working groups on multiple subjects (e.g. Corporate Responsibility, Legal, Manufacturing). On the trade matter itself, Mr. Magnus insisted on the fact that the most important mandate of the WFSGI Trade Committee was to promote free and fair trade for the SGI. Through the WFSGI Trade Committee, the WFSGI is able to formulate a common industry position on trade topics, coordinates strategic guidance in trade cases, interacts with institutional representatives (e.g. governmental authorities, ministries, embassies and missions to the WTO), exchanges with regional and national federations and liaises with international organizations such as the Word Trade Organization, the World Customs Organization, the International Labor Organization, the World Health Organization, the United Nations, the International Organization of Employers, the Organization for Economic Co-operation and Development on trade issues.
4 To illustrate the WFSGI s trade activities, Mr. Magnus gave several examples such as the support of independent suppliers in China, Cambodia, Vietnam, Indonesia, the representation in trade cases (e.g. anti-dumping cases against footwear imports in Argentina, Brazil, Chinese Taipei, and Columbia, import license case in Argentina, or license and safeguard measures for bags and footwear in Turkey), the participation in the WTO Public Forum, the adjustment of the Sporting Footwear HS code, or the evaluation of a sectoral agreement for the SGI. Finally, Mr. Magnus brought into limelight some of the advantages for its members to work under an industry federation s umbrella when they deal with trade cases such as 1) the possibility to speak with a more authoritative voice 2) the occasion to coordinate specialized legal advices for the entire industry 3) the chance to reduce the costs by performing repetitive tasks in house especially in countries with complex procedural requirements, like registration of interested parties and submission of Power of Attorney (POA). Mr. Jeffrey Whalen, Senior Counsel, Customs and International Trade at Nike Inc. and Chairman of the WFSGI Trade Committee, spoke about trade facilitation, global supply chain and economic development with a special focus on the U.S. Generalized System of Preferences (GSP). Mr. Whalen noted that GSP brought benefits not only to the developing but also to the advanced economies and that trade was a foundational element of economic growth and development. However, the panelist stressed the fact trade preferences programs alone could not support global development, mentioning that eliminating duties did not necessarily mean that trade follows. Indeed, Mr. Whalen underlined the fact that it was also crucial to build a trade environment and particularly for trade facilitation to enable investment and enhance the rule of law (i.e. labor rights, intellectual property rights protection). He invited the participants to read a recent study published by New Markets Lab which is a think tank based in Washington DC. The panelist informed the audience that US-based NGO s, business community, economists and trade experts contributed to this study and tried to figure out why the GSP was not as used and effective as it could be. Their reflection led to four recommendations to enhance the GSP which Mr. Whalen listed and detailed: 1) The first recommendation concerns the duration of trade preferences which should be long enough for benefits to vest. Indeed, the panelist explained that investments to develop supply chains were long-term and implied substantial start-up costs. Thus, these frequent legislative renewal periods created uncertainty for investors and were therefore a disincentive for supply chain expansion. 2) The second recommendation mentioned by Mr. Whalen concerns the products covered in the GSP which matter most to development. He recalled that footwear and apparel were excluded from US GSP eligibility, while many of these products were manufactured in GSPeligible countries (e.g. Vietnam, Indonesia, Cambodia). In the SGI, performance athletic footwear tariffs range from 8.5 to 20 percent in the U.S. The tariff rate for performance athletic apparel is as high as 32 percent. The average tariff rate for athletic footwear and apparel is 13.7 percent in 2013. However, the US value-added exceeds 70 percent of the retail price and supports jobs in product design and development, transportation and logistics, marketing and retail.
5 3) The third recommendation refers to the necessity of better integrating trade preferences into global supply chains. Most preferential programs focus only on the last manufacturing step for finished products, while trading in intermediate goods and materials accounts for the majority of global trade. Moreover, traders have to deal with complex and differing rules of origin which place burdens on them to manage their supply chains and create increased compliance risks. In addition, reforms should include globally consistent, and simpler rules as well as more flexible cumulation rules. 4) Finally, the fourth recommendation which was mentioned by the panelist was the need to target initiatives to improve the business enabling environment and enhance the rule of law. Mr. Whalen noted that one of the biggest challenges in trade facilitation is investment to infrastructures. As a company like Nike, with billions of products around the world, it is important to have access to ports, roads, consistent electrical power for instance before considering shifting the manufacturing process or manufacturing origin. Consequently, the focus on infrastructures is incredibly important. The other important thing is the enhancement of the rule of law and in particular the protection of Intellectual Property Rights and the promotion of improved working conditions. The meeting was finished with a Question & Answer session moderated by Mr. Robbert de Kock. The audience was engaged in the debate and posed several questions as well as made comments on number of points, including the Single Window system implemented in Brazil and mirrored in Argentina, the investment of the private sector/sgi in capacity building, the post TPP strategy, the non-efficiency of the African Growth and Opportunity Act (AGOA), or the implications of outsourcing and independent manufacturing. You can listen to the WFSGI session at the WTO Public forum here.