"The Seattle meeting is doomed to succeed because too much is at stake."—Mike Moore, director general of the World Trade Organization (WTO), at the beginning of the WTO Negotiations

Given the antipathy of his troops toward the new "Millennium Round" trade talks at the start of the World Trade Organization Ministerial Summit in Seattle last December, none would confuse Mr. Moore's apocryphal utterance with the heroic confidence of Henry V on the eve of the Battle of Agincourt. Sure enough, by the time the smoke cleared, the Battle of Seattle left the cause of trade liberalization feeling like the dazed and battered French army on St. Crispian's Day.

Defeated in their attempts to craft a consensus position, the delegates' retreat to Geneva was orderly and, perhaps, pre-ordained. They likely will try again after the U.S. presidential elections in November 2000 and the completion of China's accession to the WTO. However, new questions will arise about the progress of trade facilitation and international customs harmonization. These were seen as promising new planks in a Seattle platform but may now languish in the wake of a standoff on more momentous trade policy issues.

"Trade facilitation" has become a catch-all term describing efforts to achieve international consistency on a range of issues dear to the hearts of logistics and supply chain professionals—customs clearance, regulatory transparency, documentary harmonization, simplified transport data requirements, automated entry and tariff payment processes, standard risk-assessment techniques in cargo inspection, reduced cargo-clearance cycle time, reliable advance ruling procedures, and rights of review. Improved trade processes are no less critical to the company controller because customs and clearance costs are estimated to account for up to 15 percent of the landed value of all merchandise.

WTO member states had followed up on a modest pledge made at their Singapore Ministerial in 1996 directing the organization's Council on Trade in Goods to "undertake exploratory and analytical work ... on the simplification of trade procedures in order to assess the scope for WTO rules in this area." Before the Seattle meeting, the United States, the European Union (EU), and others had proposed to authorize the negotiation of multilateral rules in which customs procedures would, for the first time, receive the full endorsement of trade ministers in the WTO. The EU even included a specific mandate for negotiation of WTO rules on customs procedural issues in its joint proposal with Japan, Korea, Switzerland, and others, in an effort to rally a sufficient number of countries to a consensus declaration.

What happened in Seattle?

Unfortunately, trade facilitation and other "second tier" matters became victims of the impasse over more weighty issues, such as whether agricultural subsidies would be reduced or eliminated; whether and how environmental impacts would be addressed in trade agreements; whether international labor standards should or could be recognized in WTO agreements; and whether the antidumping code agreed upon in the Uruguay Round is being properly implemented by the member countries, particularly the United States. Environmental and labor issues led the way, in the negotiating rooms and on the street, as a disparate host of colorful defenders of redwood trees, sea turtles, hormone-free beef, genetic nonintervention, Teamsters, rain forests, Tibetan religious freedom, and anarchism (paradoxically, the best organized of the participants) let loose in an Internet-fueled orgy of self-expression—and, in some cases, vandalism. (My personal favorite was the Monarch Butterfly lady, who protested the dangers posed by genetic engineering of pest-resistant crops by donning a pair of colorful butterfly wings and removing everything else above the waist.) Although rules to accommodate seamless international transactions were not foremost in the minds of the protesters, their efforts left trade facilitation, along with the bigger trade issues, in a cloud of tear gas on Sixth Avenue.

Even more effective than the headline-grabbing protesters, however, were the business and farm interests who held credentials for the conference in unprecedented numbers. They were more intent on protecting gains from previous rounds or preventing erosion of their status than in achieving anything concrete in the new talks. The WTO's somewhat grudging new "openness" brought out larger numbers of lobbyists and private interests than ever seen by its predecessor, the General Agreement on Tariffs and Trade. Then President Clinton issued his ill-timed statement that WTO sanctions might be used in the future to enforce international labor standards. Many of the less-developed countries saw this obvious play to domestic political supporters as a new form of protectionism and refused to compromise on issues they might have conceded in the past.

Despite the unfortunate setback at Seattle, multilateral customs improvements will not be halted. The most significant recent development has been the 1999 completion of amendments to the Kyoto Convention on Simplification and Harmonization of Customs Procedures. That treaty, first negotiated in 1974 and now having 60 member countries, covers many of the same concerns about procedural harmonization and simplification that have been the focus of the WTO's recent multilateral efforts. These include procedural transparency, the use of electronic cargo processing, acceptance of more efficient duty drawback and in-transit duty deferral procedures, and minimal standards of due process with respect to alleged violations of national customs laws.

These Kyoto amendments, however, treat as "transitional" or as "recommendations" the more advanced standards that most developed countries have come to rely upon. For instance, the amendments treat only as "transitional standards" the authorization of import filings by electronic means, the coordination of simultaneous inspection of imported goods by different regulatory agencies, and the provisional release of imported goods by customs for free circulation prior to full completion of entry requirements. Even the application of information technology to the entry and release process is couched in diplomatically equivocal terms, encouraging the use of such techniques "where it is cost-effective and efficient for the Customs and the trade."

The WTO approach is superior to the Kyoto amendments in a number of important respects. This multilateral effort would not only bring global organization to the process but also provide for technical assistance and funding in support of modernization for those countries lacking the administrative infrastructure. Furthermore, the Kyoto Convention has only 60 members, and at least 41 of them must ratify the amendments before they go into force. The WTO's membership of 107 countries, by comparison, would implement customs improvements as part of a larger package of trade agreements. Most importantly, Kyoto lacks the enforcement teeth of the WTO's Dispute Resolution Agreement, which spells out deadlines and trade sanctions for failure to comply with its terms. Accountability and enforcement remain the keys to the WTO's success since the Uruguay Round Agreements in 1995.

Individual countries (primarily the developed industrial economies) also will continue their efforts toward next-generation customs modernization. The United States, for instance, has spent the last five years implementing (incompletely) its Customs Modernization Act and struggling to fund conversion to its next generation of entry automation (the Automated Commercial Environment, or "ACE"). Now, the country has undertaken a long-promised move toward an account-based system of entry processing. The objective of this "Entry Revision Project" is to convert eventually to a system more akin to the income tax. Entry information, corrections by the importer, collection of tariffs, and post-entry compliance audits would be handled, theoretically, more like annual tax returns than serial transactions.

The mere existence of such a progressive effort, however, does not guarantee lack of controversy. The U.S. proposal would basically leave import entries "open" for up to three years, in order to permit audit checks. It also would bind importers to their final entry summary declarations. This would create an extended period of potential duty liability and would bar importers from certain administrative protests to which they are now entitled. It also would eliminate the relative clarity of the current system, in which the date of liquidation of an entry establishes the time limitations and rights of both the importer and the Customs Service. While this proposal appears to be a step toward further streamlining commerce, it also reminds the private trader that customs authorities are, first and foremost, tax collectors and law enforcement officers, not trade facilitators. The proposal also underscores why real customs harmonization and improvement should be driven by the WTO—at the political level of trade ministers—rather than solely through national enforcement agencies.

The Seattle conference was a skirmish, not a war. The special interests set up a few speed bumps, flexing the "real-time" telecommunications muscle made possible by the booming global economy they seemed to be protesting. But customs harmonization and trade facilitation make compelling business sense in the long term. Supply chain professionals should remain optimistic that this, in the end, will prevail.