New WTO Trade Facilitation Agreement Seen Benefiting Developing Nations, Global Trade

Multilateral institutions have received a lift with the realization of the World Trade Organization’s Trade Facilitation Agreement that is expected to provide a boost to sluggish international commerce by cutting out clogging regulations.

Rwanda, Oman, Chad and Jordan on 22 February ratified the TFA, allowing the agreement to enter into force and for its implementation when the total number of ratifications crossed the threshold of 110 of the WTO’s 164 members, exceeding the required total by two.

The WTO press release is available here. The agreement is available here.

WTO Director General Roberto Azevêdo, who comes up for approval next week as he enters a second term at the helm of the WTO, was clearly delighted when he explained that the TFA is the first multilateral deal concluded in the 21-year history of the body regulating international commerce.

“This would boost global trade by up to one trillion dollars each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world,” said Azevêdo, who described the deal as a “win-win” for both developing and developed trading nations. He also called it an affirmation of commitment to the multilateral trading system, and said it will trigger technical assistance to help poorer countries with implementation.

He avoided being drawn into a debate about the United States, saying he has yet to talk with the new administration about its intentions in the this regard.

Azevêdo said he had heard US President Donald Trump’s concerns about trade, but said the WTO can make progress, noting, “I have seen situations like this arise over and over again, where situations of uncertainty or predictability prevail, especially in transition.”

The WTO head said the estimates by the organisation’s economists estimate that the TFA could reduce costs globally by an average of 14.3 percent. The agreement focuses mainly on borders and customs issues for shipments of physical goods, improving transparency and clarifying many customs measures. It does not appear to directly address issues of counterfeiting.

Geneva Multilateral Institutions Embrace Deal

The advantages of the TFA have long been advocated by groups such as the United Nations Conference on Trade and Development (UNCTAD) and the International Trade Centre (ITC).

“We welcome the entry into force of the Trade Facilitation Agreement as a huge step forward in making trade around the world cheaper, easier and faster,” UNCTAD Deputy Secretary General Joakim Reiter said in a statement.

He said help for developing countries to do this, provided by UNCTAD and others, is among the provisions of the deal. He noted that the Automated System for Customs Data (ASYCUDA) that helped Rwanda to cut down on waiting times was, for example, supplied by UNCTAD.

UNCTAD said waiting times at customs points for trucks bringing goods into the East African nation of Rwanda “dropped from an astonishing 11 days” in 2010 to 34 hours in 2014 thanks to an automated “single window” system.

It said the benefits to Rwanda’s economy from such streamlining are clear – an estimated 27,060 trucks entered Rwanda with imports in 2014 and, with running costs of $225 a day per truck, importers and consumers saved $6 million in that year alone.

“New technologies and institutional reforms can improve governance, reduce entry barriers and pull the informal sector into the formal sector. And with less paperwork to dodge, and fewer palms to grease, public revenues go up. This generates new resources for spending on essential services,” Reiter said.

ITC Executive Director Arancha González said in a statement that the new agreement will have a strong impact on small and medium enterprises (SMEs).

“The TFA will enable more SMEs to break out of local and national markets, and tap into regional and international value chains. Faster, more efficient and predictable exports will allow SMEs to climb up the value chain into higher-margin products,” said González.

‘Watershed Moment’ for Industry

The Paris-based International Chamber of Commerce hailed the agreement as a “watershed moment” for world trade saying it has estimated the deal could support the creation of some 20 million jobs worldwide – the vast majority in developing countries.

ICC Chairman Sunil Bharti Mittal said in a statement: “The reality today is that many small businesses find themselves unable to trade internationally due to complex customs requirements. By cutting unnecessary red-tape at borders, the TFA will have a transformational effect on the ability of entrepreneurs in developing countries to access global markets.”

US Chamber of Commerce President and CEO Thomas Donohue also welcomed the deal saying, “This groundbreaking agreement will unleash new trade flows and spur growth around the world by cutting red tape and easing the movement of goods across borders. It’s a welcome shot in the arm for the U.S. and world economies.”

The Chamber said that the TFA makes it easier for small business to sell overseas, something Trump has championed, and it noted, “Tariffs aren’t the only barrier to increased trade. The procedures, paperwork, and bureaucracy – customs clearance – that are required to move goods across borders gum up the works for importers and exporters alike.”

As of 23 February, the following WTO members have accepted the TFA: Hong Kong China, Singapore, the United States, Mauritius, Malaysia, Japan, Australia, Botswana, Trinidad and Tobago, the Republic of Korea, Nicaragua, Niger, Belize, Switzerland, Chinese Taipei, China, Liechtenstein, Lao PDR, New Zealand, Togo, Thailand, the European Union (on behalf of its 28 member states), the former Yugoslav Republic of Macedonia, Pakistan, Panama, Guyana, Côte d’Ivoire, Grenada, Saint Lucia, Kenya, Myanmar, Norway, Viet Nam, Brunei Darussalam, Ukraine, Zambia, Lesotho, Georgia, Seychelles, Jamaica, Mali, Cambodia, Paraguay, Turkey, Brazil, Macao China, the United Arab Emirates, Samoa, India, the Russian Federation, Montenegro, Albania, Kazakhstan, Sri Lanka, St. Kitts and Nevis, Madagascar, the Republic of Moldova, El Salvador, Honduras, Mexico, Peru, Saudi Arabia, Afghanistan, Senegal, Uruguay, Bahrain, Bangladesh, the Philippines, Iceland, Chile, Swaziland, Dominica, Mongolia, Gabon, the Kyrgyz Republic, Canada, Ghana, Mozambique, Saint Vincent & the Grenadines, Nigeria, Nepal, Rwanda, Oman, Chad and Jordan.

Members who have not done so must ratify a protocol of amendment, according to WTO.

 

Image Credits: Peter Kenny