A ray of hope for the global economy

MULTILATERALISM seems down and out. So does trade liberalisation. Any suggestion that the UN or the World Trade Organisation (WTO) may bring about meaningful progress increasingly falls on disbelieving ears. To be sure, the pace of globalisation has been rapid. The resulting feeling of nervousness is therefore comprehensible.

Given the present unease in various quarters, it is almost to be expected that no one really notices when significant progress is being achieved on the world stage. This is such a moment.

The Trade Facilitation Agreement (TFA), agreed in 2013, is about to enter into force. This will happen as soon as twothirds of WTO members (that is 110 nations) have ratified the agreement. Reaching that threshold is imminent. However, perhaps due to its technocratic name, the TFA has so far failed to spark enthusiasm.

Yet, this is a big deal, especially for many developing countries. Properly understood, the TFA is key to creating a level playing field for small and mediumsized businesses operating there.

In a nutshell, the TFA aims at promoting global inclusion. It does so by tackling a lot of the inefficiency as well as rent-seeking behaviour at the border in a sizeable number of countries. Even in today’s global economy, many entrepreneurs in developing countries cannot fully tap their cross-border potential due to red tape and complex procedures at the border.

Look at the world from the perspective of one of these many millions of merchants: On the one hand, the world of e-commerce and the power of the internet promises them direct access to the global market. On the other hand, they continue to confront a veritable “wall” of obstacles that stands in their way. Removing that wall is the principal goal of the TFA.

Intolerable

The lack of transparent rules and the persistent requirement for paper documents are simply intolerable in the age of digitalisation and smartphones and in a world that is moving to same-day delivery.

In a further key step toward the democratisation of trade, e-commerce is of particular importance for so-called “micro entrepreneurs”. It enables them to access products and far-away markets that have been closed off to them in the past.

Overcoming these hurdles to global trade through steps such as the digital transformation of border procedures is what the Trade Facilitation Agreement is all about.

Granted, this is not an earth-shaking deal. As a matter of fact, there are no more earth-shaking deals to be had. We live in an era when we must take a lot of little steps in order to make progress. That may seem unsatisfactory to some, but is ultimately an apt reflection of the human condition.

If we achieve no more via the adoption of the Trade Facilitation Agreement than countries from Rwanda and Sri Lanka to Kyrgyzstan and Jamaica – by embracing transparent and simple rules – have a real shot at becoming an integral part of the global economy, we should be proud of that. This is ultimately what the democratisation of global trade is all about.

And if these countries attract more foreign direct investment and develop into regional hubs through more transparency and efficiency, it would come as no surprise. One can only hope that their neighbours will see that as an incentive to do likewise. That is what triggers a strengthening of the regional economy.

If the TFA, by relying on IT-empowered automation and transparent regulation, reduces transaction costs that currently still take a sizeable cut out of the pockets of entrepreneurs, especially those running micro, small and medium-sized enterprises, then everyone should be eager to achieve that.

And if the TFA finally makes borders and long distances – still the biggest impediment to the growth opportunities of many developing countries – less of a factor in global trade, then we should all welcome that as well.

Globalisation has provided many people, especially those living in developing countries, with more opportunities to lead a better life and participate in the global economy. As a result, the global economic pie is not shrinking, but expanding. The Trade Facilitation Agreement will ensure even more progress in that direction.