Expectations from new WTO pact
Last week, the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO) came into effect, when four of its members sent their instruments of acceptance to the body’s director-general, bringing the total number of ratifications over the required threshold of two-third of its 164 members.
This agreement aims to expedite the movement, release and clearance of goods across Customs barriers. It launches a new phase for trade facilitation reform over the world, creating a significant boost for commerce and the multilateral trading system as a whole, says WTO. Developed countries have committed to immediately implement the agreement. Developing countries will immediately apply only the TFA provisions they have designated as ‘Category A’ commitments. For the other provisions of the agreement, known as Category B and C commitments, they must indicate when these will be implemented and what capacity building support is needed for this. Least-developed countries may set their own timetables for implementing. A TFA Facility has been created at the request of developing and least-developed countries, to help ensure they receive the assistance needed to reap the full benefits of the TFA, and to support the ultimate goal of full implementation.
Essentially, the TFA prescribes many measures to improve transparency and predictability of trading across borders, and to create a less discriminatory business environment. The provisions include improvements to the availability and publication of information about cross-border procedures and practices, improved appeal rights for traders, reduced fees and formalities connected with the import and export of goods, faster clearance procedures and enhanced conditions for freedom of transit for goods. And, measures for effective cooperation between various Customs administrations and other authorities.
According to a study by WTO economists in 2015, full implementation is expected to slash members' trade costs by an average of 14.3 per cent, with developing countries having the most to gain. Also, TFA is likely to reduce the time needed to import goods by over a day and a half, and to export goods by almost two days, a reduction of 47 per cent and 91 per cent, respectively, over the current average. Implementation is also expected to help companies export for the first time and once fully implemented, developing countries are likely to increase the number of new products exported by as much as 20 per cent, with least developed countries expected to see an increase of up to 35 per cent, says the report. As with many other such studies, the estimated benefits seem exaggerated.
The significance of TFA is that this is the only meaningful multilateral agreement the WTO members have brought into force since the launch of the Doha Development Round in 2001. Otherwise, WTO has made very little headway on issues such as elimination of subsidies to agriculture by richer countries and more liberal trade in services. Given the antiglobalisation sentiment, especially in developed countries now, TFA alone might not help revive the moribund multilateral trade negotiations.