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WTO Trade Facilitation Agreement Comes Into Effect

WTO Trade Facilitation Agreement Comes Into Effect

The World Trade Organisation (WTO) on February 22, 2017 announced that with more than 110 member nations ratifying the Trade Facilitation Agreement (TFA), the much awaited custom easing rules have come into effect.

For the TFA to come into effect a minimum of 110 member nations or two-third of total 164 members should have ratified the agreement.

The game-changing biggest reform of global trade came into effect when on February 22 Chad, Jordan, Oman, and Rwanda ratified the agreement. With this, the total number of countries that ratified the agreement reached 112 surpassing the minimum requirement of 110.

It is the first multilateral deal concluded in the 21-year history of the WTO to have entered into force.

Trade Facilitation Agreement: the Concept

To cut short ‘red tape’ in international trade, it is important that free trade is facilitated and the benefits of it are made available to developed and developing countries equally. Trade facilitation means simplification, modernization and harmonization of export and import processes.

It was at the Bali Ministerial Conference 2013 that the Agreement on Trade Facilitation (TFA) was concluded.

Provisions of TFA

The TFA provides for many measures to improve transparency and predictability of international trade and to create a less discriminatory business environment. Towards achieving this, some of the provisions of TFA include among others

  • 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/export of goods
  • Faster clearance procedures and enhanced conditions for freedom of transit for goods
  • Measures for effective cooperation between customs and other authorities on trade facilitation and customs compliance issues.

Implementation of TFA

Developed countries have committed to apply the substantive portions of the TFA from the date it comes into force.

Implementation of TFA by developing and LDCs has been mentioned under Category A, B and C notifications.

Category A: It contains those substantive provisions of the TFA which needs to be implemented, if these groups of countries are in a position to do so, from the date TFA takes effect. LDCs were given an additional year to do so.

Category B: It lists the provisions the WTO’s developing and LDCs member will implement after a transitional period following the entry into force of the TFA.

Category C: It contain provisions that a developing country or LDC designates for implementation on a date after a transition period and requiring the acquisition of implementation capacity through the provisions and assistance of capacity building.

TFA and Developing Countries

The Trade Facilitation Agreement (TFA) is of very special importance to developing countries and LDCs as

  • It allows them to set their own timetables for implementing the TFA depending on their capacities to do so.
  • To assist the developing countries and LDCs in reaping the full benefit of TFA, a Trade Facilitation Agreement Facility (TFAF) has been created.

Advantages of TFA

The full implementation is forecast to bring in a host of advantages to both – developing as well as developed nations. According to a study done by WTO economists in 2015, some of the advantages are listed below:

  • It will cut member nations' trade costs by an average of 14.3 percent, with developing countries having the most to gain.
  • It is also likely to reduce the time needed to export goods by almost two days and import goods by over a day and a half. This represents a reduction of 91 percent and 47 percent respectively over the current average.
  • It is also expected to help new firms export for the first time.
  • Developing countries are predicted to increase the number of new products exported by as much as 20 percent
  • Least developed countries (LDCs) are likely to see an increase of up to 35 percent.

Besides, the implementation of TFA would increase global trade by up to 1 trillion dollars each year, with the biggest gains being felt in the poorest countries.

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