The FINANCIAL — On 27 November, the World Trade Organization (WTO) took a major step towards implementing its first multilateral trade accord, the Trade Facilitation Agreement (TFA). This is good news for businesses and the world economy.
Success came in the form of a vote to adopt a key protocol, which means the agreement can advance to the next stage. While the agreement still requires ratification by two thirds of WTO members before it can enter into effect (a process that may take months or longer), the vote marks a turning point for the WTO, which has faced public questions about its future.
If ratified, the Organisation for Economic Co-operation and Development estimates the agreement’s measures to remedy key barriers to trade could cut 12 per cent or more from the cost of cross-border commerce. This means practical benefits for businesses striving to boost exports or access cheaper imports, and for governments striving to stimulate their economies. It means multilateral trade liberalisation can be part of the solution to weak global growth.
This is because the TFA addresses key challenges in customs clearance and related matters, expected to improve areas such as documentation, automation, procedures, advance rulings and availability of customs information. It is precisely these kinds of efforts which are key to addressing current barriers to trade.
Reading through the text of the TFA, I’m struck by the practical nature of many of the provisions. It makes intuitive sense, for example, to consult on new customs laws and regulations; to minimise documentation requirements; to publish customs procedures in a non-discriminatory manner; to post information on the internet; and to accept electronic payments for fees and duties. So it’s not surprising that implementation of the TFA offers the prospect of win-win outcomes. Preventing deadweight losses from unnecessary delays and expenses at the border is in the interest of both sides of trade, the buyers and the sellers.
As a multilateral accord, the TFA will apply to all WTO members. Its provisions fall into three categories: those that WTO members commit to implement at the time the agreement enters into force, those that WTO members commit to implement within specific transition periods, and those that will require technical assistance and support to implement. This won’t happen overnight – the notification of these commitments and their implementation will roll out over a period of years, a timeframe that corresponds to the scale of the undertaking.
Given the role it can play in fuelling growth, work on tackling impediments to trade merits the fullest of attention and the ratification process needs to be expedited. Further delays are in nobody’s interest. While the challenge of addressing trade barriers is substantial, the potential rewards are even larger.
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