Good trade policies often come to those who wait – and work hard to demonstrate their real economic advantages, like the more transparent and uniform trading procedures included in the World Trade Organization’s (WTO) newly in-force Trade Facilitation Agreement (TFA).
“TFA holistically focuses on streamlining, harmonizing and modernizing customs procedures,” said Floyd Gaibler, U.S. Grains Council (USGC) director of trade policy and biotechnology. “The agreement has enormous potential for reducing trade costs and times, particularly for developing and least developing countries.”
The new TFA will benefit both importers and exporters by clarifying unclear customs issues or eliminating time-consuming and costly procedures. Trade facilitation measures like the ones in the TFA work to cut through the red tape that adds cost and delays global shipments by establishing more uniform and efficient trade regulations. TFA is also groundbreaking because it provides assistance to developing countries to help them implement the agreement.
The TFA officially entered into force on Feb. 22, 2017, more than three years after WTO member countries agreed on measures to harmonize import-export procedures at the WTO Bali Ministerial Conference in December 2013.
The delay in execution of the TFA follows a requirement that two-thirds (110 countries) of the 164 WTO member countries ratify the agreement. The United States ratified the agreement on Jan. 23, 2015. Last week, the agreement finally crossed the required threshold with 112 total ratifications with the delivery of notifications from Chad, Jordan, Oman and Rwanda.
According to the World Trade Report 2015, full implementation of these measures could reduce global trade costs by 14.3 percent and potentially increase global exports 2.7 percent a year, worth between $1.8 and $3.6 trillion.
For agriculture specifically, the measures could reduce trade costs by 10.4 percent. Full implementation of the TFA should also significantly reduce the time needed to import or export products, by an estimated 47 percent and 91 percent over current averages, respectively.
“The Trade Facilitation Agreement is the biggest reform of global trade this century,” WTO Director-General Roberto Azevêdo said in the official announcement. “It sends a message about the power of trade to support jobs and growth around the world, in developed and developing countries alike. Now, working together, we have the responsibility to implement the Agreement and make those benefits a reality.”
Learn more about the importance of trade facilitation in this prior article from Global Update.