WTO's trade facilitation deal getting ready to take effect
The trade facilitation agreement (TFA) under the World Trade Organisation will come into force once six more countries ratify the deal meant for reducing the cost of doing business globally, according to the WTO.
A total of 104 countries have already ratified the agreement that was adopted by the member countries at the ninth ministerial conference of the WTO in December 2013 in Bali.
The agreement will come into force automatically once it is ratified by 110 countries.
Ghana is the latest country that ratified the TFA, while Bangladesh gave its approval in October last year.
Mustafizur Rahman, executive director of Centre for Policy Dialogue, said TFA is important for Bangladesh -- both for raising export competitiveness worldwide and ensuring efficient import of goods.
As the TFA will reduce the cost of doing business, it will have a positive impact on the prices of goods, he said.
The agreement will mainly boost digitisation of customs clearance and documentation both in export and import business, he added. The TFA contains provisions for expediting the movement, release and clearance of products, including goods in transit, the WTO said.
It sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
The treaty also contains provisions for technical assistance and capacity building in this area, the WTO said.
According to a 2015 study carried out by WTO economists, the full implementation of the TFA would reduce members' trade costs by an average of 14.3 percent, with the developing countries having the most to gain.
The deal also has the ability to reduce the time to import goods by over a day and a half while also bringing down the time to export by almost two days, representing a reduction of 47 percent and 91 percent respectively over the current average.
The TFA has the potential to increase global merchandise exports by up to $1 trillion.
It broke new ground for developing countries and least-developed countries in the way it will be implemented.
For the first time in WTO history, the requirement to implement the agreement was directly linked to the capacity of the country to do so. In addition, the agreement states that assistance and support should be provided to help them achieve that capacity.
The Trade Facilitation Agreement Facility (TFAF) was also created at the request of developing and LDC members to help ensure that they receive the assistance needed to reap the full benefits of the TFA, the WTO said.
One of the major commitments of the TFA is the introduction of paperless business worldwide, which is expected to slash the cost of doing business by 10-15 percent.
The cost of doing business, particularly in the LDCs, is higher as importers and exporters have to pay extra money as bribe in customs, transportation and to process other documents. Developing countries will benefit significantly from the TFA, capturing more than half of the available gains, according to the WTO.
If the TFA is implemented properly, exports from developing countries are estimated to increase between $170 billion and $730 billion, while that of developed economies between $310 billion and $580 billion a year, according to the World Trade Report.
The fuller and faster implementation of the TFA will also boost the overall world export growth by up to 2.7 percent and global GDP growth by 0.5 percent, the WTO said.
The agreement is expected to help the developing countries diversify their exports as well.
If the TFA is fully implemented, developing countries could increase the number of new products being exported by as much as 20 percent. The LDCs are likely to see a much bigger hike of up to 35 percent.
Rahman said, once the 110 member countries of the WTO ratify the deal, it will be an obligation for the countries to follow the rules of the TFA. “If a country does not follow the rules, it might face sanction in international trade,” he said. Bangladesh should start doing homework on how to implement the rules of the TFA, Rahman said. The country will also need to improve the roads and highways and infrastructure as part of the TFA, he added.