On the 22 February the World Trade Organization (WTO) welcomed the entry into force of the Trade Facilitation Agreement (TFA), the only WTO multilateral agreement that has been concluded since 1995.
The agreement’s objective is to simplify and modernise customs and cross-border procedures, reducing transaction costs for exporters and importers and therefore – as it says on the label – facilitate increased trade between nations.
A laudable ambition. A recent survey conducted by the International Trade Centre highlighted that the greatest barriers encountered by EU businesses in exporting to other markets are the procedural obstacles encountered at the border - such as the administrative burdens associated with the number of documents that must be obtained, the high costs associated with obtaining documentation and the lack of transparency and information that applies in many export destination.
The TFA seeks to address these issues but it might be questioned whether its final scope achieves the ambition of its conception.
It was initially envisaged 20 years ago – as one of the “Singapore Issues” for the Doha Development Round of negotiations – as a tool to clarify provisions in the WTO’s General Agreement on Tariffs and Trade (the “GATT”) related to freedom of transit, fees and formalities connected with importation and exportation and publication and administration of trade regulations.
The TFA includes provisions by which WTO members are required to take steps to expedite the movement, release and clearance of goods across borders. Members commit to taking steps to implementing simplified customs procedures, including the digitalisation of information and availability of electronic payments, reducing red tape and improving information and transparency on procedures and associated fees and charges. They also commit to other measures related to an impartial, non-discriminatory and transparent provision of information and administration of procedures.
According to the WTO, the full implementation of the TFA could reduce trade costs globally by an average of 14.3 per cent and could add 2.7 per cent per year to world trade growth, an effect that could be “greater than the elimination of all existing tariffs around the world”. The scale of trade costs can be equivalent to 219 per cent tariff equivalent in developing countries, so the TFA, in theory, will provide increased opportunities to trade at lower costs, improving market access opportunities for all WTO members.
Most regional and bilateral preferential trade agreements negotiated in the years since the TFA has been under discussion incorporate provisions related to trade facilitation. However, despite the increasing in-depth coverage of the subject within some recent trade agreements, their scope and ambition vary. The achievement of the TFA is the broader application of these commitments. In this sense, the agreement’s impact will be global. Furthermore, unlike many of those preferential agreements, the TFA offers enforceability of the rules, as it is subject to the WTO’s Dispute Settlement Mechanism.
Of course, effective implementation will be required to achieve the benefits of such a comprehensive agreement. That is the challenge for all WTO members. At the same time, the conclusion and entering into force of a multilateral agreement at the WTO is good news for the advancement of “free-er trade”. In a time when bilateral deals are preferred over multilateral trade agreements, the TFA could act as a catalyst to further debate in the WTO concerning other pending issues aimed at removing barriers to trade beyond borders – issues such as trade and investment, trade and competition and transparency in government procurement – the other orphan children among the Singapore Issues, withdrawn from the negotiating agenda of the Doha Development Round.