Four reasons why the TFA should be recognised as the WTO’s greatest achievement
Blogs are the author’s own opinion and not necessarily representative of Misys or the World Trade Board.
The ratification of the Trade Facilitation Agreement by the World Trade Organisation (WTO) on February 22nd was an historic moment – it is the only global deal negotiated and agreed by the WTO since it was founded 23 years ago. Intended to boost trade and reduce costs by simplifying border procedures, the agreement, known as the TFA, could cut trade costs globally by as much as 14 per cent, and aid developing economies in particular. These are the four reasons why I believe the TFA should be recognised as the WTO’s greatest achievement:
1) The TFA standardises customs procedures; it is claimed that this will not only help reduce time to market but also reduce costs, resulting in an additional US$1 billion worth of trade each year.
2) The TFA will become part of a multilateral trading system covering more than 96% of global GDP, potentially supporting the creation of some 20 million jobs worldwide, mostly in developing countries.
3) The OECD has placed the potential reduction in trade costs at approximately 11-15 percent for low-income and upper middle-income countries:
- The TFA is the first WTO agreement that allows developing countries to determine which commitments they implement straight away, versus those which will require a transition period.
- This is a good news story for global trade at a time when trade volumes continue to stagnate, globalisation is being heavily scrutinised and there are strong signs of increased protectionism.
- Cutting red tape should be of particular benefit to less developed countries as well as to small and medium sized businesses for whom the absence of international standards are a handicap.The agreement is a boost for the WTO and for multilateralism as regional agreements such as the Trans Pacific Partnership have been abandoned, and Trans Atlantic Trade and Investment Partnership is likely to follow suit.
SMEs want access to information and streamlined procedures – that is what the TFA can give them - it’s estimated that the TFA could increase SME exports by 80% in some economies, boosting financial inclusion.
Of course, such agreements and the role of the WTO in general, are not without their critics. Some would argue in favour of increased self-determination and diversity in order to promote sustainable systems of commerce. Whilst there is still some division of opinion, however, response in general to this announcement has been overwhelmingly positive. WTO General Council Chair, Ambassador Harald Neple said at the meeting: “The agreement on Trade Facilitation is a defining multilateral achievement of our time,” establishing the essence of the WTO with “members from all corners of the globe coming together, overcoming differences and responding to pressing trade issues for the benefit of all.”