REUTERS | Denis Balibouse

Long awaited trade facilitation agreement enters into force at the World Trade Organisation

It is not every day that the Geneva-based World Trade Organisation (WTO) can claim a major achievement in global trade.

We all remember the Doha Development Round, which commenced in 2001 with the aim of achieving major reforms of the international trading system, through the introduction of lower trade barriers and revised trade rules. While opinions vary on how much was achieved, it is common ground that the negotiations stalled early in the process. Even if, in December 2015, the Nairobi ministerial declaration opened a new window of opportunity for WTO member states to explore new approaches to move forward on continuing negotiations, many take the view that this ministerial conference (quietly) cast aside the Doha Development Agenda.

After several years of stagnation, the WTO deadlock was eventually overcome in 2013 by the conclusion of the Trade Facilitation Agreement (TFA) in Bali. It bears noting that the TFA, which was billed as a “major milestone for the global trading system”, is the first multilateral agreement concluded since the creation of the WTO in 1995.

However, in order to enter into force, two thirds of the WTO’s member states needed to ratify the agreement. At long last, on 22 February 2017, the (long-awaited) TFA entered into force, following the formal notification from two thirds of the WTO membership that they had ratified that instrument. Indeed, Rwanda, Oman, Chad and Jordan recently submitted their instruments of acceptance to WTO Director-General Roberto Azevêdo. This brought the total number of ratifications over the required threshold of 110.

The TFA contains provisions (and sets out measures) for:

  • Expediting the movement, release and clearance of goods, including goods in transit. As such, it clarifies and improves the relevant articles (V, VIII and X) of the General Agreement on Tariffs and Trade (GATT) 1994.
  • Effective cooperation between customs and any other appropriate authorities on trade facilities and customs compliance issues.

The TFA is ground-breaking in that the commitments of developing and the least-developed countries (LDCs) are linked to their capacity to implement the TFA. Further, the WTO created the Trade Facilitation Agreement Facility (TFAF). This was in order to help ensure that developing and LDC member states receive the assistance they need to reap the fruits and full benefits of the TFA, and to support the ultimate goal of full implementation of this new agreement by all member states.

In other words, the TFAF will support developing and LDC member states to assess their specific needs, and to identify possible development partners to help them meet those needs. This is to be achieved through a diverse number of activities, including the development and delivery of assistance and support for capacity building, with a view to ensuring that WTO member states fully understand the agreement.

The TFA is expected to provide a boost to international commerce by cutting out clogging regulations. As explained above, its implementation will:

  • Cut red tape.
  • Enhance the predictability of trade.
  • Reduce the costs and delays of trading at international borders.

There is likely to be a special focus on assisting developing countries, which are expected to capture most of the predicted gains from implementation. The International Chamber of Commerce (ICC), based in Paris, hailed the agreement as a “watershed moment” for world trade. As the ICC has pointed out, the TFA is expected to create some 20 million jobs worldwide. The vast majority will be in developing countries.

What is even more encouraging is that, at a time when global trade deals are increasingly prompting criticisms by some political forces and leaders, the ratification of the TFA shows the commitment to the multilateral treaty system of WTO member states. Hopefully, that landmark global trade agreement will provide an important, and much needed, boost to the WTO’s activities and the multilateral trade agreements system.

Schellenberg Wittmer Sebastiano Nessi

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