Trade facilitation has emerged as the key issue for the world trading system in recent years. In November 2014, WTO members adopted a Protocol of Amendment which is a necessary step towards making the Trade Facilitation Agreement (TFA) an integral part of the WTO Agreements. TFA was successfully negotiated at the Bali Ministerial Conference in December 2013 as part of a wider set of ministerial decisions, according to the editorial of the current News Bulletin of International Chamber of Commerce-Bangladesh (ICCB) released today.
TFA will enter into force with the ratification by at least two-third of WTO members. So far, 72 countries have ratified the TFA. Since WTO members have a shared interest in facilitating trade, the Agreement also breaks new ground in the way that it encourages and helps developing-country members to implement their commitments. It is the first WTO Agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity.
Although a large part of the trade facilitation agenda involves policy changes – especially coordination and information-sharing, both within and among governments–modernizing Customs systems and adapting new technologies can also involve significant technical capacity and financial resource demands. With this in mind, the TFA sets out a framework for trade facilitation-related technical assistance and capacity-building support, as well as detailed transparency procedures for monitoring this support.
The WTO’s Trade Facilitation Agreement also represents an important milestone by creating an international framework for reducing trade costs. Early estimates by the OECD suggested that implementation of the TFA would reduce trade costs by 10%. More recent OECD estimates increase
this to 14.5%. Of course, trade facilitation can be implemented unilaterally, but a multilateral agreement brings added value. First, it provides greater legal certainty to the changes in policy. Second, it helps reform in governments marshal support from domestic constituents. Third, it helps solve a coordination problem that would have been created by different approaches to changing border procedures.
There are varying estimates of the value of implementation of TFA. One frequently referenced report by the Peterson Institute estimates that trade facilitation reforms will expand global trade by as much as US$ 1 trillion annually. The OECD estimates that 2/3rd of the gains from the TFA will accrue to the developing countries. But not only do developing countries capture a big share of the trade expansion; they are also able to diversify their exports, entering new markets and selling a wider array of products. Moreover, the increase in global economic activity to be brought about by TFA implementation will provide a badly needed dose of momentum at this time of global economic weakness, especially due to the slowdown in Chinese and Indian economies.
Experts, based on the survey of WTO members, believe that, trade facilitation is a high priority for developing economies and LDCs. However, they also report a great deal of uncertainty about the benefits and costs of the TFA. Donor countries and Agencies expect to increase aid for trade facilitation, but are concerned that political will may be lacking in partner countries.
Bangladesh is actively considering the TFA Ratification soon, to allow an easy flow of goods across borders and lowering the costs of doing business. 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 least-developed countries like Bangladesh, is higher as importers and exporters have to pay extra money to avoid bureaucratic hassles at customs point, higher cost of transportation and processing other documents. In order to become middle income country by 2021, Bangladesh has to ensure full facilitation for promotion of trade and investment.