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  February 24th, 2017 | Written by

WTO’s Trade Facilitation Agreement Enters Into Force

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  • TFA seeks to expedite the movement, release and clearance of goods across borders.
  • TFA’s ratification is particularly timely, given today’s trade protectionist rhetoric.
  • Trade leads to growth; and growth results in prosperity.

Despite all the talk in the United States and around the world of a retreat from the global trading system, a major milestone was reached earlier this week when the Trade Facilitation Agreement (TFA), the first multilateral deal concluded in the 21 year history of the World Trade Organization, entered into force.

When Rwanda, Oman, Chad and Jordan submitted their instruments of acceptance to WTO Director-General Roberto Azevêdo, they brought the total number of ratifications over the required threshold of 110, two-thirds acceptance of the WTO’s 164 members.

The TFA seeks to expedite the movement, release and clearance of goods across borders. Its entry into force launches a new phase for trade facilitation reforms worldwide and creates a significant boost for commerce and the multilateral trading system as a whole.

WTO forecasts indicate that full implementation of the TFA will slash members’ trade costs by an average of 14.3 per cent, with developing countries having the most to gain. The TFA is also likely to reduce the time needed to import goods by over a day and a half and to export goods by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average.

Implementing the TFA is also expected to help new firms export for the first time. Moreover, once the TFA is fully implemented, developing countries are predicted to increase the number of new products exported by as much as 20 per cent, with least developed countries (LDCs) likely to see an increase of up to 35 per cent, according to the WTO study.

“This is fantastic news for at least two reasons,” said Azevedo. “First, it shows members’ commitment to the multilateral trading system. Second, it means we can now start implementing the agreement, helping to cut trade costs around the world.”

The agreement is expected to boost global trade by one-trillion dollars each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world, according to the WTO.

“This groundbreaking agreement will unleash new trade flows and spur growth around the world by cutting red tape and easing the movement of goods across borders,” said US Chamber of Commerce President and CEO Thomas J. Donohue. “It’s a welcome shot in the arm for the U.S. and world economies. Some of the biggest beneficiaries will be American small and medium-sized businesses.”

“Better border procedures and faster, smoother trade flows will revitalize global trade to the benefit of citizens and businesses in all parts of the world,” said the European Union’s Commissioner for Trade Cecilia Malmström. “Small companies, that have a hard time navigating daily bureaucracy and complicated rules, will be major winners.”

The International Air Transport Association (IATA) also welcomed the entry into force of the TFA.

“That’s great news for airlines, which deliver about a third of the goods traded across borders by value,” said Alexandre de Juniac, IATA’s Director General and CEO. “And it’s a particularly timely reminder of the dangers of the current protectionist rhetoric that we are seeing in various parts of the world. Trade leads to growth; and growth results in prosperity. With the treaty now in force, we urge governments to move forward with early implementation so that the TFA’s substantial benefits can be realized.”