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Global Benefits of the Trade Facilitation Agreement

Global Benefits of the Trade Facilitation Agreement
The Trade Facilitation Agreement (TFA) came into effect on Feb. 22, 2017, after ratification by the World Trade Organization (WTO). According to the WTO, the TFA contains provisions allowing for “expediting the movement, release and clearance of goods, including goods in transit.” The agreement was created to benefit both wealthy, developing and underdeveloped countries that wish to engage in trade and commerce.

According to an article in The Economist, the TFA is designed to cut trading costs in developing countries by implementing more efficient processes and eliminating unnecessary obstacles prior to export clearance.

For example, individuals in sub-Saharan Africa must go through an excessive amount of barriers to get an item exported, including going through up to 200 hours of regulations and inspections. In comparison, wealthier countries may face up to only 15 hours of regulations and inspections.

According to the WTO, full implementation of the TFA “could reduce trade costs by an average of 14.3 percent and boost global trade by up to $1 trillion per year, with the biggest gains in the poorest countries.”

The TFA is divided into different sections and categories, each made up of substantive provisions. For example, section one of the agreement contains provisions necessary for expediting the movement and clearance of goods. Section two, however, consists of special provisions that would allow for developing and underdeveloped countries to benefit from trade facilitation upon receiving special assistance from member organizations that are involved in its implementation.

The member organizations that are involved in assisting developing and underdeveloped countries include the WTO, World Customs Organization and the United Nations Conference on Trade and Development.

The TFA will result in a heightened level of exports taking place out of developing and underdeveloped countries. Furthermore, a rise in trading expenditures will have a positive global effect on countries such as the U.S.

– Lael Pierce

Photo: Flickr

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Trade Facilitation Agreement and India’s Poor

india-trade-facilitation-hurts-poor
Due to lack of progress on food security to help India’s poor, India has refused to accept the World Trade Organization’s, or WTO, trade facilitation agreement. This deal was achieved in Bali in December 2013 and India’s refusal prevents the adoption of the Bali agreement.

India’s refusal has been criticized by trade officials around the world. Diplomats have noted that it may hamper the WTO’s Doha Round of trade negotiations.

Indian Prime Minister Narendra Modi and his Bharatiya Janata Party won a decisive victory in the spring election where they promised to develop the economy and tell the world that India is welcoming to business.

However, the new government is sticking by its previous position that the WTO is limiting their agricultural support programs.

Food security is important concern for India’s poor because 450 million people in India survive on less than $1.25 per day. The government has been arguing that the value of subsidies for food stockpiles has to be changed to more than 10 percent of a country’s total food production.

Indian Finance Minister Arun Jaitley said that the issue of food security is critical for the country’s small farmers. India’s position on the trade facilitation agreement is probably due to political pressure from India’s poor.

India’s government argues that wheat and rice are more expensive than market prices. Their agricultural programs protect farmers’ livelihoods and provide reasonably priced nutrition to India’s poor and vulnerable. However, WTO rules only allow governments to stockpile food if they acquire those stocks at market prices.

The Bali agreement will only take effect if it is approved by all 160 member governments. Unless the World Trade Organization relaxes restrictions on a countries’ ability to subsidize farmers, the agreement will not come into effect.

“India has a decision to make about where it fits in the global trading system,” John Kerry, U.S. Secretary of State, said. “India’s willingness to support a rules-based trading order and fulfill its obligations will help to welcome greater investment from the United States and from elsewhere around the world.”

– Colleen Moore

Sources: Gulf Today, Washington Post, Wall Street Journal
Photo: Washington Post