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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

WTO
The World Trade Organization recently held talks to discuss the possibility of duty-free trade on information technology goods. The proposed legislation sought to extend a 17-year-old trade agreement to end all tariffs on IT products.

However, on December 12, all talks ceased and collapsed due to a deadlock between China and South Korea over liquid crystal displays, commonly referred to as LCDs. The zero-tariff agreement applied to over 200 hundred products. South Korea wanted LCD products to be included in the deal; however, China refused this measure. It seems unlikely that China will concede to the stipulations regarding the LCD screens.

The Information Technology Agreement, or ITA, intends to strengthen trade between countries in the growing sector of technology. Opening channels for trade would have benefited both countries immediately as they would no longer be penalized for trading goods.

WTO Director General Roberto Azevedo said after the talks collapsed, “The participants have significantly reduced the gaps on expanding the coverage of the ITA agreement in recent days, but unfortunately it has not been possible to finalize the negotiations this week.”

In 2015, the talks are projected to continue with the hope that they will receive a unanimous vote in agreement. The WTO is committed to multilateral trade that integrates 161 countries around the world. The ITA deal would integrate mostly developing economies with significant production of new technology.

The deal makes imported products significantly cheaper than manufacturing and selling the products in one’s own country. India’s Prime Minister, Narendra Modi did not enter into the signed deal with the United States and China to protect India’s manufacturing interests.

However, a case could be made that a deal for India would increase exports, in turn benefiting India’s economy.

India is currently number 19 on the list of leading exporters and the 12th largest exporter. The balance of trade is India’s main concern and the concern of counties who do not already have robust industries.

– Maxine Gordon

Sources: NDTV, Rediff
Photo: Business Times

WTO
The World Health Organization (WTO) recently announced the largest global trade deal in its history. After years of waiting for this deal to go through numerous negotiations, the WTO has finally passed legislation on the first world wide trade reform.

This deal took a whopping 19 years to be passed into law. After years of gridlock the reform became a major priority when food started stockpiling in India. The Indian government has long been against the deal because it simplifies customs regulations across the board. A deal brokered between the U.S. and India on the details of the agreement put the reform back in motion. All 160 members of the WTO had to agree to the deal in order for it to go through and it passed into WTO law on November 27, 2014.

This deal has brought attention to how the WTO should proceed without massive stalemates that last years. India previously stymied the trillion dollar reform due to a disagreement in trade subsidies. Because the WTO requires unanimity among all member states, it is no surprise that this is the first deal affecting global trade reform to pass in 20 years.

The “Bali package” as it is called is important because it boosts the ability for countries across the globe to trade more easily with one another. It decreases trade restrictions that inhibit poor countries from trading with wealthier nations.

Cecilia Malmstrom, WTO commissioner says, “Once in force, it will help developing countries better integrate into the global economy, intensify regional integration and lift millions out of poverty.” Both governments and businesses are expected to benefit from the deal. This multilateral trade agreement is expected to boost jobs as well providing millions of jobs across many countries.

The trade package will make it easier for countries to trade. India will still be allowed to stockpile food based on subsidy agreements. The consensus between India and the U.S. on the trade agreements was a welcomed relief and has allowed for the trillion dollar package to go through.

This deal comes at a critical hour for the global economy. As global inequality between the wealthy and poor countries of the world increases, this WTO reform should help out. The breakthrough should provide other opportunities to increase trade among WTO member states. Reforming global trade regulations will allow countries to benefit from international trade and to support domestic development as well.

– Maxine Gordon

Sources: International Business Times, Reuters, Asia One
Photo: BBC

pro-poor-tourism-development

The World Travel & Tourism Council predicts that travel and tourism will be one of the world’s fastest growing industries between 2013 and 2021, and the best part is – this will create about 66 million jobs.

According to the World Tourism Organiza­tion (UNWTO), international travel to developing countries is on the rise and the tourism boom is driving development, exports, and jobs. Tour­­ists are increasingly looking for cultural and natural attractions in rural areas, thereby exploring more developing countries. Overall, two-thirds of people living in extreme poverty live in rural areas, so these communities will benefit from this pro-poor tourism according to the Rural Poverty Report 2011 (International Fund for Agricultural Development).

Tourism requires local labor and thus presents more employment opportunities for even low-skilled people. According to the UN International Trade Center (ITC), “tourism offers superior poverty reduction opportunities.” And the UNWTO points out that women and young people, who are generally proportionally disadvantaged, have more opportunities to find jobs within tourism.

It is not all trouble-free, tourism is vulnerable to natural disasters and political instability, and poor communities do not automatically benefit as some companies prefer to import supplies and services. But the ITC is taking measures to promote “inclusive tourism” and elevate the priority of this industry with international organizations and corporations. In 2003 it launched a project in Brazil’s Coconut Coast to increase capacity building activities for  agriculture, arts and crafts, the hotel business, computer science, English, environmental education, design, and culture, all as part of the tourism industry. They even installed an organic waste processing plant, providing balanced fertilizer at subsidized rates to 300 farmers. Today, 70 percent of the 3,000 beneficiaries of the project have found employment (mostly in nine five-star partner hotels) and the monthly income of 390 local women artisans has risen from $40 US to $250 US. The portion of the population earning less than one minimum salary has also decreased from 40 percent to 28 percent. The success of this and other projects confirms the fact that tourism represents an important opportunity for developing countries in their fight against poverty.

– Mary Purcell

Source: UN ITC

India-spices-ITC-development

The International Trade Center (ITC) is a joint agency of the World Trade Organization and the United Nations. Its mission is to build and promote businesses in developing countries, assist in becoming more competitive in global markets, speed economic development, and further the achievements of the UN’s Millennium Development Goals (MDGs). It now has more than 40 years of hands-on trade and business experience in the developing world, and a very focused approach to export-led poverty reduction. Their slogan, “Export Impact for Good.”

For ITC, the “true story of development” is the small, low-cost project that aims to give poor people “a hand to get started on the ladder of success.” After a modest level of support and funding, they are on their own path to self-sufficient living, and their success is exponential in impact for the immediate community. Three examples:
• Lifestyle products, derived from a local plant of the Eastern Cape in South Africa, are helping create jobs in one of that country’s poorer regions. Expert help from ITC, funding from an innovative public-private partnership and guaranteed commitments from overseas markets, will raise some 1,000 local people out of poverty.
• Brazilian tourist resort provides job opportunities to surrounding, impoverished areas: like a low-cost, organic waste recycling project – based on a local invention, and the sale of products made by local communities – leading to a significant rise in incomes.
• In India, rural populations are being lifted out of poverty through a program of selling locally produced spices and aromatic herbs on the international market. In just four years, exports grew seven fold and the average income increased five fold, benefiting well over 2,000 people.
The ITC article “New Jobs for Poor Communities Through Trade” gives the full story of the above projects.
– Mary Purcell

Source: ITC
Photo: Independent.co.uk

Does WTO's Aid for Trade Reduce Poverty?
Aid for Trade is a holistic approach to incorporating developing economies into global trade networks by assisting them in increasing exports and market access. Aid for Trade was initiated at the WTO Ministerial Conference in 2005, and the program has since increased its scope to include building production capacity (financial services, businesses, and industry), trade-related infrastructure (communications, energy, transportation), and trade policy and regulations.

When the Aid for Trade initiative began, it was unclear whether it would receive funding or be successful. Now that it has been implemented for over a decade, it is time to reexamine the links between trade, development, and poverty reduction that Aid for Trade aims to strengthen.

The principle behind Aid for Trade is that increased trade should benefit inhabitants of developing countries, whether or not they are directly involved in the program. One Aid for Trade program teaches Ugandan farmers how to grow and process dried fruit to be sold into the European cereal market. The farmers involved should benefit from increased income, market access, and productivity, and Uganda should benefit from increased exports.

Most evaluations of the effectiveness of Aid for Trade programs take place within 18 months of a given program’s initiation. This is not enough time to measure whether the program has truly been successful at reducing poverty in a sustainable way. Additionally, evaluations often do not take into account a program’s impact on those not involved; how did the fruit-growing education program impact farmers who did not receive additional training and support?

A new study on European trade assistance aid, commissioned by NGOs Traidcraft and the Catholic Agency for Overseas Development, suggests that there may be “hidden losers” to Aid for Trade initiatives. For example, South African fruit growers increased exports to Europe after trade sanctions were lifted. They earned higher wages and improved their standard of living. However, the demand for cheaper fruit also caused some growers to lower wages and to replace full-time employees with temporary, often migrant workers, who did not enjoy the benefits.

The study also found that the majority of trade assistance goes to middle-income countries rather than to the least developed countries (LCDs) that Aid for Trade is directed towards. Little evidence exists to prove Aid for Trade’s effectiveness in reducing extreme poverty; this is likely a result of short-term program evaluations that take place before real impact can be measured, as well as lack of donor interest in, and therefore funding for, impact evaluations.

Overall, there are many obstacles to determining whether or not Aid for Trade has been successful thus far. More thorough, accurate, and long-term evaluations of poverty rates are necessary in order to determine the tangible successes or failures of Aid for Trade.

– Kat Henrichs

Sources: OECD, International Center for Trade and Sustainable Development, The Guardian
Photo: European Commission