Despite recent tensions, the global community's push towards greater trade liberalization remains on track to continue its recent progress, with the World Trade Organization's (WTO's) Trade Facilitation Agreement (TFA) playing a key role in this.
The TFA, which entered into force in February last year, was engineered to expedite the movement, release and clearance of goods across borders, while also setting out measures for effective cooperation between customs authorities and provisions for technical assistance and capacity-building in this area. It is expected to improve the flow of commerce around the world, a move that will be of particular benefit for lower-income countries.
This week, the Organisation for Economic Co-operation and Development (OECD) has published a new report on the state of trade facilitation reforms around the world, with a particular focus on the progress of the TFA. It has demonstrated that the legislation continues to gain traction at an encouraging pace, despite ongoing challenges, and that significant benefits can be expected as a result.
Continued progress being made on TFA implementation
The latest OECD Trade Facilitation Indicators has shown that TFA implementation is now well underway, standing at 60.4 per cent as of June 26th. This equates to a 100 per cent implementation commitment rate by developed WTO members, as well as a 59.1 per cent rate for developing members and 21.6 per cent for least-developed countries (LDCs).
This variance is to be expected, as one of the stipulations of the TFA was that developed nations would change their legislation as soon as the agreement went into force on February 22nd 2017, while developing countries and LDCs were able to set their own timetables in accordance with their respective capacities. Resources and assistance are being provided by the WTO to help poorer nations get up to speed.
The OECD's analysis demonstrated that technical and financial assistance is playing an important role in enabling the current implementation work, noting early improvements in areas such as automation and streamlining of procedures, as well as engagement with the trade community. As such, it was deemed that the model of adjusting legislative timescales in line with local capacity represents "a promising approach for future multilateral trade reform".
Challenges remain
However, a number of potential obstacles continue to persist. Although almost 85 per cent of WTO members have now completed their domestic ratification processes, progress remains uneven across different countries, with the provisions of the TFA being put in place at varying rates.
The biggest challenge remains in ensuring the cooperation of domestic and cross-border agencies, noting that redundant systems, duplicative documentation requirements and confusion over the delineation of responsibilities continue to cause a variety of problems, including delays, excessive costs and overall reduced efficiency.
As such, the report called for an "explicit and sustained" political commitment to tackling this problem by fostering a more integrated approach between different border authorities, supported by shared frameworks and infrastructure, and the maintenance of open channels of communication.
The importance of maintaining momentum
Perhaps most importantly, the OECD analysis affirmed the WTO's view that the benefits of pushing for greater trade facilitation through the TFA will greatly outweigh the initial outlay, with trade costs expected to be slashed by between 14 and 18 per cent, resulting in a 0.6 per cent rise in world trade.
Countries that fully implement TFA stand to reduce their trade costs by between 1.4 and 3.9 percentage points more than those taking a minimalist approach, with lower-income nations seeing the greatest gains. Reduced import and export costs and faster delivery times will make it easier for all nations to participate in time-sensitive global value chains, with the legislation also helping to stamp out illicit trade, bribery and corruption.
WTO director-general Roberto Azevedo welcomed the OECD findings, saying: "We all know the potential that the TFA has to cut trade costs. This report takes a closer look at why this matters. For example, it highlights the difference that this will make for micro, small and medium-sized enterprises, which often face a prohibitively high cost of trading. It also highlights the fact that inefficient border procedures multiply the costs when goods and components cross borders many times during their production.
"The agreement is a truly inclusive endeavor. This was true of its design and its negotiation, and it will be true of its impact."
