Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

WTO Approves Trade Facilitation Agreement

Posted November 28, 2014

Almost a year since Roberto Azevêdo’s declaration at the Bali Ministerial Conference in late 2013 that the World Trade Organization had “truly delivered” on a multilateral global trade deal for the first time in its almost 20-year history, the WTO Director-General’s premature claim has finally become a reality. Following years of negotiations and months of stalemate with India over the unrelated issue of food security, Trade Facilitation Agreement (TFA) that could boost global commerce by $1 trillion and create 18 million jobs in the developing world today received unanimous backing of the WTO’s 160 member countries.

“This is a very important moment for the WTO,” said Azevedo. “We have put ourselves back in the game. We have put our negotiating work back on track.”

U.S. Trade Representative Michael Froman, whose extension of the “peace clause” with India over the issue of food stockpiling and grain subsidies helped clear the way for final approval of the trade agreement, said the WTO “has taken a critical step forward.” EU Trade Commissioner Cecilia Malmström likewise said that the deal puts the WTO “back in business.”

Once implemented, the aim of the TFA is to remove administrative barriers to trade by cutting red-tape and streamlining customs. While that may not sound like a terribly ambitious goal from the vantage of advanced economy like Canada’s, for developing-countries, inefficiencies in areas such as customs and transport can be roadblocks to their integration into the global economy and may severely impair export competitiveness or inflow of foreign direct investment.

Analysts have pointed out that the reason why many small and medium-sized enterprises — which, as a whole, account in many economies for up to 60 per cent of GDP creation — are not active players in international trade has more to do with red tape rather than tariff barriers.

Trade facilitation measures seen as having the potential to make the biggest impact in terms of reducing costs include: harmonization of documents; streamlining of customs procedures (such as pre-arrival clearance); and predictability in customs regulations (such as advance rulings on what tariffs apply to specific products or clear rules of procedure and availability of trade-related information).

The agreement was originally scheduled to come into force by July 31, 2015, but that date could be adjusted to reflect the time lost since the TFA was to have been ratified this summer.

Update: The Bridges Weekly publication from the International Centre for Trade and Sustainable Development provides some additional clarification regarding the implementation track of the TFA going forward:

“The Protocol of Amendment adopted on Thursday integrates the new TFA into the overall WTO Agreement, now allowing governments to begin the ratification process domestically. Ratification by two-thirds of the membership is required for the deal to enter into force for those members. [...]

“Notably, the trade facilitation accord includes language saying that developing countries will not be required to implement the commitments they take unless they receive the technical assistance to do so. The deal therefore allows developing countries and LDCs to categorise their commitments in one of three ways: Category A commitments, which take immediate effect once TFA enters into force; Category B commitments, which require a transition period; and Category C commitments, requiring both a transition period and technical assistance.”

Click here to read the complete article.