The aspirational TFA

WTO’s new trade facilitation deal may not have enforcement mechanism, but it can combat rising protectionism    The World Trade Organization’s latest achievement, the multilateral Trade Facilitation Agreement, which was put into effect Feb. 22, is noteworthy in two respects.
   First, any deal that further liberalizes trade is a positive development for both business and countries, and the TFA is no exception.
   Moreover, the agreement shows interest in continuing the growth of global trade against the backdrop of protectionism that has swept the globe over the past year, most notably in the United Kingdom and the United States.
   The WTO is positioning the agreement as a logistical upgrade as well as a stimulus for trade. It says the TFA will reduce clearance times by 47 percent for imports and 91 percent for exports, and cut costs associated with trade by 14.3 percent. Ultimately, the WTO anticipates the agreement will increase imports and exports by $1 trillion per year once fully implemented.
   According to the WTO, among the main benefits of TFA are increased bilateral trade through reduced barriers, such as high trade costs and long delays in processing trade, greater export diversification, enhanced foreign investment, and improved national competitiveness.
   The agreement features a host of new rules and regulations regarding trade, from expedited customs releases for air cargo and perishable goods to new harmonized processes and a new appeals process for customs decisions. It also establishes a permanent trade facilitation committee and “will require members to create national committees to facilitate domestic coordination and implementation of [its] provisions,” the National Law Reviewreported.
   The agreement is a boon for poorer member-countries. Generally, it can be difficult for multinationals to maximize the opportunities that exist in emerging markets that lack a modern infrastructure. The TFA addresses this by mandating that wealthy member-countries leverage their technical expertise and financial resources over the long term to help poorer countries shore up their infrastructure.
   Although the lack of a true enforcement mechanism is not ideal, the agreement is a step in the right direction and is widely expected to improve the position of poorer economies, potentially creating new emerging markets for the wealthier member-countries to leverage in a number of ways.
   The more interesting conversation, however, is not what the agreement does (or does not do) in the immediate term, but rather what it signals.
   Protectionism won out over globalism in several respects in 2016, from the surprising outcome of the U.K.’s Brexit referendum to the shocking election of U.S. President Donald Trump.
   Hamstrung by weak demand, global trade is no longer growing. The Trans-Pacific Partnership fell apart entirely, and it is possible that the North American Free Trade Agreement (NAFTA) will be substantially altered.
   The WTO database indicates that non-technical barriers to trade—through import quotas, subsidies, customs delays, testing requirements, or other means—doubled between 2006 and 2016.
   Although the world has not yet fallen into isolationism, protectionist measures and the associated rhetoric make it a worse place for businesses and consumers alike.
   The good news is that the ratification of the TFA is a step away from this cliff. Two-thirds of the WTO’s 164 members needed to adopt the agreement before it could come into force, a threshold that was reached on Feb. 22, when Rwanda, Oman, Chad, and Jordan submitted their acceptance to the WTO director-general. A majority of the world’s economies seem to be on the same page with respect to the rules and regulations that ought to guide trade. That’s progress.
   While there is a real risk that countries may implement it imperfectly, the TFA has positive long-term implications and should be seen as an aspirational effort in the battle to quell creeping protectionism.

Provisions of the trade facilitation agreement:
   • Release of goods before final determinations on duties, fees, and taxes owed are made.
   • Expedited customs release for certain air cargo and perishable goods.
   • Online publication of import and export procedures.
   • Automated customs processing, including the use of electronic documents.
   • Acceptance of e-payments for duties, fees, and taxes.
   • Creation of a single window for customs clearance.
   • Assessment of customs fees based on the approximate cost of the services rendered.
   • Harmonized processes and standards for customs clearance.
   • Greater border agency and customs cooperation.
   • Opportunities for importers and exporters to comment on proposed trade facilitation rules
   • Rights of WTO members to appeal customs administrative decisions.
   • Provision of technical assistance to lesser developed countries in their rollout of the TFA.

Source: National Law Review.