On 22 February 2017, the World Trade Organization Agreement on Trade Facilitation (TFA) finally entered into force after it was approved by two-thirds of its 164 members.
FTA has supported its ratification for several years and welcomes this great step forward as it will expedite the movement, release and clearance of goods across borders and boost international trade significantly.
Faster, cheaper and more transparent trade
According to WTO analysis the agreement will bring a number of benefits once it is fully implemented:
- It is forecast to slash members' trade costs by an average of 14.3%, with developing countries having the most to gain.
- It is also likely to speed imports (by over a day and a half) and exports (by almost two days), representing a reduction of 47% and 91% respectively over the current average.
- The TFA envisages quicker customs clearance and the consequent reduction of transport costs for business.
- It also seeks to increase the transparency of customs’ clearance and promote automated procedures. Cheaper trade means better conditions for all businesses, and especially for small and medium sized enterprises, according to the WTO.
What does it mean on the ground?
Once the TFA comes into effect, countries will have to:
- Implement a ‘single window’ policy: All clearance for incoming ships — sanitary checks as well as those related to security and bureaucracy— will have to be done in one go, and before the ships dock in the port.
- Promote the automation of customs procedures: to avoid paper work and minimise corruption risks.
Which countries will benefit the most?
The TFA will greatly benefit trade worldwide. However, the countries that will benefit the most are developing countries whose customs require streamlining. Those countries are mainly in Southern Africa such as Angola, Mozambique and South Africa, and a number of Latin American countries such as Peru, Bolivia and Venezuela.
Case Study: TFA to improve efficiency in Vietnam
Vietnam requires more documents from importing and exporting companies than average Asian countries and its clearance processes are much slower (i.e. exporting goods takes an average of 16-21 days, compared with the global best practice of 6 days). Importing involves a similarly lengthy period. The lost time translates into added costs for importers and exporters, making Vietnam a less attractive location for trade.
Therefore, the TFA can help Vietnam boost its competitiveness by:
- Synchronising procedures with global standards.
- Supporting the development and implement of its national electronic clearance system.
- Encouraging all government agencies to participate in the ‘single window’ platform.
By addressing these numerous challenges in procedures, documentation and automation, Vietnam could deliver trade savings of 2-3% and thus making the country more competitive.
How can businesses support trade facilitation?
Each WTO member will establish a national trade facilitation committee to oversee local implementation. These committees will include business representatives (chambers of commerce or business associations) to ensure that reforms match real needs.
By Milan Pajic, Trade Policy Advisor
- FTA and Eurocommerce call for Trade Modernisation (5 March 2015)
- Joint Statement by Business Organisations on WTO Trade Facilitation Agreement (15 October 2014)
- Business urges WTO Member States to ratify the Agreement on Trade Facilitation (15 October 2014)
- European Trade Highly Welcomes WTO Deal on Trade Facilitation (7 December 2013)
- Business calls for a deal on Trade Facilitation in Bali (21 November 2013)
- FTA organises discussion on ‘Trade Facilitation’ at the WTO Public Forum in Geneva (25 September 2012)