Trade facilitation deal at long last
The Trade Facilitation Agreement (TFA), the first agreement negotiated and adopted by the members of the World Trade Organisation (WTO) in 22 years since its inception, is now set to come into force. As 108 members of the multilateral trade body have already ratified the agreement (as of February 02, 2017), only two more ratifications are needed to declare the enforcement official.
Enforcement of the agreement is, however, a continuous process. Member countries have to do it gradually within the timeframe set by the agreement. The core issue of the agreement is to reduce all kinds of bureaucratic hassles in business by introducing automated-electronic documentation so that paper works could come down to zero or at a very minimal level.
In fact, trade facilitation means simplification and harmonisation of export, import and transit procedures including paperless trade or the exchange of data and trade documents electronically to ease trade transactions. Trade procedures cover activities, practices and formalities included in collecting, preparing, communicating and processing data required for the movement of goods in international trade. More trade means more goods crossing borders and having to comply with customs formalities. The ultimate goal is to reduce trade cost by cutting the vast amount red tape that still exists across the borders.
TFA, agreed by the member courtiers in the Bali ministerial conference in 2013, has outlined 38 trade facilitation measures the member countries have to adopt so that trade among the countries could be hassle-free and smooth. It is thus said that TFA is designed to 'streamline, simplify and standardise customs procedures' in such a way so that the cost of moving goods across the borders, and by doing so, it will cut trade cost around the world.
Bangladesh ratified the TFA in September last year as the 94th member of the WTO and 12th Least Developed Country (LDC). Initially, the country's position was to wait for automatic enforcement of the agreement. As per WTO rule, any agreement could come into effect if two-thirds of the members ratified the deal. Thus, it needs 110 ratifications to make the TFA effective as total members of the WTO is now 164. Later, Bangladesh decided to ratify the deal to make the enforcement process faster.
Enforcement of the TFA has deep implications for Bangladesh which is struggling to improve its business climate. The country has already taken a series of reforms to reduce the trade costs. A major part of the reforms include automation of customs procedures which is critical as the TFA deals almost entirely with customs-related topics. One very important and large step is this regard is single window (SW) system which facilitates electronic communication between traders and relevant government agencies. Similar to a one-stop solution or mechanism, SW allows traders to submit all required import, export and transit information through a single electronic gateway. So, by using the SW system, traders submit required documents only once and regulatory agencies also process the same information at a time. Bangladesh is scheduled to operationalise the SW by 2019 with the technical and financial assistance from the World Bank. Thus, the country has advanced significantly in a critical area as the TFA.
The TFA contains twelve articles regarding trade facilitation and customs cooperation in Section I; ten articles on special and differential treatment for developing countries and LDCs in Section II; and two articles on institutional arrangements and final provisions in Section III.
The special and differential treatment (SDT) provision allows developing countries and LDCs to determine the timeframe of implementation of various provisions of the agreement. There are three categories outlined in the agreement. Category-A includes the provisions that the member countries will implement by the time the agreement enters into force. However, LDCs like Bangladesh will get one year extension to do so. Under category-B, members will implement those provisions which they will commit to do after a transitional period. The transitional period will be a period of time after the deal enters into force. Provisions of technical and financial assistance from the donors will be classified under the category-C. To put it simply, countries are allowed to implement the TFA with immediate, time-bound and assistance-bound manners.
Bangladesh has great flexibility in implementing the deal. Policy makers are now reviewing the ongoing reform measures along with the already taken measures to match with provisions of the agreement. Once the review is completed, the country will categorise the provisions and move accordingly by notifying the WTO.
For instance, Bangladesh has already introduced the country's national trade portal to make trade related rules and regulations easily available to all. But, it is not fully updated. If the country wants to put the trade portal under category-A, the process of updating all information have to be there.
Enforcement of the TFA will ultimately create a global common platform to deal with the customs related transactions in a smooth manner. It will bring a set of uniform obligations and regulations in the long-run.
It has been estimated that TFA would reduce the trade cost and so global export would increase by $1 trillion annually. Expressing his enthusiasm on the outcome of the TFA, Roberto Azevedo, Director General of the WTO, told Reuters that once fully implemented, this could have an impact of around 2.7 percentage points on trade expansion throughout the world every year until 2030, and half a percentage point of GDP growth around the world.
He also mentioned that where a product may previously have taken 6-7 weeks to arrive, the waiting time should be cut to a few days. And if truly implemented, there will be almost no contact between the clients and the (customs) authorities. This will significantly reduce the scope of corruption and also cut trade cost.
But the immediate implication of the enforcement of the global deal is very significant because of US President Donald Trump's aggressive stance against multilateral trade regime. When he is moving to undermine multilateral and even regional trade and economic cooperation, TFA will be a symbol of upholding the multilateral trade regime for greater benefit of all. Bangladesh needs to tap the benefit by substantially improving its own capacity.