Trade Facilitation Agreement was signed on 22nd February, 2017. This agreement is the most successful multilateral trade agreement since the establishment of WTO in 1995. Negotiations started in 2013 as part of the Doha Development Plan. WTO members acknowledged potential benefits because of the agreement for all of the members, but especially for developing countries. EU committed to aid financially to the countries which are in the largest need to meet the regulations of the Trade Facilitation Agreement. European Union has been one of the leaders in the efforts to sign the deal. EU hopes that this agreement will play a significant role in developing countries economy, for that reason EU committed to give 400 million euros that will assist to meet the requirements and the rules as set by the agreement. Here is few more examples of European Union’s commitments for developing countries: “Zambia Regional Integration Capacity Building Project” Grant amount: 2.66 million euros (part of COMESA Regional Integration Support Mechanism programme of 116 million euros). Starting date: May 2015. Key objective: To focus on key economic sectors, including important trade facilitation reforms, to improve border management in line with WTO Trade Facilitation Agreement. “Uganda Northern Corridor Road (NCR) Improvement Project” Grant amount: 167 million euros (EC contribution 122 million euros). Duration (2009 – 2014). Objective: To reduce transport costs and travel time on the Northern Corridor Route in Uganda with the aim of promoting economic and social development and facilitating international and transit trade and thereby boosting regional integration. The Northern Corridor links Burundi, the DRC, Rwanda and Uganda, as well as Southern Sudan to the Kenyan port of Mombasa.” (Source: European Commission Support for Trade Facilitation January 2017. Available at: http://trade.ec.europa.eu/doclib/docs/2017/february/tradoc_155332.pdf ).
Following the activation of the agreement by the Council and the European Parliament in 2015, EU actively encouraged other WTO members to approve the deal without postponing. As Chad, Oman and Rwanda validated the agreement the minimum requirement of WTO members required has been reached and the agreement was immediately was launched into force. So, how this ‘Trade Facilitation Agreement’ is going to contribute towards global economic rise?
The agreement aims to simplify and clarify the international import and export orders, customs formalities and transit requirements. It could reduce trade costs by an average of 14.3 percent and boost global trade by 1 trillion a year, with biggest contribution to the poorest countries. It will simplify commercial – related agreements and will lower the costs. This will help to boost to global economic growth quite significantly. European Union administration will have a leading role in the beginning of the agreement and will act as an example to follow towards further progress of this agreement within European Union and at global level. As Facilitation Agreement benefits globally are uncontested. Like: transparency, consistency and predictability, simplified border procedure there is costs of the agreement.
Agreement was signed when the minimum WTO member’s amount was reached, which is 110. Why others countries does not want to commit to the Facilitation Agreement? First reason is that poorest developing countries to improve the borders and customs systems may face multiple agreement demands on very limited sources. The governments have an idea that it will have to fund themselves some of the reforms, before the benefits will be seen in an increased revenue and trade despite EU financial aid and ability that reforms can bring the benefits to pursue further reforms. In general the main concern is that it is too early and difficult to say how much effective trade facilitation will cost and how much reform governments will have to undertake to start felling the benefits of the agreement. So this could be a cause why some countries are still not signing the agreement.
Even though the reforms are costly and complex, even the modest improvements will bring considerable relative gains. Costs that incurs in implementation of Trade Facilitation are mainly: new regulations, institutional changes, training, equipment and infrastructure.
Regulatory costs: Costs rise mainly because agreement requires new legislation or changes to the existing laws, which requires time and specialized people in regulatory work.
Institutional costs: Costs arise because some facilitation agreement measures requires deploying new units which requires additional staff. The costs rises if existing staff is relocated because of training requirements.
Training costs: This is considered as most expensive and most important subject in facilitation. It is most important trade facilitation principle as the agreements primary principle is to get more effective ways of doing trade between border agencies. Countries can choose to recruit new expert staff, train existing staff or ‘import’ trained staff through exchanges with other countries ministries and agencies. As recruiting or importing new experts are the most costly option, countries often decide to train old staff as it is less costly but as well more lengthy process, because staff still needs to perform their normal duties.
Equipment and infrastructure: Often these are most costly elements as well as staff training. Most of the equipment has to be carefully implemented and sequenced with regulatory, institutional or human resource changes. At the same time insufficient equipment and infrastructure make some facilitation measures too difficult to implement.
Generally the costs are significantly high, but those countries who undertake the reforms in trade facilitation have seen that benefits exceeds costs in very wide margin. Angola undertook a five year customs modernisation process, and even mid-way through the process Angola saw the increase of revenue by 150 percent and reduced customs procedures up to 24 hours.
Trade Facilitation Agreement is the helping hand for all of the world, but mostly for the developing countries which from first sight lookalike that will suffer from expensive costs of the reforms, but as we can see the benefits can exceed the expectations.
World Trade Organization (No date) Trade Facilitation.
Available at: https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm (Accessed: 9th April, 2017).
World Trade Organization (2017) WTO’s Trade Facilitation Agreement enters into force.
Available at: https://www.wto.org/english/news_e/news17_e/fac_31jan17_e.htm (Accessed: 9th April, 2017).
WTO Trade Facilitation Agreement Facility (No date) The Trade Facilitation Agreement.
Available at: http://www.tfafacility.org/trade-facilitation-agreement-facility (Accessed: 11th April, 2017).
European Commission Press Release Database (2017) EU welcomes entry into force of the WTO Trade Facilitation Agreement.
Available at: http://europa.eu/rapid/press-release_IP-17-188_en.htm (Accessed: 11th April, 2017).
European Commission (2017) European Commission Support for Trade Facilitation.
Available at: http://trade.ec.europa.eu/doclib/docs/2017/february/tradoc_155332.pdf (Accessed: 11th April, 2017).
OECD Policy Brief (2005) The Costs and Benefits of Trade Facilitation.
Available at: http://www.oecd.org/trade/facilitation/35459690.pdf (Accessed: 11th April, 2017).