Trade costs could fall by an average of 14 per cent as a result of the World Trade Organisation’s Trade Facilitation Agreement, which has come into force after the number of countries ratifying the deal topped the threshold of 110.
Full implementation of the TFA is forecast to cut members’ trade costs by an average of 14.3 per cent, with developing countries having the most to gain, according to a 2015 study carried out by WTO economists. The TFA is also expected to reduce the time needed to import goods by over a day and a half and to export goods by almost two days, representing a reduction of 47 per cent and 91 per cent respectively over the current average.
The WTO needed two thirds of its 164 members to ratify the deal – that happened on 22nd February when its was accepted by Rwanda, Oman, Chad and Jordan.
Director-general Roberto Azevêdo said: “This is fantastic news for at least two reasons. First, it shows members’ commitment to the multilateral trading system and that they are following through on the promises made in Bali. Second, it means we can now start implementing the agreement, helping to cut trade costs around the world. It also means we can kick start technical assistance work to help poorer countries with implementation.
“This would boost global trade by up to 1 trillion dollars each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world.”
Implementing the TFA is also expected to help new firms export for the first time. Moreover, once the TFA is fully implemented, developing countries are predicted to increase the number of new products exported by as much as 20 per cent, with least developed countries (LDCs) likely to see an increase of up to 35 per cent, according to the WTO study.
“But this is not the end of the road. The real work is just beginning. This is the biggest reform of global trade in a generation. It can make a big difference for growth and development around the world. Now, working together, we have the responsibility to implement the Agreement to make those benefits a reality,” said Azevedo.
The agreement has been welcomed by the British International Freight Association. Director general Robert Keen said: “If better border procedures and faster, smoother trade flows result from the agreement and help to revitalise global trade, BIFA members, which facilitate much of the UK’s visible trade, will benefit.”
“We shouldn’t forget that it has taken 16 years to get to this point and are left wondering how the world’s trading activity, in which BIFA members have a vested interest, would have developed had it not taken quite so long to get where we are today.
“Of course, of late, some nations have made it clear that they intend to scale down multi country free trade deals and switch to bilateral relationships, marking a return to the bad old days of protectionism.
“BIFA believes that the world has benefited immeasurably from liberalised trade. Not only has consumer choice been enriched in many countries, but also out-sourcing of production has brought valuable employment to developing economies throughout the world. BIFA members have worked to bring these products to the UK and taken UK production to customers abroad.”
The International Air Transport Association has also backed the deal. Director general Alexandre de Juniac, said: “Aviation is the business of freedom. Air cargo is a vital link in the manufacturing supply chain and between producers and consumers. We look forward to working with governments and airlines to maximize the benefits of the TFA and make air cargo an even more potent catalyst for jobs, growth, and prosperity,”