Trade facilitation is an agreement signed under WTO’s Bali Ministerial Conference in 2013. The agreement aims to simplify and speed up customs procedure by member countries for enhancing trade.
What is trade facilitation?
The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. It will be a legally binding agreement and is one of the biggest reforms of the WTO since its establishment in 1995. The TFA will come into existence once two third of the WTO members ratify it. As on January 24, 2016, sixty four countries out of the 162 WTO members ratified it.
The objectives of Trade Facilitation Agreement are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency, reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighboring countries.
It is expected that once customs procedures on imports and exports are simplified, it will quicken international trade volume.
What is its significance?
Significance of the Trade Facilitation Agreement is that it is the first major new agreement reached by the member countries after the establishment of the WTO in 1995. Because of the conflicting stand of the member countries on different issues, no noticeable agreement was reached before the Bali MC except few less important ones like that on financial services, IT products, and on telecommunication.
The TFA has made the WTO a significant institution for promoting trade liberalization. It was one of the three components of the ‘Bali Package’.
Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement.
It is expected that after the implementation of the TFA, it will give a benefit between $ 400 billion and $1 trillion to the world economy by reducing costs of trade by between 10% and 15%. Increased trade flows, revenue collection, stable business environment and enhanced foreign investment etc are supposed to be the other benefits of the TFA.