Trade facilitation agreement

Prelims & Mains

Trade facilitation agreement

Trade Facilitation Agreement (TFA), which came into force on 22 February 2017

Traders from both developing and developed countries have frequently highlighted the vast amount of “red tape” that exists in moving goods across borders. To address this, WTO members have forged the Trade Facilitation Agreement (TFA), which came into force on 22 February 2017

Trade facilitation efforts, such as simplifying required paperwork, modernizing procedures and harmonizing customs requirements, can slash the costs and time needed to export and import goods.

Trade facilitation agreement

Need for Trade facilitation agreement

This is critical as trade costs can be equivalent to a 134% ad valorem tariff on a product in high-income countries and a 219% tariff equivalent in developing countries according to a 2015 study by WTO economists.

Reductions in time and costs to trade can thus make the difference between a country seamlessly linking up to an integrated global production chain or being left on the margins of a big part of world trade.

The full implementation of the Trade Facilitation Agreement (TFA), which came into force on 22 February 2017 is estimated to reduce global trade costs by an average of 14.3%, with African countries and least-developed countries (LDCs) forecast to enjoy the biggest average reduction in trade costs.

Reduce the average time needed to import by 47%.

Cuts in export time will be even more dramatic, estimates predict a 91% reduction of the current average.

Trade Facilitation Agreement is expected to increase exports from existing traders while also enabling new firms to export for the first time. Furthermore, the Trade Facilitation Agreement is forecast to add up to 2.7% a year to world export growth and more than 0.5% a year to world GDP growth over the 2015-30 horizon.

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Developing countries are expected to enjoy larger gains than the global average: the swift and full implementation of the TFA is estimated to boost their exports by 3.5% annually and augment their economic growth by 0.9% each year. Overall, two thirds of all benefits are predicted to go to the developing and least-developed world.

TRADE FACILITATION AGREEMENT

  • Section I contains provisions for expediting the movement, release and clearance of goods, including goods in transit.
  • Section II contains special and differential treatment (SDT) provisions that allow developing and least-developed countries (LDCs) to determine when they will implement individual provisions of the Agreement and to identify provisions that they will only be able to implement upon the receipt of technical assistance and support for capacity building.
  • To benefit from SDT, a member must categorize each provision of the Agreement, as defined below, and notify other WTO members of these categorizations in accordance with specific timelines outlined in the Agreement
  • Category A: provisions that the member will implement by the time the Agreement enters into force (or in the case of a least-developed country within one year after entry into force)
  • Category B: provisions that the member will implement after a transitional period following the  entry into force of the Agreement
  • Category C: provisions that the member will implement on a date after a transitional period following the entry into force of the Agreement and requiring the acquisition of assistance and support for capacity building.

Implementation

Developed countries have committed to apply the substantive portions of the TFA from the date it takes effect.

Related Topics  National Trade Facilitation Action Plan (NTFAP)

Developing countries and least-developed countries (LDCs), meanwhile, will only apply those substantive provisions of the TFA which they have indicated they are in a position to do so from the date of the TFA’s entry into force. LDCs were given an additional year to do so. These commitments are set out in the submitted Category A notifications.

Category B notifications from developing countries and LDCs list the provisions the WTO member will implement after a transitional period following the entry into force of the TFA.

Category C notifications contain provisions that a developing country or LDC designates for implementation on a date after a transition period and requiring the acquisition of implementation capacity through the provision and assistance of capacity building.

National Trade Facilitation Action Plan (NTFAP)

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Raja Raja Cholan
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Trainer & Mentor for aspirants preparing for civil service examination

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