The WTO’s long awaited multilateral Trade Facilitation Agreement has at last received the required number of ratifications and entered into force on 22nd February. It will expedite the movement and clearance of goods at the border and at airports, and significantly reduce time and costs for traders.
Not all is negative on the international trade scene.
Amidst the flurry of criss-crossing bilateral and multilateral ‘free trade’ agreements, how carefully have ‘beneficiaries’ of these agreement calculated what their gains would be in practical and efficiency terms?
It is one thing to have a right of access under your country’s trade agreement. It is another to secure that access when your exported goods are tied up at the docks, or at the airport, of the importing country due to ‘red tape’ over documents or some alleged failure to meet technical standards, real or invented.
The much maligned World Trade Organisation (WTO) has calculated that an average export consignment requires some two to eleven separate documents and may take between two and 86 days to be cleared through border customs and other authorities. Imagine when those goods consist of fresh, perishable food.
The average import in its turn requires between two and 17 documents and may take anywhere between four and 130 days to get clearance. These procedures have been wide open to abuse and corruption.
The WTO has been battling with this issue for over 20 years. But just last November it achieved a landmark breakthrough when its 2013 Trade Facilitation Agreement (TFA) was finally ratified by the requisite number of countries (two thirds of 164) and entered into force on 22nd February this year. This includes Australia and our major trading partners – but not Indonesia, with which the government is currently negotiating a bilateral agreement (see note below).
The agreement is the first multilateral agreement negotiated within the WTO since its inception, succeeding the General Agreement on Trade and Tariffs (the GATT) back in the 1990s.
As summarised by the WTO the TFA contains provisions for:
” … expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area. The Agreement will help improve transparency, increase possibilities to participate in global value chains, and reduce the scope for corruption”.
Under the TFA it is the duty and responsibility of ratifying countries to observe and enforce its provisions at their borders so that the rights of traders are properly realized.
Indeed it is estimated by the WTO that the TFA “is likely 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 TFA is expected also to reduce total trade costs for most countries by some 15%.
There are special provisions in the TFA to allow developing and least developed countries more time to meet the prescribed standards and implement its provisions, and they will receive technical assistance in this respect.
This agreement alone will prove the value of the WTO, and given the jumble of trade agreements of one variety or another now existing will assist the organisation to get world trade back on the post-WW2 tracks of reciprocal non-discrimination which it left several decades ago. And will be a strike against disguised protectionism in all its forms.
It is a further plank too in the Australian government’s eagerly sought after rules-based international order.
Andrew Farran is a former diplomat, trade adviser and senior academic in public and international law.
Note: Regarding Indonesia the following observation in this regard by Tim Lindsey in Pearls and Irritations on 28.2.17 under the heading ‘Jokowi Lite: The Indonesian president’s non-visit’ is more than pertinent:
“Indonesia is, in fact, currently renegotiating all its bilateral trade agreements, with the aim of strengthening its ‘national interests’. This is really shorthand for increasing its capacity to protect domestic business, a position that reflects reality on the ground in Indonesia. Although Jokowi repeatedly asserts that Indonesia is open for business and wants foreign investment to fix its crumbling or absent infrastructure, in reality Indonesia remains a very challenging destination not least because of bureaucratic red-tape and poor law enforcement. This is particularly true for investors who might find themselves competing with one of Indonesia’s politically powerful konglomerat, or tycoons.”