Andrew Willcocks. The multi-billion dollar trade agreement you’ve never heard of.Dec 16, 2015
In less than a week trade ministers from across the globe will come together at the 10th Ministerial Conference of the World Trade Organisation (WTO) in Nairobi, Kenya.
The meeting follows more than a decade of stalled global trade negotiations since the WTO’s Doha Round of talks in 2001.
Dominating the Nairobi discussion is the expectation that an impasse will continue over the scope and future of the multilateral Doha trade agenda, particularly given the influence of large newly-minted regional trade agreements.
Given the slow movement of the WTO talks since the Doha Round in 2001, many country members have forged ahead and conducted so-called “mega-regional” trade agreements amongst themselves, designed to be “WTO plus”.
These agreements – including the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) – commenced life as draft propositions between government negotiators, generating little public interest until they burst onto the world stage and into the public lexicon.
Like many countries in the Asia-Pacific region, Australia has also taken part in a growing number of mega-regional and bilateral trade agreements. These include more recently the TPP and free trade agreements with China, Korea, and Japan.
Each agreement promises to deliver substantial benefits to goods and services exports worth billions of dollars, and each has generated significant media interest and political debate.
However, in June, to little fanfare, Australia formally accepted a pending treaty that will be part of the Nairobi talks worth hundreds of billions of dollars annually to global trade, known as the WTO Trade Facilitation Agreement (TFA).
The TFA is a rescued component of the original Doha Round, concluded at the last WTO Ministerial in Bali in 2013. Once in force, it will benefit global trade through harmonisation of customs procedures, improved cooperation between customs and trade authorities, linkages on facilitation between the private sector and Customs, and a raft of capacity development programs for Least Developed Countries (LDCs).
The economic benefit to global trade arising from full implementation of the TFA is simply staggering.
Research undertaken by the OECD has found that in some African countries, estimated revenue losses from inefficient border procedures exceed 5% of GDP. Full implementation of the TFA would stem such losses, reducing trade costs by 16.5% in low income countries, by 14.6% in upper-middle income countries, and by 11.8% in OECD countries.
A World Bank study in March 2015 estimates that the global trade cost savings from full implementation of the TFA will conservatively amount to US$210 billion per year. To put this in perspective, that’s a gain of US$33.31 per year for each and every person residing in a WTO member country.
And yet despite its imminent extraordinary global impact, the TFA has earned barely a mention in the international discourse on trade, compared with the attention afforded to the mega-regional trade agreements such as the TPP and TTIP.
This suggests that the TFA has been dramatically undersold in the lead-up to Nairobi, with the influence of the mega-regionals serving to dominate and further split the discussion on achievements and direction.
Resulting speculation as to the relevance, scope and future of the WTO’s Doha trade agenda has gripped the Nairobi dialogue. In a recent speech, US Trade Representative Michael Froman called for “credible” results in Nairobi. This may indicate a normative expectation – is the scope of the TPP the new credible?
Across the Atlantic, the European Parliament has pushed for an ambitious but “realistic” result in Nairobi that takes into account the needs of LDCs. Is the TTIP, on which the EU is presently focused, the new global realistic?
However, in the same way as the mega-regional agreements grew from small contractual propositions into influential normative actors, so too has the TFA begun to take hold amongst members, suggesting that the WTO’s normative power is far from decrepit.
To date, 53 countries have already ratified the deal, with that figure growing every month. The TFA will enter into force once two-thirds of WTO members have completed the ratification process.
Each time a country ratifies the TFA, they are obliged by Article 13 of the Agreement to form or designate a National Committee on Trade Facilitation (NCTF). These committees have already been set up in many countries, and will facilitate implementation of the TFA between domestic Customs, industry, and other stakeholders.
The NCTF customs-to-stakeholder interaction on facilitation is arguably where the rubber hits the road for ratifying governments, and where the real delivery of benefits will occur. The World Customs Organisation will act as a key player in this space, and some of this work has already commenced.
The emergence of the Trade Facilitation Agreement onto the world stage should be a core focus of public discussion in the lead-up to the Nairobi Ministerial. It is without doubt a real and tangible success story for the WTO in recent years, limiting popular arguments that the WTO agenda is at risk of being blunted by mega-regional agreements.
The rapid ratification rate of the TFA also demonstrates members are voting with their feet, further underscoring the argument that although mega-regional agreements dominate present discourse, there are substantial areas of global trade regulation over which the WTO necessarily retains normative primacy.