The Trade Facilitation Agreement (TFA) sets forth a series of measures for facilitating the movement of goods across borders inspired by best practices from around the world. It is the first multilateral trade agreement to be concluded since the World Trade Organization (WTO) was established 20 years ago.
Initially it was thought that the benefits of the treaty could reduce trade costs by more than 14 percent for low-income countries and 13 percent for upper income countries. Once the new rules come into effect, it will cut red tape at the borders, standardize customs procedures such as waiting times, lessen the potential for corruption, and hasten foreign direct investment into weaker economies. Recent calculations by the WTO however have estimated that it could add close to $3.6 trillion to the $19,002 billion annual global merchandise exports. That will do more to boost trade than if all the world’s import tariffs were removed, cutting costs 9.6 to 23.1 percent.
“You could say that it’s global trade’s equivalent of the shift from dial-up internet to broadband,” WTO Director-General Roberto Azevedo said.
The agreement, which was created in December 2013, will come into full force when two-thirds (or 106) of the 161 WTO members have ratified it. An amendment protocol for the TFA was adopted by the General Council in November 2014 to bring he TFA into the WTO’s legal framework. Hong Kong was the first member state to accept the agreement and to date 50 members have ratified it. Azevedo hopes that the agreement would conclude by the end of 2016.