Advisor for the Commonwealth Small States Office in Geneva
Trade and Investment Facilitation
The first international agreement concluded under the auspices of the World Trade Organization, the Trade Facilitation Agreement (TFA) celebrates this month two years since its entry into force (February 22, 2017). Focused on the streamlining of border and customs procedures and expediting the movement and clearance of goods, its main objective is to facilitate Member’s export and import transactions, with a view to reduce red tape, trade costs and timeframes and ease the flow of goods across borders. By initial estimates, the TFA had the potential to reduce trade costs by an average of 14.3%, with export gains potentially reaching between US$ 750 billion and over US$ 1 trillion dollars per annum, with full implementation of the TFA. A landmark agreement and novel in many ways, this provides us with a timely opportunity to assess its achievements so far and outline possible challenges which still remain for countries looking to fully reap the benefits that result from the TFA. As the Trade Facilitation Committee met last week in Geneva to take stock of the progress made so far , the implementation record shows that, while a lot of the implementation efforts have been successfully deployed, there still remains a lot to be done. In that regard, Members should continue exchanging their best practices and national experiences and work with partner agencies and organizations to obtain the required assistance in fulfilling their commitments.
A quick overview of the TFA points out to its success and also provides some indication for the next two years of its application.
The TFA agreement: a change in paradigm
Firstly, the possibility for countries to self-determine their implementation roadmap, through the notification of commitments under the relevant category, are an important aspect of the agreement’s features. When negotiated, the TFA enshrined a new philosophy, in which implementation is segmented on a country level and on a measure by measure basis, taking into account a Member’s capacity to fully adhere to the normative commitments set out in the agreement. This classification of commitments into A, B, C categories provided for a much-needed flexibility on how the agreement was to be incorporated into national policies, allowing Members to modulate their implementation and ensure there is room for implementation on a targeted and fine-tuned way and which responded to Member’s national contexts and abilities. This approach, coupled with the provision of Technical Assistance and Capacity Building– triggered when commitments were to be classified as “C” -, have allowed for a growing corpus of success cases and projects, with Members increasingly sharing their national experiences and best practices for the adoption of trade facilitation measures. As mentioned, these national examples have been an interesting component frequently discussed at the meetings of the Trade Facilitation Committee, the WTO body put in place to monitor the application of the agreement.
With regards to technical assistance and capacity building, numerous agencies and organizations have been providing advice and capacity building assistance for all the stages involved in the implementation stage of the TFA, which are a clear sign that a lot can be achieved through international cooperation and coordination. The technical assistance component of the TFA is also a recognition that developing Members will face higher challenges when implementing the agreed upon rules, and thus the need to provide them with an institutional framework that allows them to have access to potential donors and agencies for them to fully implement TFA obligations. These Technical Assistance projects will be adjusted to meet the recipient Country’s concrete capacity constraints and implementation gaps, creating a joint ownership environment and ensuring its long lasting effects.
Thus, these two components are a central element for the agreement’s success and could serve as a source of inspiration for other initiatives which aim at promoting “facilitation” lato sensu and the rationalization of regulatory processes, improving a country’s business environment and contributing to a potential increase in its participation in international trade flows.
The TFA two years on: what lies ahead?
According to data provided by the Trade Facilitation Agreement Facility (TFAF), the level of ratification of the TFA stands at 86% today, with 61.7% of the commitments contained therein already fully implemented. In addition, 64 Members have presented 29 notifications under category “C”. Generally speaking, one can qualify these indicators as a success, as countries become increasingly aware of the importance of the agreement and how to resort to support mechanisms to implement it.
Even with that successful track record of implementation, the same date of its entry into force also marks the deadline for Least Developed Countries (LDCs) to notify their Technical Assistance and Capacity Building needs for the implementation of the measures categorized under “c”. As part of the TFA also relates to awareness-raising and information-sharing, this is an opportunity for Members to show their commitment to the TFA and reach out for international organization and donor countries and explore possible ways to get engagement and implement trade facilitation projects, capitalizing on the current momentum to do so. As such, countries which still have to either perform a detailed needs assessment on what are their main capacity gaps or difficulties in incorporating TF commitments or have understood what their implementation challenges are but haven’t been able to secure the required assistance can liaise with agencies and partners engaged in TF assistance and leverage the necessary support. Likewise, assistance is also provided from key actors and organizations in preparing and submitting a notification or even gathering all the necessary information to obtain resources for a project or even design and execute one. These efforts would help reaching the objective of full implementation of the TFA. In that context, other important deadlines to look out for this year include the 22 August 2019 deadline for LDCs to notify the definitive dates for category C implementation. Next year, three years after its entry into force, LDCs will have to provide the definitive date for their category B commitments as well.
Trade facilitation is also an area which is multi-stakeholder by nature, which implies strong private sector involvement. Traditionally, the private sector is well placed to identify and point out difficulties and hurdles in getting goods across the border. In addition, gains from projects that address changes in the regulatory framework and require training and human capital development involved in international trade will be greatly enhanced if needs will also require that the business community will be able to operate the new procedures, as they will also, ultimately, benefit from the reduction in costs and time promoted by the trade facilitation measure. Thus, national entrepreneurial involvement also contributes to the co-owned or joint-partnership dynamic of Trade Facilitation projects.
Lastly, with the exponential development of new technologies, Trade Facilitation cannot be approached in an isolated manner and should be inserted in a broader context, where potential interlinkages between Trade Facilitation and other issues become increasingly more apparent. In that regard, the relationship between Trade Facilitation and Information and Communication Technologies (ICT) become strategically intertwined, as efforts to develop more streamlined, fast and efficient import and export procedures could also contribute to a higher rate of digitalization and automation of some of those steps. At the margins of the Trade Facilitation Committee in Geneva last week (12-13 February), a technical workshop on the interlinkages between Customs Valuation and Trade Facilitation was held (14 February), and promoted the discourse and dialogue between how implementation of one supports the implementation of the other, and how new technologies can help in these both efforts.
In addition, the TF also has the potential to promote further social and economic development across countries, allowing them to link their TF implementation strategies with, for instance, the achievement of some of the Sustainable Development Goals. The cross-cutting nature of TF can foster the integration of smaller and medium sized companies, arguably the main beneficiaries of trade facilitating measures, or even contribute to empowering of women and promoting gender equality. Resort to Trade Facilitation through the adoption of new technologies would render import and export procedures more efficient, which could also bring about gains from an environmental perspective and potentially contribute to reduce emissions and fight climate change.
Thus, a lot has been achieved, and the potential is still there. These interlinkages should be explored and Members should continue to promote their implementation efforts. The international trade community will definitely be seeing further developments and accompany the future work of the TFA agenda, building up from the accumulated and successful experience of its first two years of application.