Overview and Factual Details
The Trade Facilitation Agreement is about making trade easier all across the world by removing or reducing the barriers and obstacles of clearances and customs.
Trade facilitation came into light of discussion at WTO Singapore Ministerial Conference in Dec, 1996 and after 7 or 8 years in 2004, WTO members officially agreed to start negotiations on trade facilitation. The draft of Trade Facilitation Agreement (TFA) is finalized at 9th WTO Ministerial Conference which held at Bali in 2013.
In Nov 2014, WTO members adopted a ‘Protocol of Amendment’ to insert TFA as an agreement under WTO agreement. TFA shall come into existence once two third of members ratified the agreement.
The 10th WTO Ministerial Conference is held at Nairobi Kenya in Dec 2015. But no decision has been taken regarding TFA or TFA is once again blocked by developing countries for not reaching a permanent solution on agriculture subsidies.
It mainly contains three sections that are as follows:
· Section 1: It contains provisions in relation to expediting the movement, release and clearance of goods and some of major provisions are as follows:
Ø Every member shall ensure that all information related to trade available online.
Ø E Payment method shall be provided for all type of fees and taxes like customs etc.
Ø Simplify procedures and documentation required for custom clearance.
Ø Single window system shall be in place for all clearances in relation to trading of goods.
Ø Fast track process for clearance of perishable goods like Fruits or Vegetables etc.
Ø Online submission of documents shall be available for traders as far as possible.
· Section 2: This section contains provision for Special and Differential Treatment (SDT) that allows developing and least developed countries (LDCs) to determine when they will implement the provisions of the agreement. To avail the benefits of SDT, members have to categorize the provisions into three categories that are as follows:
Ø Category I: Provisions to be implemented at time of ratifying the agreement.
Ø Category II: Provisions to be implemented after a transitional period.
Ø Category III: Provisions to be implemented on a date after a transitional period and requires assistance and support.
· Section 3: It contains provisions about setting up a permanent committee on trade facilitation at WTO and necessary to set up a national committee for coordination and implementation of the provisions of the agreement.
Importance: National & International
· It is believed that this agreement has potential of adding more than 1 trillion dollar in world GDP. The global GDP growth may be boosted by approx 0.5% per annum.
· It can also generate more than 21 million jobs worldwide by removing the hurdles of red tapism and rationalizing the customs.
· Trade Facilitation is all about reducing the cost of trade which is still in higher range despite of large decline in transportation cost and huge progress in IT. It is estimated that trade cost of members can be reduced up to an average of 14.5%.
· Developing countries and LDC Perspective:
Ø It is estimated that exports of these countries may increase by between $170 billion to $730 billion per annum.
Ø Developing countries have possibility of entering 30% more foreign markets and LDCs have 60% more en
Ø Small and Medium Enterprises (SMEs) will be benefitted more by implementation this agreement and SMEs are bedrock of economy in almost all developing countries including India. This agreement will help SMEs to become more integrated in International trade.
Ø The TFA will help to attract more FDI for developing and LDCs including India as TFA is an integrative step in ease of doing business.
· Further simplifying or streamlining the procedures and reducing time move the goods across the borders, this agreement will help to reduce corruption and fraudulent practices and increase the amount of revenue collected.
· Food Security and AOA: It is said that trade distorting domestic support (under Amber Box) given to agriculture sector shall be limited up to 10% of total value of farm produce in developing and 5% in developed countries. But India’s contention is that 5% min quota of developed country say USA is much bigger than 10% min quota for India. India is opposing the TFA only for the reason of restrictions on agriculture subsidies provided under AOA.
· Peace Clause: This clause was an integrative part of ‘Bali Package’ in 2013. This clause allows countries to avoid commitments or restrictions under Amber Box of AOA. But it is also said that permanent solution shall be taken at least before 11th WTO Ministerial Conference in 2017.
· Doha Round: It is 9th negotiation round after World War 2 and first since WTO came in place in 1995. This round was officially launched at WTO 4th Ministerial Conference in Doha, Qatar in 2001. It is also known as Doha Development Agenda (DDA) because of its aim to achieve major reform in international trading system. The subjects of Doha Round include Agriculture, Non Agriculture Market Access (NAMA), Trade Facilitation or Services etc.
· Special Safeguard Mechanism (SSM): It is a tool under Doha Round of Agriculture that will allow developing countries to raise tariffs temporarily to deal with import surges or price falls.