Trade Facilitation the Way Forward

Trade Facilitation – the way forward

On the 22nd February 2017 the historic Trade Facilitation Agreement (TFA) came into force.  According to the World Trade Organisation (WTO) it is the first multilateral trade agreement to be concluded since the WTO was established 20 years ago. Now it has entered into force it is expected to reduce total trade costs by more than 14 per cent for low-income countries and more than 13 per cent for upper middle-income countries by streamlining the flow of trade across borders. 

To quote from the WTO website: “World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible."  How ironic, one could argue, that the WTO has looked at the success of the European Union’s  internal market agreement to encourage their members to open their markets and embrace Trade Facilitation as the means of internal growth and for building trade links.  The 28 EU countries combined are currently the 2nd biggest exporter of merchandise by value with 15.2% of the global share (China is 17.4%/ USA 11.5%) while the UK the 4th biggest exporter in the EU (of which 52% goes into other EU Member States) so there is evidence that this approach works. 

The WTO sees Trade Facilitation as a major benefit for all countries: "The entry into force of this agreement (the TFA), which seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms all over the world and creates a significant boost for commerce and the multilateral trading system as a whole.

Full implementation of the TFA is forecast to slash members' trade costs by an average of 14.3 per cent, with developing countries having the most to gain, according to a 2015 study carried out by WTO economists. The TFA is also 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.

Implementing the TFA is also expected to help new firms export for the first time. Moreover, once the TFA is fully implemented, developing countries are predicted to increase the number of new products exported by as much as 20 per cent, with least developed countries (LDCs) likely to see an increase of up to 35 per cent, according to the WTO study."

Since joining the European Economic Community in 1973 we have led the way in what, is now known as, Trade Facilitation.  Over 40 + years we have worked in removing tariff barriers, customs duties, variation in product standards, excessive paperwork until the European Union (EU) has become a success story, the glowing example of how to trade.  We have moved progressively from being a Single Market, to a Customs Union to what is now an Internal Market.  It is no more challenging sending goods from Birmingham to Berlin than it is sending them from Birmingham to Brighton.  So, with the WTO Trade Facilitation Agreement (TFA) now in place we need to ensure trade between EU-27/ UK is not crippled by "old-fashioned" principles of customs borders, tariff measures, paperwork and duties.

“Bureaucratic delays and “red tape” pose a burden for moving goods across borders for traders. Trade facilitation—the simplification, modernization and harmonization of export and import processes—has therefore emerged as an important issue for the world trading system,” says the WTO and yet, if we are not careful this is opposite to what the UK will be doing.  We (the UK) cannot be seen to be going in the opposite direction of the TFA, looking at the statement from the WTO above, the positives seen by introducing Trade Facilitation measures - which is basically what the Customs Union and internal market conditions already give us - should be seen as the negatives we will have if we cannot maintain a meaningful trade association with our neighbours. 

It was in October 2015 that the EU finalised the ratification process of the WTO Trade Facilitation Agreement – and set a target of up to €400 million over five years to assist developing countries in bringing the agreement into effect. The EU agreed to help finance reforms and projects improving the customs systems of developing and least developed countries, as part of its "Aid for Trade" engagement. The UK agreed to contribute GBP 500,000 to the WTO’s Trade Facilitation Agreement Facility to help developing and least-developed countries implement the WTO’s Trade Facilitation Agreement as part of a broader GBP 180 million commitment the UK has made to support trade facilitation, through bilateral, regional and multilateral programmes. 
Julian Braithwaite, UK Ambassador to the WTO, said: back in October 2015: “The UK is a major Aid for Trade donor, contributing over £1 billion a year to help developing and least-developed countries to trade regionally and internationally. Our support to the WTO Trade Facilitation Agreement Facility will contribute to improving coordination and coherence among the various agencies and programmes helping WTO members to implement the TFA.” And yet the greatest risk to Trade Facilitation seems to be the UK’s determination to split from the EU with or without a trade deal.  Brexit means Brexit but we cannot let Europe be the trading area that starts going backward from, not forward into, trade facilitation

Article written by Sandra Strong - Strong & Herd LLP

Contact Strong & Herd
to discuss your requirements
0161 499 7000
0161 499 7100
Strong & Herd LLP, Manchester International Office Centre
Styal Road, Manchester, M22 5WB