Update of the WTO Trade Facilitation Agreement

It is now just over two years since the World Trade Organisation (WTO) Trade Facilitation Agreement (TFA) came into force. The obvious question is have we noticed any difference?

One of the realities, of course, is that the various articles of the TFA are not really innovative. Virtually all the measures that member nations have to implement are standard good practice in trade facilitation and customs / regulatory operations and these have been on the agenda for most administrations for some time. However, the TFA provides a platform and incentive for customs, and other relevant regulatory authorities, to accelerate their modernisation programmes and to obtain assistance, technical and financial, if necessary to do so.

As at February 2019 the WTO Secretariat reported that 141 members had ratified the agreement, this represents 86% of the total membership. The previous committee meeting had been held in October 2018 and, since then, Zimbabwe, Cameroun and Ecuador had ratified with Egypt committing to ratify imminently. It has been estimated that full implementation of the agreement will reduce the cost of doing cross border business, on average, by about 14.3 per cent. Developing and least developed countries, with less mature customs authorities, are likely to gain most from implementation but even OECD countries should see significant benefit, possibly including ease of doing business with emerging markets as a result of the latter’s reduction in import costs and increased transparency of processes together with simplified procedures. Potential time savings are also significant – the current estimate is that, on average, the time taken to import goods will reduce by 1.5 days and the time taken to export goods will reduce by nearly 2.0 days – these estimates represent reductions of 47 per cent and 91 per cent respectively over current average timescales and include pre-arrival and pre-departure arrangements and formalities. These projections are impressive and highly significant.

There is another very interesting aspect. Developed countries agreed to implement the agreement, in full, by the time it came into force in February 2017. In other words, for example in the UK, every measure should have been fully implemented by now. This has to be balanced by the reality that, under the terms of the agreement, whilst many of the measures are mandatory others are, to some extent, optional. For example, the agreement states that several measures should be implemented ‘to the extent possible’ or countries should use ‘best endeavours’ to implement. Notwithstanding this, it would be fair to assume that developed nations will implement every measure in full. It would be an interesting exercise to score how many of the seventy odd measures within the articles have been fully implemented by HMRC and other UK regulatory agencies. Themes throughout the TFA include the use of risk management in customs operations and de-materialisation of documents, in other words an almost complete migration from paper documents to electronic messages. Whilst, in the UK, we comply well with the former theme the same cannot be said for the latter. Then, there is the requirement to establish a Single Window and the argument as to whether the Gov.uk platform fulfils the requirements and intent of a National Trade Single Window? A comparison with Tradenet in Singapore or Kentrade in Kenya, for example, would probably effectively answer that question. It is, undeniably, easier for developing countries to perform a technology leap over more established economies, such as with Single Window platforms, as they tend not to have legacy systems to worry about. However, in relation to the TFA, they are other areas where emerging nations are showing exciting proactivity in relation to the agreement. At the end of 2018 UNCTAD hosted the First Africa Forum for National Trade Facilitation Committees in Addis Ababa. The objectives of the forum were there fold – knowledge sharing, promoting best practice and matchmaking for co-operation. It makes absolute sense for neighbouring economies to share experiences and work together to implement the TFA, not least of all due to the measures which will have to be implemented to streamline regulatory processes at land borders. The significance of this will not be lost on readers in relation to the current Brexit debates.

The simple measure of how countries are doing in relation to the TFA is their ranking under the principal global indices used to measure performance relating to international trade activities – the World Bank Group’s Ease of Doing Business / Trading Across Borders index and the Logistics Performance Index. These are not perfect measures but every country is judged on the same variables so the overall comparisons tells a strong story. The specific ‘customs’ measure is the obvious one to watch as the vast majority of TFA measures are customs related. The next few years will be interesting – developed countries will be, or should be, finally ensuring they meet all the requirements whilst developing, and LDC, nations will have made the final commitments, including implementation timelines and requests for technical assistance.  It will be interesting to see which countries significantly improve the rankings in the indices over the next two or three years – that will be a very telling indicator of the efficacy of the TFA.

Article written by Jon Walden - Associate of Strong & Herd LLP

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