Trade Facilitation Agreement (TFA).

February 22, 2017 marked a major milestone for global trade.  The Trade Facilitation Agreement (TFA) entered into force on February 22nd after the World Trade Organization (WTO) obtained the needed acceptance from two-thirds of its 164 members.  Rwanda, Oman, Chad and Jordan submitted their instruments of acceptance to WTO Director-General Roberto Azevêdo, which brought the total number of ratifications over the required threshold for the TFA to take effect.  This is the most significant multilateral deal that has been concluded in the 21 year history of the WTO.

The TFA seeks to expedite the movement, release and clearance of goods across borders. The TFA also aims to simplify and clarify international import and export procedures and to make trade-related administration easier and less costly. The WTO forecasts that the TFA will create a significant boost for the multilateral trading system.

Implementation of the TFA is predicted to benefit all members and should slash members’ trade costs by an average of 14.3 percent.  Developing countries potentially have the most to gain from the implementation of the TFA.  The TFA is predicted to increase the number of new products exported by developing countries by as much as 20 percent, with least developed countries likely to see an increase of up to 35 percent, according to the study by WTO economists in 2015.

While the critical mass has now been reached, allowing the TFA to become effective, there are several remaining WTO members that may still ratify the TFA.

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In the past two days, two more countries – Peru and Saudi Arabia – ratified the World Trade Organization’s Trade Facilitation Agreement (TFA).  Their ratification followed Mexico and Hondurus, who ratified the TFA earlier this month.

The submission of instruments of acceptance from Peru and Saudi Arabia means that more than 80 percent of the ratifications needed for the TFA to take effect have been obtained.   The TFA will enter into force once two-thirds of the WTO membership formally accepts it.  Now that Peru and Saudi Arabia have accepted the TFA, there are a total of 89 ratifications.

The TFA requires its members to establish and maintain a national committee on trade facilitation to facilitate implementation of the TFA.  Earlier this year, on June 8th, the WTO hosted an experience-sharing event to help members of the WTO identify best practices and the challenges faced by WTO members in establishing or maintaining national trade facilitation committees.

The TFA contains provisions for improving the movement, release and clearance of goods and increasing global merchandise exports.  According to the WTO, the TFA could add USD 1 trillion per year to global trade.  For a brief summary of the TFA, see our earlier post here.  The World Trade Report 2015 is available here.