World Trade Organization (WTO)

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.

As U.S. sanctions on Cuba continue to thaw, some long standing disputes have been reignited.  Perhaps chief among them is the decades-old battle over the trademark for “Havana Club” rum.

The original distillery that produced Havana Club rum was expropriated by the Castro regime in the 1960s.  After the original distiller’s trademark registration had lapsed, the Cuban government registered the mark in the United States in 1976.  The Cuban government assigned its rights in the mark to spirit producer Pernod Ricard in 1993.  Meanwhile, distiller Bacardi Ltd., which had fled Cuba in the 1950s, acquired rights to the Havana Club mark from the family of the original distiller in 1994.

After litigation in U.S. courts over the right to use the mark ensued, U.S. Congress passed the Omnibus Appropriations Act in 1998, which included Section 211, known as the “Bacardi Act.” Section 211, which was reportedly crafted at the behest of Bacardi, protected the trademarks of companies which had been expropriated by the Cuban government and, in turn, solidified Bacardi’s claim to the Havana Club mark through its connection to the original distillers.  In 2001, the World Trade Organization found that Section 211 was illegal because it was aimed at a single country, Cuba. The United States has, however, largely ignored the WTO ruling.

As part of the recent reduction of restrictions on Cuba, Pernod Ricard (through a joint venture with Cubaexport) has been been permitted to renew the Havana Club once owned by the Cuban government.  In a recent letter to the U.S. Treasury Secretary and the U.S. Secretary of State, twenty-five members of Congress demanded an explanation as to how OFAC has permitted Cubaexport-Pernod Ricard to renew the Havana Club mark in light of Section 211.  The members of Congress, largely representing Florida districts, are particularly concerned the U.S. government is ignoring Section 211 and is instead choosing to recognize the rights once held by the Castro regime which expropriated the goodwill of the brand decades ago.  Neither the Department of Treasury nor the State Department has yet issued a response.

The Havana Club saga is a cautionary tale which demonstrates that even though formal U.S. regulations are being scaled back, the broader relationship between the countries remains politically charged and full of pitfalls.  Navigating both the black letter regulations and the larger landscape of Cuban-U.S. relations requires skilled advocates and patience as “normalization” continues to take root.

The Trade Facilitation Agreement

On November 17, 2015, Panama became the 52nd WTO member country to ratify the Trade Facilitation Agreement (TFA). The United States has already accepted the TFA. The TFA will enter into force when two-thirds of the WTO’s 161 members have formally accepted the TFA, completed their domestic legal procedures, and submitted instruments of acceptance to the WTO.

What is the TFA and Why is it Important?

The TFA promises to improve trade efficiency and is projected to generate hundreds of billions of dollars in economic activity. The TFA contains provisions for improving trade efficiency by expediting the movement, release and clearance of goods across borders, including goods in transit.

For developing country economies, inefficiencies in areas such as customs and transport can be roadblocks to their integration into the global economy. These barriers can impair their export competitiveness or inflow of foreign direct investment. The TFA intends to enhance transparency and lessen some of the trade burdens for developing country members.

The Sections of the TFA:

  • Section I contains provisions for expediting the movement, release and clearance of goods across borders. It clarifies and improves articles of the General Agreement on Tariffs and Trade (GATT) 1994. It also sets out the provisions for customs cooperation.
  • Section II contains special and differential treatment provisions aimed at helping developing and least-developed countries implement the provisions of the TFA.

The Facility

The Trade Facilitation Agreement Facility (the Facility) was created to support the full implementation of the TFA. The Facility intends to help ensure that the developing and least-developed country members receive the assistance needed to reap the full benefits of the TFA.

Visit the WTO website to learn more about the TFA and the Facility.

The World Trade Organization (WTO) released new editions of its key statistical publications for 2015: International Trade Statistics, Trade Profiles, World Tariff Profiles and Services Profiles.

These publications provide data on world trade, including trends in world trade, trade policy measures, average tariffs imposed by individual economies, basic economic indicators, and key statistics on infrastructure services for approximately 200 economies.

The four publications are available in electronic form on the WTO website.  You can access and download the information regarding Trade Profiles here, and the other three publications here.

The printed versions will be available in mid-November.