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WTO Trade Facilitation Agreement Inches Closer to Force

The World Trade Organization is three steps closer to ratifying the Trade Facilitation Agreement, meaning greater ease of trade may not be far ahead.

This week, Peru, Saudi Arabia and Mexico joined the list of countries to ratify the agreement that promises to expedite the movement, release and clearance of goods for trade. The TFA also establishes measures for better cooperation between customs and for customs compliance issues.

These latest additions mean the WTO has 89 nations signed up, or more than 80 percent of the ratifications it needs to bring the TFA into force (the deal, negotiations for which concluded in 2013, requires two-thirds of WTO members be on board for it to move forward). Honduras and El Salvador ratified the deal earlier this month, and Madagascar agreed to it in June.

In 2014, according to the WTO, customs procedures for export required between two and 11 documents and took anywhere from six to 86 days. Imports were worse, demanding between two and 17 pieces of paperwork and taking from four to 130 days to process. The goal of the TFA is to help simplify those processes and processing windows, plus minimize the costs that come with them.

Once the agreement takes effect, total trade costs for low-income countries should come down 14.5%, they will fall more than 15 percent for lower middle-income countries and more than 13 percent for upper middle-income countries.

Part of the deal also includes plans to double least developed countries’ (LDCs) share of global exports by 2020. Africa is one region were benefits from the TFA are expected to be big as 34 of the 48 LDCs are African nations.

Because many countries in Africa are landlocked, lacking natural infrastructure (like waterways), hard infrastructure (roads, rail, ports) and regulatory infrastructure, trade costs on the continent can be steep. The World Bank’s Doing Business database points to sub-Saharan Africa as having the highest costs of both import and export processes.

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Successful implementation of the TFA, according to an article for the International Centre for Trade and Sustainable Development (ICTSD), would mean “reducing uncertainty related to trade, streamlining market access procedures, and providing greater transparency at customs, thus leading to lower transaction costs. Higher trade volumes would then be an engine of growth and poverty reduction.”

The TFA, according to the WTO, has the potential to increase global merchandise exports by up to $1 trillion per year and developing countries will likely capture half of the available gains.

“The Trade Facilitation Agreement will be of benefit to all members of the WTO because the costs of implementing the agreement are likely to be far less than the expected benefits from improving the flow of goods across borders,” the WTO said in a report.