Business Magazine

Trade Facilitation Helps Developing Countries Get a Leg Up

Posted on the 24 October 2016 by Center For International Private Enterprise @CIPEglobal


By Lindsey Klaassen

This piece originally appeared on the U.S. Chamber of Commerce Above the Fold blog

Developing countries tend to experience higher costs to trade and are ill-equipped to navigate through the mire of international border requirements. The World Trade Organization (WTO) established the Trade Facilitation Agreement (TFA) in part to address this very challenge.

The TFA is unique in several respects, as it was the first multilateral trade agreement set forth by the WTO, and it was intentionally designed to make cross-border trade easier for developing countries. Once fully implemented, it is estimated that the TFA will reduce trade costs by up to 15 percent for developing countries and increase global merchandise exports by up to $1 trillion annually by increasing customs efficiency and cutting red tape that impedes the efficient flow of goods at the border.

The Trade Facilitation Agreement was intentionally designed to make cross-border trade easier for developing countries.

In addition, what makes the TFA ground-breaking is that the requirements for a country to implement the agreement are tailored according to that nation’s capacity to do so. The agreement does not adhere to a one-size-fits-all standard, and as a result, it allows countries of all stages in development to participate.

Special and differential treatment is further extended to developing and least developed countries by granting greater flexibility and additional grace periods in implementation commitments when needed. Wealthier nations are also encouraged to provide assistance to developing countries to help the latter reach their capacity to implement the agreement.

Of the total 164 countries that belong to the WTO, 109 must ratify the TFA before widespread adoption can take effect. As of today, 94 countries have ratified the agreement, putting us 85 percent of the way there. However, reaching the 109 benchmark will only be the first step toward the greater challenge – that is, achieving economically meaningful results and reduced trade costs through TFA.

Recognizing that neither the private nor public sector can turn this goal into reality on their own, the Global Alliance for Trade Facilitation (the Alliance) was established to bridge the gap and advocate for effective trade facilitation reforms measured by real-world business metrics.

The Alliance is a unique public-private platform established by the World Economic Forum (WEF), the International Chamber of Commerce (ICC), and the Center for International Private Enterprise(CIPE), and joined by the governments of Australia, Canada, Germany, the United Kingdom, and the United States. The Alliance works with private enterprises and government officials to pinpoint and address the areas in trade that pose the most difficulty.  We at the Chamber are proud supporters of the Alliance and look forward to strong success around the globe.

We’re also working with the Federation of Indian Chambers of Commerce and Industry (FICCI) and the U.S. India Business Council (USIBC) to cohost the India-United States Workshop on Trade Facilitation, which will be held on October 17 and 18 in New Delhi, India. This program will bring together public and private sectors to find a path forward for India’s implementation of the TFA.

Cumbersome border regulations hurt competition for everyone and restrict global markets from reaching their potential. Every nation – and particularly developing countries – will benefit from the TFA, and we are excited to get the ball the rolling. We need to get the final 15 countries across the finish line by ratifying the agreement and then working together towards implementation.

It’s time to take action and move this initiative forward before the year’s end.

Lindsey Klaassen is a Staff Assistant with the National Security and Emergency Preparedness Department at the U.S. Chamber of Commerce

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