Although it may not be on the radar screen of the in-coming Trump administration, the World Trade Organization’s Trade Facilitation Agreement (TFA) is on the cusp of entering into force. It will be the first WTO multilateral agreement since the WTO was created in 1995. On 16 December 2016, Canada submitted its “instrument of acceptance” to the agreement and Canada’s ratification brings the number of ratifying countries to 103, including the United States. Only seven more World Trade Organization (WTO) members need to ratify it in order for the agreement to enter into force and it is expected that the last seven members will ratify it relatively quickly.
What are the Implications of the WTO TFA?
According to a 2015 WTO Report, developed countries such as the United States stand to gain as the TFA has the potential to reduce trade costs for WTO members by an average of 14.3 percent. If implemented, the TFA will also reduce the amount of time for the import and export of goods by one and a half to two days, respectively. The WTO Report goes into detail about the theory and measurement of trade facilitation and how trade facilitation creates economic benefits. However, the difficulty with the TFA is not about whether facilitation creates economic benefits, reduces costs and administrative burdens, rather it is whether developing and least developed countries (LDCs) are able to implement their commitments.
TFA implementation is where things get murky and leave some shrugging their shoulders. First, the requirement to implement is directly linked to a country’s capacity for implementation. The WTO Report states that “[a]vailable information on the cost of implementing trade facilitation reforms is quite limited.” Additionally, donor countries are concerned that some member nations lack the political will for implementation. However, recognizing the challenges, the TFA establishes a Trade Facilitation Agreement Facility (TFAF) that is intended to match up demands for capacity building from LDCs with donor assistance from developed countries. Although the TFA will not have the same impact as would the TPP or RCEP, its entry into force will continue to push forward with free trade in Asia Pacific and elsewhere.