Pact seen to greatly reduce global trade costs

THE IMPLEMENTATION of the World Trade Organization’s Trade Facilitation Agreement (TFA) is expected to reduce global trade costs by as much as 17.5 percent, further enhancing the participation of economies in global value chains.

In its June 2015 report, the Organization for Economic Cooperation and Development (OECD) said that, with the TFA, low and middle income countries like the Philippines stand to benefit the most in terms of cost savings.

The TFA formed part of the Bali Package adopted by the WTO members during the 9th ministerial conference held in Bali, Indonesia in December 2013.

Trade facilitation refers to initiatives like cutting red tape and streamlining customs and port procedures. Thus, the agreement is expected to improve the speed and efficiency of border procedures which, in turn, will ease the nontariff barriers and enable smaller enterprises to tap growing opportunities in regional and global trade.

Once fully implemented, trade facilitation measures will greatly simplify the processing of trade documents and border procedures, generating cost savings of 2.8 percent to 4.2 percent, the OECD reported.

For lower middle income countries like the Philippines, streamlining border procedures are estimated to have the greatest impact (a reduction of 3.9 percent), while harmonizing and simplifying trade documents and automating trade and customs procedures would reduce costs by 3.5 percent and 2.9 percent, respectively.

Based on the OECD country analysis, the Philippines’ strongest trade facilitation performance would be in areas involving the trade community, fees and charges and internal border agency cooperation. But the country did not perform quite as well in the areas of information availability and advance rulings.

WTO director general Roberto Azevêdo, during his visit to Manila last month, had asked the Philippines to support the ratification of the TFA, stressing that the agreement would be “very important for the Philippines.”

“Once implemented, this agreement could inject up to $1 trillion per year into the global economy, creating 21 million jobs worldwide,” Azevêdo earlier explained.

“The challenge now, as far as the TFA is concerned, is ratification. Two-thirds of WTO members must ratify the agreement for it to come into force. Some members have already done so, but we need to accelerate the process. I am therefore urging the Philippines … to take the necessary steps to ratify this agreement, and thereby seize the benefits it offers.”