Update: the three essential tasks for the WTO’s trade facilitation deal

A year ago, two-thirds of the WTO’s membership had ratified the Trade Facilitation Agreement, activating it in the ratifying countries. What’s happened since then?

Advertisements

By Peter Ungphakorn
FEBRUARY 22, 2018 | UPDATED FEBRUARY 22, 2018

A year ago today, the World Trade Organization’s Trade Facilitation Agreement took effect in the ratifying countries amid a blaze of publicity, two decades after it was first proposed.

It was the first new WTO agreement since the late 1990s and its potential benefit was huge, particularly for implementing countries and particularly if their own procedures for handling imports and exports at the border were cumbersome.

JUMP TO

1. The need to keep ratifying
2. The need to notify and implement
3. The need to provide assistance

It was also the first agreement to allow developing countries to link what they were prepared to do with receiving assistance from richer countries and donor organisations.

But the promise of the streamlined customs and other processes was conditional. For the full effect to be felt, the agreement had to be implemented in full. And a year ago that was still a long way off.

“The real work is just beginning,” said WTO Director-General Roberto Azevêdo that day, February 22, 2017, and he warned against complacency.

I wrote at the time that countries still needed to do much more on this important agreement. There’s been some quiet progress since then, but it’s been slow.

There are three main areas of work: for the countries that hadn’t yet ratified to do so; for all countries to implement it including developing countries saying what choices they were going to make; and for the promised assistance to be delivered — the way aid is handled here is a unique feature among WTO agreements.

This is a brief look at what has been achieved since then.

Chart, TFA ratifications by month
Source: TFA Facility,  Click the image to see it full size

1. The need to keep ratifyingBack to top

As soon as the two-thirds figure was reached on February 22, 2017, the pressure was off, and the flow of ratifications has eased off too.

NOT YET RATIFIED

The agreement will not apply to these countries until they ratify it, although other countries will apply the trade facilitation measures equally to all WTO members (9.2.18)
Angola, Benin, Burkina Faso, Burundi, Cabo Verde, Cameroon, Colombia, Cuba, Congo (Democratic Republic), Djibouti, Ecuador, Egypt, Guinea, Guinea-Bissau, Haiti, Kuwait, Liberia, Maldives, Mauritania, Morocco, Papua New Guinea, Solomon Islands, Suriname, Tajikistan, Tanzania, Tonga, Tunisia, Uganda, Vanuatu, Venezuela, Yemen, Zimbabwe
See the TFA Facility website

Up to that date, the WTO had campaigned vigorously for countries to ratify and the ratifications accelerated from late 2016 to February 2017.

Immediately afterwards, the campaign stopped and the numbers tailed off. Countries have continued to ratify, but slowly, except for a mini-peak around the December 2017 WTO Ministerial Conference in Buenos Aires.

What the WTO’s campaign never clarified is that even after the two-thirds was reached, the agreement still hadn’t “entered into force” everywhere, only in the ratifying countries.

The remaining members also have to ratify it if it is to apply to them, and for them to receive any aid under the agreement.

Since February 22 a year ago, 18 members have ratified it, but 32 still have not.

The number has fallen gradually bit significantly a large number of countries that have not yet ratified are in Africa, the continent that is forecast to benefit most from the agreement.

There may be other reasons why the 32 still haven’t ratified. But it would be a pity if the end of the campaign on February 22, 2017 meant that outside the limelight, some countries might consider ratification no longer to be a priority.

That said, those that have not ratified will still be able to trade more easily with other countries because each applies the provisions to all-comers. But larger countries that have not ratified might not implement the agreement, and may cause problems for their trading partners.

Cat A, B, C notifications
Developing countries’ category A, B and C notifications. Source: TFA Facility. Click the image to see it full size

2. The need to notify and implementBack to top

The agreement requires countries to provide information on what they intend to do, including the aid they intend to provide, and on details of the trade facilitation measures they have implemented. The information is gradually being submitted but progress continues to be slow.

On trade facilitation itself, the requirement includes: governments providing information and allowing consultation on laws and regulations, how rulings and appeal are handled, impartiality and non-discrimination, fees, release and clearance of goods, cooperation between border agencies and between customs authorities, various formalities, and freedom of transit.

Developed countries simply have to implement everything. Most had already done a lot unilaterally.

But for developing countries, ratifying the agreement says nothing about what each country is going to do. They can choose how they want to handle its provisions, under three categories. They have to tell other members, and the world at large, what they have chosen to do and under which category.  The information is shared through notifications to the WTO:

  • Category A — measures they will implement immediately (or one year later for least-developed countries). Some, such as Egypt and Indonesia, have already notified under this category even though they have not yet ratified the agreement itself, suggesting their ratification process ought to be underway (107 notifications submitted, 44.9% of all notifiable items)
  • Category B — measures that will be phased in over a notified period (47 notifications, 7.6%)
  • Category C — measures that will be phased in so long as assistance is provided (37 notifications, 8.9%)

The stream of these notifications has been promisingly steady, if slow. It has risen to 61.4% of the notifications expected for the full range of options, compared with 47.5% in late June 2017.

The figures are broad and hide crucial detail. Even if a country has handed in notifications in all three categories, the content might not cover all the provisions, so further notifications will be needed.

Often overlooked is how notification also plays an important role domestically. It means the country’s government is getting its act together and is prepared to tackle any vested interests that might resist reform. The agreement also encourages cooperation between various agencies.

It’s an open secret that customs procedures in a number of countries are prone to corruption and inefficiency, although procuring expensive computer systems creates its own temptations. Change can also threaten officials’ sense of security.

Ultimately the country streamlining its procedures gains the most. Its imports and exports enter and leave the country quickly and at lower cost.

3. The need to provide assistanceBack to top

Twelve members (including the EU and some of its member states) have notified development assistance under the agreement.

The agreement does not commit donors to give assistance. On this, it’s a statement of intent. Donors said they could not legally bind their budgets.

But although implementing this side of the deal has only just begun, in general, aid for trade-facilitation has been around for some time. For example, the EU says its latest data shows over €700m provided in the period 2008–12. That’s before the WTO deal was struck.

The TFA Facility website’s list of donors includes 17 developed countries (including the EU and some of its members), eight international organizations, 12 regional organizations, five transport organizations and five others, with links to their programmes.

It will still take time and effort for the agreement to achieve its potential. In some countries, probably a long time — longer than the economists’ simulations assumed. As Azevêdo said, it’s only just begun.


Updates: None so far


Author: Peter Ungphakorn

I used to work on trade issues and am now retired. I am an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions, with periodic analyses for AgraEurope www.agra-net.com/agra/agra-europe. This blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form or tweeting @CoppetainPU — Copyright © Peter Ungphakorn except where stated