4/06/2015 - Implementing the WTO Trade Facilitation Agreement (TFA) could reduce worldwide trade costs by anywhere from 12.5% to 17.5%, according to new OECD analysis, with the greatest benefits accruing in developing countries.
The 2015 OECD Trade Facilitation Indicators (TFIs) find that countries which implement the TFA in full will reduce their trade costs by anywhere from 1.4 to 3.9 percentage points more than those that only implement the minimum requirements. The greatest opportunities for reductions in trade costs are in low and lower middle income countries.
Trade costs include all tariff and non-tariff costs including transport, border-related and local distribution costs from foreign producer to final user in the domestic country.
The Trade Facilitation Agreement was the most substantive outcome of the WTO’s first multilateral agreement, concluded in December 2013 during the 9th WTO Ministerial Conference in Bali, Indonesia. The TFA creates a significant opportunity to improve the speed and efficiency of border procedures, thereby reducing trade costs and enhancing participation in the global value chains that characterise international trade. The WTO General Council formally adopted the Bali Package measures in November 2014, and the TFA will enter into force once two-thirds of WTO members have completed domestic ratification processes.
The updated OECD Trade Facilitation Indicators (TFIs) provide the most current assessment of the impact of the WTO TFA. The OECD TFIs are designed to inform governments on potential measures to improve border procedures, reduce trade costs, boost trade flows and reap greater benefits from international trade. The Indicators identify areas for action and enable the potential impact of reforms to be assessed post-implementation.
“As G20 economies seek to achieve an additional 2% of GDP growth by 2018, facilitating a more open flow of goods and services across international borders should be a key contributor to this target,” OECD Secretary-General Angel Gurría said. “The new Trade Facilitation Indicators will help countries benchmark their performance and identify areas of priority action where great rewards can be reaped with little effort.”
The case for fully implementing the Trade Facilitation Agreement is compelling – for producers of goods and services, full implementation will lift export performance and lower the costs of imports. These lower costs will eventually be passed onto consumers, especially those in countries that can afford these imports the least.
Significant financial assistance is available to help countries implement reforms. Nearly USD 1.9 billion has been disbursed in aid for trade facilitation since 2005, with annual commitments up eightfold between 2005 and 2013. An even more compelling argument is the fact that most of the TFA measures with the highest cost reduction effect are easy and cheap to put in place.
The 2015 OECD Trade Facilitation Indicators were presented in the context of the OECD’s annual Ministerial Council Meeting, which devoted one of its sessions to discussing the cross-linkages between trade, investment and development, including efforts to combat protectionism and further strengthen the multilateral trading system.
For further information on the Trade Facilitation Indicators, an interactive website allows users to review and compare trade facilitation indicators across 152 countries. Once a given countries’ trade facilitation performance is identified, a policy simulator allows users to test the effects of policy changes.
For further information about Trade Facilitation Indicators, please visit: www.oecd.org/tad/facilitation/indicators.htm