New WTO Deal Supposed to Boost International Trade by $1 Trillion
Global trade has been growing slowly over the last several years, but it might have just gotten a big shot in the arm.
As of yesterday (February 22nd, 2017), the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) has officially received the necessary ratification from countries around the world to enter into force.
According to the WTO, the agreement “seeks to expedite the movement, release and clearance of goods across borders, launches a new phase for trade facilitation reforms all over the world and creates a significant boost for commerce and the multilateral trading system as a whole.”
What seems to be grabbing everyone’s attention about this deal is its potential to increase world trade by $1 trillion per year.
The FTA has been in the works for some time. It was actually was agreed to by WTO members at the Ministerial Conference in Bali back in December of 2013. In 2015, the WTO released a World Trade Report subtitled
Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement.
The report contained a detailed study of the TFA and estimates of its results, which include that trillion dollar world trade growth potential.
In a WTO press release after the launch of the report, Director-General Roberto Azevêdo said:
… all too often, outdated and uncoordinated customs processes slow down the movement of goods and raise costs to prohibitive levels. By standardizing, streamlining and speeding-up customs processes around the world, the WTO’s Trade Facilitation Agreement will help to solve this problem. It is global trade’s equivalent of the shift from dial-up internet access to broadband — and it will have a similar impact.
The report found the TFA would have the following key impacts:
Global merchandise exports estimated to increase by between $750 billion and $1 trillion per annum.
Developing countries’ exports estimated to increase by between $170 billion and $730 billion per annum.
Developed economies’ exports estimated to increase by between $310 billion and $580 billion per annum.
Fuller, faster implementation of the TFA will increase the likelihood of impacts reaching the higher ends of these ranges.
Overall boost to world export growth per annum estimated at up to 2.7 per cent.
Overall boost to global GDP growth per annum estimated at 0.5 per cent.
You can get the entire report from the WTO.
It required 110 nations, two-thirds of the WTO members, to ratify the TFA in order for it to go into force. It took just over three years from the agreement being made to that actually happening.
That delay has not lessened the WTO’s excitement about the agreement. Director-General Azevêdo called the agreement “a landmark for trade reform” and said of its ratification in the WTO’s press release yesterday:
“This is fantastic news for at least two reasons. First, it shows members’ commitment to the multilateral trading system and that they are following through on the promises made in Bali. Second, it means we can now start implementing the Agreement, helping to cut trade costs around the world. It also means we can kick start technical assistance work to help poorer countries with implementation.
“This would boost global trade by up to 1 trillion dollars each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world.
“But this is not the end of the road. The real work is just beginning. This is the biggest reform of global trade in a generation. It can make a big difference for growth and development around the world. Now, working together, we have the responsibility to implement the Agreement to make those benefits a reality.”
Now we’ll see if the implementation of the TFA really has the kind of impact on global trade that the WTO projects.