WTO agreement could reduce worldwide trade costs

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.

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.

“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.