Trade Facilitation Agreement

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Trade Facilitation Agreement

A Brief Introduction About the Trade Facilitation Agreement

The two-trade facilitation agreement came into effect on the 22nd of February 2017. It was an outcome of the Doha Trade Negotiations, which began in 2001. The WTO members accepted the content of this agreement at the 9th Ministerial Conference at Bali, held between the 3rd and 6th of December 2013.

The objectives of this agreement are as under:

  • facilitate smoother and seamless movement of goods between the member countries including the goods in transit
  • ensure greater cooperation between the member countries about the facilitation of trade and compliance with customs issues
  • provide assistance as well as support to developing and the countries that are the least developed

The agreement has three sections which are as under:

  • Section 1 contains information regarding the agreement, provisions for comments by members, rulings, procedures for review and appeal, rules relating to import and export, fees to import and export
  • Section 2 deals with provisions related to the treatment of developing countries and those that are the least developed
  • Section 3 has information relating to institutional ties and final provisions, the progress of members to higher levels after entry

What Does TFA Mean

TFA means a trade facilitation agreement whose primary goal is to ensure the reduction of both cost and complexity of the trading process.

Who Takes the Trade Facilitation Agreement? – People Involved

The World Trade Organization has the primary objective of facilitating smoother trade and providing a platform for the weaker nations to improve trading relations with the developed countries. This agreement is between the World Trade Organization and its member countries. The member countries enjoy certain facilities, and as they are governed by WTO regulations, trade between member countries is hassle-free.

Purpose of the Trade Facilitation Agreement – Why Do You Need It?

The World Trade Organization or the WTO has members whose economic status varies, with some being developed countries and other developing or least developed countries. To facilitate trade between these countries, WTO ensures that there are certain regulations that govern these transactions. The three sections of the agreement cover the specific treatment of the lesser developed countries, including assistance in their capacity building and technical assistance, ensuring transparency through the availability of detailed information regarding trading norms and institutional agreements.

This agreement aims to provide all countries irrespective of their development status to participate in trade on a level playing field. The movement of goods, including goods in transit between member countries, becomes easier with faster clearance. The weaker players can actively participate at par with the stronger players with the assistance from the WTO as well as the regulations that need to be followed member countries.

Every country has a right to review and appeal procedures if they feel that another member country has an unfair advantage. The fees charged by member countries for import and export are also regulated. The agreement ensures cooperation from border agencies. All members are given the full opportunity to consult the WTO regarding their rights and obligations before becoming a member. Release of goods or clearance is carried out without complications.

Contents of the Trade Facilitation Agreement – Inclusions

The trade facilitation agreement pdf can be checked online to find out the contents. It is the first multilateral trade agreement of its kind since the formation of the WTO 20 years ago. It is expected to bring down total trading costs by 14% for the developing countries and by 13% for the developed countries through streamlining of trade flow across different borders.

The agreement includes information on how developing and least-developed countries are made competitive through technical assistance initiatives, information on the assistance available by donors. Where no other form of assistance is available, there are two types of grants.

When it comes to assistance through the WTO, the developing countries need to evaluate and determine whether they are ready to implement the TFA. These countries are classified into three categories. Countries in category A needs to implement the agreement when it comes into force. Category B will have a transitional period by which the agreement needs to be implemented, and Category C would require assistance in the capacity building before the agreement can be implemented.

The agreement also finds the right match between donors and recipients. Case studies and training aids are available for the developing countries to guide them regarding TFA implementation. The agreement also has information on how a recipient can get a grant for project preparation. This is provided when the recipient has been able to find a possible donor but is unable to develop a project according to the donor’s specifications.

Information regarding grants to implement projects are also provided in this agreement. These grants deal with ‘soft infrastructure’ which could be updating the customs laws through workshops.

How to Draft the Trade Facilitation Agreement?

Points to Consider While Preparing the Agreement

The TFA benefits would include a reduction in trading costs by 14.3%. Global trade would go up by $1 trillion annually. The biggest beneficiaries would be poor countries. In February 2017, the trade facilitation agreement ratification by two-thirds of the WTO members made it a reality.

The agreement is drafted by taking inputs from all the members of the WTO. The import and export processes between the member countries are simplified to improve trading between them. The WTO identifies the developed countries and the developing countries who are its members. They ensure the rationalization of fees charged by the member countries.

The functioning of customs and other regulatory authorities of different countries are taken into consideration while drafting the agreement so that there is greater cooperation.

Developed countries are classified, and according to their classification in category A, B, or C, the agreement will have provisions for assistance to these countries. The process by which the donor and the recipient countries can be connected needs to be mentioned. The names of all the countries involved in the agreement are classified as developed or developing countries. The agreement accommodates countries of all stages of development and tries to create a common platform for them so that all countries have the same opportunity to grow.

Negotiation Strategy

The member countries of the WTO have the opportunity to review and appeal any decision taken by it. This would include the fees charged on imports and export between the different member countries. The developing countries can negotiate the implementation of the TFA by presenting the required facts to the WTO. After analyzing their facts, the WTO will decide which category they should be classified under.

Benefits & Drawbacks of the Trade Facilitation Agreement

The member countries of the WTO are aware that the rules and regulations that govern trading between them will protect their interests. No country can impose any barriers of entry to another member country.

India is an integral part of the WTO, and the trade facilitation agreement in India has been started through the National Trade Facilitation Plan (2017-2020). Being a part of this agreement, the member countries have the right to oppose any legislation proposed by the WTO. Developing countries or least-developed countries that do not have the expertise to compete with the developing countries are classified into three categories. According to the category they are in, they will receive assistance from the WTO.

The TFA has been ratified by many members of the WTO, including India, which would lead to smoother customs procedures and faster clearance of goods. Developed member countries have to keep their import fees low so that developing countries have access to their markets. They cannot raise their fees, or else their membership might be canceled.

The developing countries would need a long time before they can become members of the WTO as they need to fulfill the conditions of the TFA. Even with the assistance from the WTO, the least developed countries would have to make numerous changes to their customs laws to meet the WTO standards.

What Happens in Case of Violation of Trade /Facilitation Agreement?

The WTO, through this agreement, ensures that all member countries are on the same platform about their rights to trade. Violation of the agreement occurs when the one-member government accuses another of the violation. The member country that has identified the issue will have to cite the particular clause that has been violated by the other member country. They will request for a consultation.

A panel could be set up by the WTO for settlement of disputes between the member countries. The dispute could be settled or terminated. It could be withdrawn by mutual consent. The panel could be established, but the members of the panel may not be yet considered.

A panel report is then prepared, after which no action is taken. The member countries could appeal against the panel report. The authority of the panel could lapse.

The WTO might give the member country appealing against a violation of the authority to retaliate. Compliance proceedings might be initiated against the member country violating the agreement. The report could be adopted, and recommendations made to bring to conformity the measures suggested. The respondent might notify the WTO regarding the implementation. There are various ways in which the violation of WTO regulations may be resolved, and it depends on the nature of the violation.

The WTO tries to facilitate trade between countries that are in different stages of development through the trade facilitation agreement. It tries to bring parity among the countries by extending assistance to the developing and least-developed countries. The assistance could be in the form of technical solutions or assistance with developing projects for recipient countries.

The developing countries are classified into three categories, and their implementation deadlines are set according to the kind of assistance they need. A country in category A would have to implement the TFA as soon as it comes into force. Category B countries would have a transition period, after which they would have to implement the TFA. The countries with the least development would come under category C. They would get technical assistance to be at par with categories A and B. Once they reach a certain level, they can implement TFA. WTO regulates the taxes charged on import and export by all member countries to ensure that no country suffers due to high entry barriers.