Trade Facilitation Agreement (TFA)

Trade Facilitation Agreement (TFA)

  1. Significance of TFA

    • Is the maiden global agreement
      • aimed at simplification of ‘customs regulations’ for boosting ‘trade’
    • The deal has been arrived at
      • through consensus among disparate nations – politically, geographically and economically
    • Trade facilitation
      • According to WTO, full implementation of the TFA
  • will reduce cost of trade by 14% (avg) for members
  • India’s trade will rise by 20%
  • LDC’s trade will increase by 35%
  1. Provisions of TFA – broad series of trade facilitation reforms

    • It aims to create a less discriminatory business environment through 
  • faster clearance procedures,
  • greater freedom of transit for goods,
  • stronger appeal rights for traders, and
  • reduced fees and formalities (red-tape) wrt imports and exports.
  1. Outcome of the Bali Package, 2013

    • India ratified it in Apr 2016
  2. The TFA came into force (globally)

    • in Feb 2017
    • after being ratified by two-thirds (112) of all WTO member nations (164)
  3. The TFA is expected to boost global trade as

    • The 164 WTO members account for >97% of global GDP and 96.8% of global trade.

Critics opine that

  1. TFA favours developed nations unfairly

    • as developing and LDC nations will need to upgrade their extant regulatory and customs practises, and modernise their trade infra,
      • While the developed countries have already got their house in order.
    • To address this concern, a ‘TFA Facility’ has been created
      • To provide the necessary assistance from developed countries.
  1. WTO’s core mandate was ‘Trade Development’ and not ‘Trade Facilitation’

    • while the Doha Round negotiations, especially wrt ‘agriculture’, continue to languish,
      • new issues like ‘e-commerce’ are taking the center-stage.
    • For India, a permanent solution to the issue of ‘public stock-holding of food-grain’ and discussions on a ‘special safeguard mechanism’ will remain critical
      • The extant WTO rules forbid MSP-based procurement >10% of the value of production of the grain being procured (de minimis)
      • India says the reference prices (1986-level) are too low and unreasonable today
      • she negotiated a ‘Peace clause’ in 2014 i.e India’s procurement prog will not be challenged till a permanent solution is found ⇒ India’s PDS is fully WTO-compatible
  1. TFA in services

    • India should bat for a TFA in services, in which it has a competitive edge

Final Word

  • Though the TFA is a step in the right direction, it should not be an excuse for letting the Doha agenda be the elephant in the room.
  • Given rising protectionism globally, TFA’s future hinges critically on its members’ commitment to its principles.

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