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Aviotec - Never Mind the TPP, the Global Trade Facilitation Agreement Has Been Ratified

The new Trade Facilitation Agreement (TFA) came into force on February 24, following its ratification by Chad, Jordan, Oman and Rwanda, which brought the total number of countries who have ratified the treaty to over the required two-thirds of the World Trade Organisation (WTO) members (currently at 108 countries). The agreement serves to promote trade by establishing harmonised rules for further expediting the movement, release and clearance of goods crossing borders, including goods in transit. The agreement also provides for greater cooperation among customs and other national authorities on trade facilitation and customs compliance.Of particular importance for the air transport industry is the agreement's commitment to accepting e-payments and electronic documentation.

The International Air Transport Association (IATA) has enthusiastically welcomed the new trade agreement. Alexandre de Juniac, IATA’s Director General and CEO commented: “The Trade Facilitation Agreement will cut red tape at the border for faster, cheaper and easier trade. That’s great news for airlines, which deliver about a third of the goods traded across borders by value. And it’s a particularly timely reminder of the dangers of the current protectionist rhetoric that we are seeing in various parts of the world. Trade leads to growth; and growth results in prosperity. With the treaty now in force, we urge governments to move forward with early implementation so that the TFA’s substantial benefits can be realised.” Mr de Juniac concluded: “Aviation is the business of freedom. Air cargo is a vital link in the manufacturing supply chain and between producers and consumers. We look forward to working with governments and airlines to maximize the benefits of the TFA and make air cargo an even more potent catalyst for jobs, growth, and prosperity.”

Signed by WTO members in December 2013, the TFA is the biggest global trade pact in 20 years — and arguably the most important multilateral trade agreement which many people have never heard of. While the Trans-Pacific Partnership (TPP) garnered much attention during the recent U.S. presidential elections — Donald Trump signed an executive order, within days of becoming president, to pull out of the TPP — the TFA has quietly been proceeding with WTO ratification, without raising the ire of the new protectionist U.S. president. It is believed that The TFA will have a greater positive impact on global trade than the TPP.

Experience has shown that non-tariff barriers represent an estimated 219 percent de facto tax on trade. A 2015 study by WTO economists concluded that the TFA would:

  • reduce the trade costs of members by an average of 14.3 percent, with the most gains by developing economies;

  • reduce the time to import goods by over a day and a half, a 47 percent improvement over the current average;

  • reduce export time by nearly two days, a 91 percent advantage; and

  • increase global merchandise exports by up to US$1 trillion.

The WTO study concluded that the overall impact of the TFA would be greater than the elimination of all existing tariffs around the world. As a result, developing countries could increase the number of products they export by 20 percent, and least developed economies by up to 35 percent.

The TFA is also significant because it offers a new model for implementing global trade agreements and will take effect in a different way from previous WTO accords. Implementation is linked to the capacity of each member to meet the agreed requirements. Developing and least developed countries are able to tailor their implementation schedules to their specific needs. The TFA also includes assistance for countries that need to build the capacity to meet their commitments. A Trade Facilitation Agreement Facility will provide funds to help developing and least developed countries with implementation.

By John Dejak, Aviotec International

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