WEB DESK: The World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) struck at a ministerial conference in Bali in December 2013 to open trade and investment on a global scale has made a reasonable progress so far. As against the understanding that the agreement will come into force when a two-thirds of members have ratified it, fifty out of 161 current WTO members have ratified it up to now.
The benefits of the TFA are, nonetheless, said to be huge. According to the calculation of the WTO, the agreement will do more to boost trade if all the world’s tariffs are removed, cutting costs 9.6 to 23.1 percent. The treaty would cut red tape at borders, standardise customs procedures and could add dollar 3.6 trillion to annual global exports.
Even on a lower side, the simulations confirm that the trade gains from speedy and comprehensive implementation of the TFA are likely to be in the trillion dollar range, contributing up to almost one percent to annual GDP growth in some countries. The WTO’s Director General, Roberto Azevedo, was so much upbeat about the agreement that he remarked “you could say that it is global trade’s equivalent of the shift from dial-up internet to broadband.”
The TFA is particularly welcome at a time when international trade growth has been disappointing and its recovery is expected to be slow. According to the WTO projections, the growth in world merchandise trade will pick up only slightly, rising from 2.8 percent in 2014 to 3.3 percent in 2015 and 4.0 percent in 2016, but well below the annual average growth of 5.1 percent posted since 1990.
Besides, in the short run, trade expansion was not expected to outstrip overall economic growth as had been the general pattern for decades. The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. The agreement also sets out measures for effective co-operation between customs and other appropriate authorities besides containing provisions for technical assistance and capacity building in this area.
The TFA also stipulates provisions for developing countries for the first time in the WTO history by linking the implementation of the TFA with the capacity of the country to do so. Besides, a facility has been created in the TFA for the developing members to receive the assistance needed to reap the full benefits of the agreement.
Although benefits of the TFA far exceed the constraints likely to be imposed by the treaty on the member countries, there is no certainty, at least as yet, that the agreement would come into effect anytime soon. It was about two years ago that the treaty was signed but 57 more members still need to ratify it before it could be implemented on the ground.
The reason for reluctance to ratify could be the apprehension by certain members that their trade deficit could widen due this measure and they will not be able to resort to protectionism to restrict imports and prop up their external sector accounts. Also, the possibility of dumping due to freer trade could increase once the agreement takes effect. However, we feel that Pakistan has done the right thing to become the 51st member of WTO to ratify the agreement. Its ambassador to WTO, Syed Tauqir Shah, presented the country’s instrument of acceptance to Director General Roberto Azevedo on 27th October, 2015. It was perhaps necessary for Pakistan due to its open economy and certain non-tariff barriers faced by its exports.
It needs to be recognised, nonetheless, that the potential for increase in exports would remain constrained in our case till the productivity of the economy is not enhanced which is presently handicapped by factors like severe energy shortages, poor infrastructure and law and order situation. According to latest estimates, Pakistan’s global ranking has already slipped 10 places in case of doing business, standing at 138th position among 189 countries, as the country’s performance deteriorated in almost all indicators particularly on benchmarks of getting an electricity connection and paying taxes.
Obviously, if the economy fails to generate enough exportable surpluses, no amount of incentives is going to help bridge the trade gap and reverse the present falling trend in exports.