It may be recalled that the TFA was agreed by WTO members at a ministerial conference in Bali in December 2013, though India did not play ball with the WTO as it sought to get a reprieve to its use of subsidy for its food security programme. However, persuaded by the US President Obama during Prime Minister Modi’s US visit last year that India’s concerns on food security for public stockings would be taken on board, New Delhi joined the consensus on implementing TFA after the WTO’s highest decision-making body-the General Council opened the deal for ratification by members late last year. Since the Preparatory Committee on Trade Facilitation (PCTF) met on June 11 this year, the total number of ratifications received now cover 49 WTO members or around 45 per cent of the total needed to bring the TFA into force. The Committee is sanguine to get a substantial number of new ratifications when it meets in February 2016, even as many members might ratify the TFA in the run-up to the 10th WTO ministerial in Nairobi, Kenya in December this year.
In a special chapter on TFA in this year’s world trade report, the WTO Secretariat has for the first time examined why the TFA is important, what its economic impact will be and how the WTO is taking a spate of crucial and novel steps to help countries to maximize its benefits. Accordingly, global merchandise exports are estimated to increase by between $750 billion and $1 trillion per annum with developing countries’ exports to rise by between $170 billion and $730 billion per annum. Overall boost to world export growth per annum is estimated at up to 2.7 per cent while overall boost to global GDP growth per annum at 0.5 per cent.
The TFA is likely to help developing nations diversify their exports. If the TFA is fully implemented, they could increase the number of new products exported by as much as 20 per cent with the least developed countries likely to see a much bigger increase of up to 35 per cent. Developing countries are expected to enter an additional 30 per cent more foreign markets and LDCs a further 60 per cent more. The report contends that many developing countries have sought to participate in global value chains to expand their trade, improve access to technology and increase productivity. Timeliness and predictability in the delivery of intermediate goods are important to the successful management of global value chains. Since the TFA would reduce both delays and variability in delivery time, it should increase the opportunity for developing countries to participate in these value chains. The report further observes that the TFA could expand the participation of their small and medium enterprises in global trade, help to attract more foreign direct investment, increase government revenues and reduce corruption at customs by bringing efficiency and transparency in the entire operations of the movement of goods across the borders and in transit. More pointedly, by pruning delays and uncertainty in delivery, trade facilitation reforms benefit the rural poor who export perishable products. Besides, trade facilitation results in the simplification of regulations which provides significant benefits to small/ informal/women traders because often they do not have the necessary capacity or resources to deal with complex documentation requirements.
Interestingly, the report notes pointblank that trade facilitation reforms help boost government coffers by augmenting trade flows, hence expanding the tax base, increasing tax collection efficiency for any given level of imports and increasing detection of customs fraud and corruption. A country of continental size like India with billions of dollars of imports of both essential and inessential items, the reforms of the customs department is a crying necessity and trade facilitation agreement is the opportune time to overhaul the obsolete and graft-laden machinery.
The report’s main findings have been arrived at using the ‘computable general equilibrium’ (CGE) model that is complemented by a separate economic modeling approach known as the ‘gravity’ model. Applying both approaches allows the WTO to respond to different questions and to compare the results to the body of the existing research on trade facilitation. Both models revealed that the potential gains from the TFA are large and that developing countries will capture the majority of the resulting economic opportunities.
For India which has not yet deposited the instrument of ratification like other major trading partners such as China, the US and the EU did with the WTO Secretariat, the time to act is now as there is a renewal of faith in the multilateral body with the WTO Ministerial looming large on the horizon in a few weeks time. It is one thing for India to always fight for what it feels the legitimate national interests of farmers and other less molly-coddled sections but it is altogether another vital thing to give and take in global trade negotiations. There is no point in adopting minatory posturing without meaning when India is not a member of the major trading blocs that dot the trading universe.
India has been maintaining that it was the original founder member of the erstwhile GATT and its modern avatar the WTO in 1995. It has to play according to rule-based trading regime that the WTO is attempting to craft so that there is an in-built measure of discipline in a world laden with so many regional trading blocs and free trade areas where skating on the thin ice of commerce is challenging in terms of resources, manpower and material. So far, the Minister of State for Commerce and Industry (Independent Charge) Ms. Nirmala Sitharaman had taken obdurate positions in WTO negotiations and it is time New Delhi softened its stance on the TFA ratification so that it will lead to a win-win situation both for domestic manufacturers and foreign players in terms of rendering “ease of doing business” endurable, if not durable enough. (IPA Service)
TIME FOR INDIA TO RATIFY TRADE FACILITATION AGREEMENT
NEW WTO REPORT OFFERS MORE BENEFITS TO POOR
G. Srinivasan - 2015-10-28 11:46
The World Trade Organization (WTO) has unequivocally told its member community recently that the more extensive and the speedier the implementation of the Trade Facilitation Agreement (TFA), the greater will be the gains. WTO Director General Roberto Azevedo was more forthright in contending that the implementation of “the TFA could have a bigger impact on international trade than the elimination of all remaining tariffs” in a foreword to the World Trade Report, 2015 the Geneva-based world trade monitoring body released on October 26. TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building for developing and least developed countries to bolster their trade facilitation works in tune with global standards. It is small wonder that Azevedo characterized the TFA as “global trade’s equivalent of the shift from dial-up internet access to broadband” and it will have an effect akin to that.