The success of the World Trade Organization's (WTO's) landmark Trade Facilitation Agreement (TFA), which took effect on Thursday, will depend on whether protectionism takes a turn for the better or worse.
The deal is expected to provide a needed boost to global growth by streamlining the trade regime, reducing the costs and time involved, and improving transparency. However, stronger voices against further trade liberalisation, such as of US President Donald Trump, might upset this scenario, experts said.
Part of the Bali Package of decisions agreed in 2013, the deal is supposed to be a watershed moment in WTO history. This is the first time a comprehensive decision was arrived at through consensus among nations, across the major geographical and political blocs.
Ratified by 112 nations or more than two-thirds of all member economies, the deal aims to help poorer and developing nations, said WTO director-general Roberto Azevedo on Wednesday.
Member nations of WTO account for almost all of global gross domestic product (GDP) and trade. Therefore, TFA's effects ought to be widespread.
"The agreement rests on improving of current practices and building upon existing trade. It doesn't target protectionism, which varies by nations," said Biswajit Dhar, trade expert and professor at Jawaharlal Nehru University.
While nations are committed to reduce tariffs, non-tariff barriers such as stricter product standards, labour and environmental regulations do not fall under the TFA ambit, he added. Such barriers have increased exponentially in the recent past.
"Developing countries could increase the number of products they export by 20 per cent, while Least Developed Countries could see an increase of up to 35 per cent," said Dhar.
That is if one discounts the rising effects of growing protectionism. India, for instance, has been in a long battle on public stockholding of foodgrain and the special safeguard mechanism, against richer nations led by America, France, Japan and the European Union.
With rationalisation of prices, additional yearly trade of $15-20 billion can be expected, according to Ajay Sahai, director-general at the Federation of Indian Export Organisations.
According to a WTO study, full implementation of TFA is forecast to decrease the trade costs of member nations by an average of 14.3 per cent, with developing countries having the most to gain. The TFA is also likely to reduce the time needed to import goods by at least a day and a half, and to export goods by almost two days, a reduction of 47 per cent and 91 per cent, respectively, over the current average.
Dveloping countries such as India are predicted to increase the number of new products exported by as much as 20 per cent, according to the study.
However, all these effects will take at least two years to be visible. All countries now have to independently notify various provisions, which might extend beyond the next three years. The basic set of provisions will be implemented by the poorest set of countries within a year from now. Also, many countries, including India, will receive more time to set in motion a further set of provisions.
"We expect goods movement and information sharing on trade to pick up soon," commerce and industry minister Nirmala Sitharaman said, adding that effective logistics support will also be achieved, based on real time data.
For India, a solution to the issue of public stockholding of foodgrain and discussion on a special safeguard mechanism will remain of primary importance at the WTO ministerial conference in Argentina later this year.
Services trade proposal
The government on Thursday sent the final legally vetted document on its proposal for a trade facilitation agreement on services at the World Trade Organization. Commerce and industry minister Nirmala Sitharaman said a special panel will take up the matter for hearing on March 14-17.
The nations in the panel will deliberate on whether to open the matter for wider discussion with other WTO members. India wants the issue to be on the agenda at the ministerial conference in Argentina. It aims to ease movement of skilled professionals across borders, as well as reducing transaction costs. India's services sector accounts for a little more than 60 per cent of its gross domestic product and 28 per cent of employment.
Easier trade
* TFA covers trade facilitation reforms over a gamut of issues;
* For instance, faster clearance procedures, enhanced conditions for freedom of transit for goods;
* Global traders to get improved appeal rights, as well as reduced fees and formalities;
* Countries to independently notify provisions on these reforms. Developing nations get up to a year to do so; some nations may ask for more time.
