Trade Facilitation Agreement Could Yield Big Drop in Trade Costs, OECD Says
A recent Organization for Economic Cooperation and Development analysis finds that implementing the Trade Facilitation Agreement concluded by World Trade Organization members last year could reduce worldwide trade costs by anywhere from 12.5 percent to 17.5 percent. Trade costs include all tariff and non-tariff costs, including transport, border-related and local distribution costs from foreign producer to final user.
According to the OECD, countries that implement the TFA in full will reduce their trade costs by anywhere from 1.4 to 3.9 percentage points more than those that only implement the minimum requirements. Moreover, the greatest opportunities for reductions in trade costs are in low and lower middle income countries. The OECD notes that significant financial assistance is available to help countries implement reforms needed to implement the TFA but that most of the agreement’s measures with the highest cost reduction effect are easy and cheap to put in place.
The TFA will enter into force once two-thirds of WTO members (approximately 100 countries) have completed domestic ratification processes. To date only seven have done so, including the United States and, most recently, Australia.