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Trade Facilitation Agreement in Danger Despite Promise of Aid to Developing Countries

Tuesday, July 29, 2014
Sandler, Travis & Rosenberg Trade Report

Efforts to implement the Trade Facilitation Agreement that World Trade Organization members concluded in Bali, Indonesia, last December are in jeopardy after India signaled that it will not support a move to add the TFA to the WTO Agreement until there is more concrete progress on its priority issue of food security. Some observers say failure to meet a July 31 deadline could deal a severe blow to the WTO, which has touted the TFA as evidence that it can still conclude a comprehensive new trade agreement among 160 countries that has been under negotiation for more than a decade.

The WTO General Council convened last week aiming to adopt a protocol that would open the TFA for member approval through July 31, 2015. India, however, refused to give its assent in an effort to force further work on ensuring that its food security spending will not count toward the calculation of its trade-distorting subsidies, which are limited under the WTO Agriculture Agreement. WTO members agreed in Bali to develop a permanent solution to this issue by 2017 and to refrain from filing related WTO cases until then, but New Delhi now wants a permanent solution by the end of this year and a delay in the TFA protocol vote until then. Indian officials have said they are not opposed to the TFA but are intent on ensuring that issues of higher importance to developing countries “be taken forward in the same time frame as trade facilitation.”

Other WTO members, however, are resisting India’s demands. A July 24 statement from more than two dozen developed and developing countries asserted that the package of decisions reached in Bali “was finely balanced” and that “it would not be possible to reopen one of those decisions without unravelling the entire package.” The European Union said that if the TFA protocol is not adopted “the credibility of the WTO, which has during the financial crisis proven its value as a firewall against protectionism, would be further damaged.” Deputy U.S. Trade Representative Michael Punke criticized India for its willingness to “walk away from [its] commitments” and “kill the Bali agreement” and said “there would be [no] business as usual in the aftermath” of such a development. There have also been warnings that India’s position could dampen prospects for additional foreign investment in that country. A Reuters article notes that while it is technically possible for WTO members to “pass the agreement on the basis of a qualified majority,” doing so would be “unprecedented and virtually impossible in an organization that operates on consensus.”

In the meantime, a number of international organizations have announced programs to help developing countries implement their obligations under the TFA, which they may do over transitional periods of their own choosing and according to their own individual capacities. The World Bank’s Trade Facilitation Support Program will provide support in the design and implementation of policy, regulatory, legal and institutional reforms, taking into account countries’ schedules of commitments, identified gaps and implementation capacity. Priority will be given to (1) low-income and fragile and conflict affected countries and (2) middle-income countries that act as gateways to least-developed countries and/or whose performance significantly impact the performance of LDCs in the region as well as those that are willing to co-finance technical assistance activities.

The WTO plans to set up a TFA Facility to help developing countries and LDCs implement their obligations under the agreement. This facility, which will only become operational when WTO members adopt the protocol to add the TFA to the WTO Agreement, will help countries assess their specific needs and identify sources of assistance and will provide grants for preparation and implementation of certain projects when no other funding is available.

Similarly, the World Customs Organization, the Organization for Economic Cooperation and Development, the United Nations Conference on Trade and Development and several other international organizations said they will provide coordinated support to developing countries for TFA implementation. This will take the form of immediate assistance, for example in creating faster and more efficient cross-border and regulatory procedures through effective collaboration among all relevant stakeholders, as well as longer term implementation planning and support in implementing comprehensive reform programs built on the TFA measures.

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