Facts:
- The Trade Facilitation Agreement (TFA) in Goods of World Trade Organisation (WTO) came into effect with its ratification by two-thirds members of WTO including India.
- The TFA in Goods was adopted by the WTO Members in 2014.
- It aims to streamline, simplify, standardise and ease customs procedures and norms.
- It will help to cut trade costs around the world
What is TFA in Goods?
- The TFA in Goods is the WTO’s first-ever multilateral accord that aims to simplify customs regulations for the cross-border movement of goods.
- It was outcome of WTO’s 9th Bali (Indonesia) ministerial package of 2013.
- The agreement includes :
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- Lowering import tariffs and agricultural subsidies: It will make it easier for developing countries to trade with the developed world in global markets.
- Abolish hard import quotas: Developed countries would abolish hard import quotas on agricultural products from the developing world and instead would only be allowed to charge tariffs on amount of agricultural imports exceeding specific limits.
- Reduction in red tape at international borders: It aims to reduce red-tapism to facilitate trade by reforming customs bureaucracies and formalities.
India became the 76th member to ratify the trade facilitation agreement (TFA) of the World Trade Organization. Do you think this will benefit India? Critically examine. (200 Words)
Background
- In December 2013, WTO members concluded negotiations on a Trade Facilitation Agreement at the Bali Ministerial Conference, as part of a wider “Bali Package”
- The purpose of the new WTO Trade Facilitation Agreement is to expedite the movement, release and clearance of goods, including goods in transit.
- Trade Facilitation Agreement (TFA) aims to harmonise various non-tariff barriers like custom procedures or administrative hurdles in the developing & least developed countries with current practices in developed countries
- TFA will enter into force once two-thirds of members have completed their domestic ratification process
Benefits in General
- Implementing the WTO’s TFA will cut global trade costs by up to 15%
- Governments gain because efficient border procedures make them able to process more goods and improve control of fraud, thus increasing government revenue.
- It will increase customs revenues and reduce the incidence of corruption by greater transparency, improved governance and modernised border procedures
- Businesses gain because if they can deliver goods more quickly to their customers they are more competitive
- Reduction of documentary requirements, processing of documents before goods arrive, use of electronic payments, and quick release of perishable goods which can further reduce costs
- Increase in the opportunity for India to integrate into global value chains (GVCs) which are responsible for rapid expansion of trade
- Consumers gain because they are not paying the costs of lengthy border delays
Benefits to India (Apart from above)
- Make In India (MII) : Simplified custom & administrative procedures would attract much needed foreign investment for success of MII
- Indo-EU Free Trade Agreement (FTA) : TFA would help harmonise non-tariff barriers between India & EU & thereby give impetus to long standing Indo-EU FTA
- APEC Membership : Simplified procedures would soften India’s image as hard bargainer which currently hindered our APEC membership
- Trade : TFA would facilitate trade with developed countries thereby help Indian Economy to grows further.
Challenges:
- Implementation still poses a challenge to resource-strapped developing countries.
- India could loose a bargaining chip to secure its interests like finding a permanent solution to the issue of public stockholding for food security purposes and a mechanism to safeguard poor farmers from sudden import surge of farm products
- Start Up India (SUI) : Given SUI at its initial stage, it needs government protection in the form of some trade barriers before opening to open competition
Way forward
The availability of international donor assistance will help governments in developing countries shore up domestic support for implementation. India also needs to ensure infrastructure development, market integration reforms, tax reforms, development of demographic dividend, agricultural revolutions (in terms of ensuring low carbon footprint, less water consumption, organic farming) etc. to take the advantage of trade facilitation agreement
Therefore, TFA is new area in policy decision which will bring down the redtepism in border delays and help the integration of small business with international trade.