Today marks a milestone for the World Trade Organization (WTO), as the Trade Facilitation Agreement (TFA)—the first multilateral WTO agreement since 1995—enters into force. The agreement represents a real win for manufacturers and workers throughout the United States, since they will increasingly be able to expand sales to foreign markets as other countries reduce red tape and slash barriers at their ports. The United States ratified the TFA in 2014 without the need for any changes to our system.
The National Association of Manufacturers (NAM) fought hard for this agreement as it was being negotiated and continued to push countries to simplify customs procedures that often represent a costly and significant barrier to foreign sales, particularly for small manufacturers. Since the agreement was concluded in December 2013, the NAM has worked vigorously to ensure ratification by the necessary 110 members so that the work of reforming and improving foreign border entry for U.S.-manufactured goods can truly get started.
According to a 2015 study, full implementation of the TFA will cut trade costs by an average of 14.3 percent. The TFA will reduce the time to import goods by more than a day and a half—a reduction of 47 percent of the current average—and reduce the time to export by almost two days—a reduction of 91 percent. Overall, the TFA also has the potential to increase global merchandise exports by nearly $1 trillion. For manufacturers in the United States, the expansion of exports is important to drive growth in manufacturing output and jobs here at home.
Last summer, more than 30 business associations joined the NAM in urging countries to ratify the TFA. Letters were sent to each of the countries that had not yet ratified the TFA at that point, and examples of those letters can be found here for FTA partners and here for non-FTA partners. Now that two-thirds of WTO members have completed their domestic ratification process, WTO members are obligated to implement their commitments.
NAM Vice President of International Economic Affairs Linda Dempsey said:
“Manufacturers are excited to see a strong Trade Facilitation Agreement enter into force today. Countries around the world have agreed to cut red tape at their borders and institute the kind of transparent customs system that the United States is proud to already have. As other countries fulfill their commitments to ensure predictable and efficient customs procedures, manufacturers in the United States will have improved access to the 95 percent of consumers outside our borders and expect increased sales opportunities globally that will bolster job growth at home. Today’s official start of the TFA reaffirms the importance of the WTO as a global rules-setting and rules-based organization, which is critical to raise standards and hold countries accountable to open and fair trade rules.”
Several international organizations crunch trade-related data into country profiles and rankings, providing a snapshot of a country’s trade facilitation progress.
• The World Economic Forum’s “Global Enabling Trade Report” uses data from public and private sources to highlight the “best performers” across criteria like domestic market access and availability/quality of transport infrastructure.
• The World Bank, as part of its Doing Business project, records the time and costs associated with the logistical process of importing and exporting goods in 189 countries. The interactive Trading Across Borders database specifically examines three sets of procedures: documentary compliance, border compliance and domestic transport.
• The OECD Trade Facilitation Indicators (TFIs) cover 11 policy areas of the TFA and will track, to the extent possible, implementation of trade facilitation measures. The interactive map covers 163 countries, with notes about each country’s trade facilitation performance and key opportunities for reform.
All developed country members of the WTO will start applying all of the substantive provisions of the TFA today. Developing countries and least developed countries will also begin applying those substantive provisions of the TFA they have indicated they are in a position to do so as set out in the Category A notifications, which more than 90 countries have submitted to date. The WTO’s Trade Facilitation Agreement Facility and the public–private Global Alliance for Trade Facilitation are providing resources and helping countries tackle these changes on the ground.
Manufacturers in the United States—particularly small businesses—will see huge cost savings and new opportunities now that countries are required to be predictable, efficient and transparent with their customs processes.
To learn more about the NAM’s efforts to create efficient customs procedures in the United States and abroad, click here.