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Hallelujah, Forward Progress on Trade Facilitation

This afternoon, the United States and India resolved their differences over New Delhi’s insistence for an interim mechanism for public stockholding programs for food security to continue until members reach a permanent solution – paving the way for breaking the impasse over implementation of the Trade Facilitation Agreement (TFA) at the World Trade Organization (WTO).

The TFA seeks to create binding commitments across 159(+) WTO Members to:  1) expedite the movement, release and clearance of goods; 2) improve cooperation among WTO Members on customs matters; and 3) help developing countries fully implement these obligations. In addition, the agreement promises to increase customs efficiency and effective collection of revenue, and help small businesses access new export opportunities through measures like transparency in customs practices, reduction of documentary requirements, and processing of documents before goods arrive.

Consequently, the TFA’s potential impact on facilitating global trade should not be overlooked. One study estimated the TFA could increase global output by about $1 trillion, while adding as many as 21 million new jobs, most of which would have flowed to developing nations such as India. The OECD estimated that it would cut global trade costs by 14.5 percent for low-income countries and 10 percent for high-income countries.

The TFA’s package of trade facilitation measures was concluded in December 2013 at WTO ministerial meetings in Bali, Indonesia, but adoption of the measures needed to be completed by consensus by WTO members by July 31, 2014. India had thus far failed to ratify TFA because it felt the international community was giving insufficient attention to India’s concerns regarding food security issues. Mostly, this argument was about a timeline discrepancy; enough progress had not been made on the matter since December. Since the timeline for food security negotiations was explicitly set for the period after 2014, it was very difficult to understand the basis for such a strong objection on lack of progress after seven months.

Because adoption of the TFA required consensus, India’s slow approval of the agreement threatened to render moot the entire trade facilitation effort. Failing to finalize the TFA meant that the process of trade facilitation would have to occur at a regional or bilateral level, and many countries might be left out of such a process, thereby reducing the global spread of technology and services. New Delhi’s stance not only put up a roadblock to greater levels of global trade, but threatened to undermine ambitions for a larger U.S.-India economic relationship by signaling that India is reticent to make the tough policy reforms necessary to embrace greater trade liberalization.

Thankfully, today, it appears that the TFA can move forward. Broad trade facilitation is a win-win-win promise for India, other nations (developed and developing alike), and the broader global economy for many of the reasons listed above, but also because it provides a stepping stone to accelerate work on other outstanding issues at the WTO, including the Doha Development Agenda negotiations.

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