Legal Documents

Free Trade Agreement (TFA)

Traders from both developing and developed countries have frequently highlighted the vast amount of “red tape” that exists in moving goods across borders. To address this, WTO members have forged the Trade Facilitation Agreement (TFA), which came into force on 22 February 2017 .

Traders from both developing and developed countries have frequently highlighted the vast amount of “red tape” that exists in moving goods across borders. To address this, WTO members have forged the Trade Facilitation Agreement (TFA), which came into force on 22 February 2017.

Trade facilitation efforts, such as simplifying required paperwork, modernizing procedures and harmonizing customs requirements, can slash the costs and time needed to export and import goods. This is critical as trade costs can be equivalent to a 134% ad valorem tariff on a product in high-income countries and a 219% tariff equivalent in developing countries according to a 2015 study by WTO economists.

The full implementation of the TFA is estimated to reduce global trade costs by an average of 14.3%, with African countries and least-developed countries (LDCs) forecast to enjoy the biggest average reduction in trade costs. Full implementation has also been found to potentially reduce the average time needed to import by 47%. Cuts in export time will be even more dramatic: estimates predict a 91% reduction of the current average.

By easing the time and costs burdens, the TFA is expected to increase exports from existing traders while also enabling new firms to export for the first time. Furthermore, the TFA is forecast to add up to 2.7% a year to world export growth and more than 0.5% a year to world GDP growth over the 2015-30 horizon. Developing countries are expected to enjoy larger gains than the global average: the swift and full implementation of the TFA is estimated to boost their exports by 3.5% annually and augment their economic growth by 0.9% each year. Overall, two thirds of all benefits are predicted to go to the developing and least-developed world.

The Agreement

The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area. 

The TFA broke new ground for developing countries and LDCs in the way it will be implemented. It is the first WTO agreement in which these WTO members can determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity. In addition, the Agreement states that assistance and support should be provided to help them achieve that capacity. 

A Trade Facilitation Agreement Facility (TFAF) was created at the request of developing and least-developed countries to help ensure that they receive the assistance needed to reap the full benefits of the TFA and to support the ultimate goal of full implementation of the new agreement by all WTO members. 

The legal agreement is attached below:

File: 

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