Last month the Trade Facilitation Agreement entered into force. This agreement aims to simplify and clarify international import and export procedures, customs formalities and transit requirements.
It will make trade-related administration easier and less costly and will also help improve transparency, increase possibilities for small and medium-sized companies to participate in global value chains, and reduce the scope for corruption.
The European Union promotes and plays a leading role in trade facilitation by:
ensuring forward looking implementation of the TFA;
acting both as an example to follow and an engine for further progress;
continuing to provide technical assistance and capacity building to help others meet their obligations.
The biggest scope for improvement – and thus the greatest potential to reap benefits – is in developing countries. OECD studies find that the implementation of the TFA could reduce worldwide trade costs between 12.5% and 17.5%. Developing country exports are expected to grow between 14% and 22% while becoming more diversified. Companies are more likely to become more profitable which should encourage domestic investment. In addition, foreign direct investment is likely to be attracted to countries that fully implement the TFA. Finally, increased trade means better employment prospects for workers and greater revenue collection by the government.
The EU wants this agreement to play a significant role in increasing developing countries’ involvement in global value chains. For that reason, the EU has committed €400 million to assist them with the reforms needed to comply with the rules set by the agreement.
More info can be found here.