The Hindu Editorial Analysis- 8th April 2023 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Why in News?

Although the World Trade Organization (WTO) is in a moribund condition, there is prolific activity taking place in one area of rule-making: investment facilitation agreement (IFA). Backed by more than 100 countries (it does not include India), the proposed IFA is meant to create legally binding provisions aimed at facilitating investment flows. The legal obligations inter alia will require states to augment regulatory transparency and predictability of investment measures.

• Trade Facilitation Agreement (TFA) is the first multilateral agreement since the inception of World Trade Organisation(WTO) which aims at streamlining the strict rules that govern international trade by reducing red-tapism by simplifying customs regulations for the cross-border movement of goods.It will help to reduce trade barriers around the world.
• Trade Facilitation Agreement (TFA) was adopted by the Members of WTO in the Bali Ministerial Conference in Indonesiain December 2013. It entered into force on 22 February 2017 after its ratification by two-thirds of the WTO membership.

Trade Facilitation Agreement(TFA): An Introduction 

• The Trade Facilitation Agreement is the World Trade Organisation’s (WTO) first multilateral pact aimed at simplifying customs requirements for cross-border movement of goods.
• It’s the most comprehensive trade pact, with the potential to generate $1 trillion trade in commerce and more than 2 million new job opportunities worldwide.
• A Trade Facilitation Agreement Facility (TFAF) was also created at the request of developing and least-developed nations to guarantee that they receive the assistance they need to fully benefit from the TFA and to support the ultimate goal of full implementation of the TFA by all the WTO members.
• India has ratified the TFA and the instrument of Acceptance for Trade Facilitation Agreement was handed over to WTO Director-General by India on 22nd April 2016.
• India is the 76th WTO member to accept and ratify the TFA out of a total 142 countries that have ratified as of 2022.

World Trade Organisation (WTO)

• The World Trade Organisation (WTO) is the only global international organisation that regulates and facilitates international trade between nations.
• It was officially set-up on 1 January 1995 by replacing the General Agreement on Trade and Tariffs (GATT) under the Marrakesh Agreement which was signed in Morocco in 1994.
• The Headquarters of WTO is in Geneva, Switzerland.
• Number of Members : The WTO has a total of 164 members (160 UN member states, the European Union, Hong Kong, Macao, and Taiwan)
• India is the founding member of WTO.
• The top decision-making body of WTO is the Ministerial Conference which usually meets once in every two years at a particular designated place while the General Council is the top day-to-day decision-making body which meets a number of times a year in Geneva.
• The WTO’s 12th Ministerial Conference (MC12) will take place on 12-15 June 2022 at WTO headquarters in Geneva.It will be co-hosted by Kazakhstan
• The WTO Secretariat is headed by a Director-General for a term of four years.
• Director-General : Ngozi Okonjo-Iweala from Nigeria (She is the first woman and the first African to serve as Director-General).
• Important Reports published by WTO –
  • World Trade Outlook Indicator
  • World Trade Report
• Important Trades Agreements of WTO–
  • Agreement on Agriculture (AoA)
  • TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights)
  • Agreement on the Application of Sanitary and Phytosanitary Measures
  • Agreement on Technical Barriers to Trade (TBT)
  • Agreement on Trade-Related Investment Measures (TRIMS)
  • General Agreement on Trade in Services (GATS)

Objectives

• Reducing Red-Tapism & Increase efficiency: TFA contains the provisions for expediting the movement, release and clearance of goods, including goods in transit and cutting the red-tapism which will improve the trade efficiency of countries.
• Improving cooperation: TFA sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues
• Enhance technical assistance: Under TFA,there are provisions that will require WTO members to accept e-payments and electronic versions of certain documents where appropriate and possible. The World Trade Organization and its members, and other international organisations, such as the World Bank, the World Customs Organization, and the United Nations Conference on Trade and Development, provide technical help for trade facilitation (UNCTAD).
• Capacity building: By providing assistance to the developing and least developed countries(LDCs) it will help for the capacity building of these nations.

What is India’s position on TFA?

• Initially, India took the stand that it would be difficult to ratify the consensus on the Protocol of Amendment for the Trade Facilitation Agreement(TFA) because of the Ministerial Decision on Public Stockholding for Food Security Purposes.
• In the Ministerial Conference of the WTO held in Nairobi, Kenya in 2015,Ministerial decisions were adopted on some agricultural issues and issues of importance of developing countries and least developed countries.
• Hence,India has ratified the Trade Facilitation Agreement (TFA) on 22nd April 2016.
• India believes that Trade Facilitation is crucial for particularly developing and LDCs countries.
• A National Committee on Trade Facilitation (NCTF) under the Chairmanship of the Cabinet Secretary was set up to facilitate both domestic coordination and implementation of the provisions of TFA.

Benefits for India 

• Reducing Cost of Imports: By simplification of regulations and enhanced transparency in cross border trade in goods along with integrating our cross-border trade with the global value chain will cut global trade costs by up to 15% so imports will become cheaper.
• Ease of Doing Business:  By the establishment of a National Single Window system to route all import related formalities such as examination, sampling, clearance etc. has also contributed to an overall improvement in the ‘Ease of Doing Business’ environment in the country.
• Economic growth: By facilitating trade with developed countries around the world thereby helping the Indian Economy to grow further and will help in achieving the target of a 5 trillion dollar economy.
• Availability of information: Information is the key for traders that have to navigate foreign markets and regulations. The TFA states that all the WTO members must publish information on import and export procedures and also while within available resources, establish contact points to respond to enquiries.
• Global Export growth: Greater integration with the global economy has made India more global.It will increase the number of new products exported by as much as 4% annually.

Challenges 

• Trade wars: Due to trade protectionism between different countries around the world there is a rising tide of trade wars which in the long run costs job losses and slows down the economic growth.
• More favourable to developed nations: Critics believe that the agreement favoured rich and developed countries because developing and LDC countries will have greater hurdles in modernising trade infrastructure and improving regulatory and customs practises in order to get benefit from the TFA.
• Weak Implementation: For resource-strapped underdeveloped countries, implementation of TFA still remains a difficulty.
• Special safeguard mechanism: The Contentious issues of public stockholding of food and a special safeguard mechanism(SSM) in the agriculture sector have not seen much progress.
• No proper definition of ‘Developing & Developed Country’: The WTO has not defined ‘developed’ and ‘developing’ countries. So, member countries are free to declare whether they are ‘developed’ or ‘developing’. This provides an advantage to economies like China to expand their dominance in global trade by obtaining Special and Differentiated Treatment (S&DT). Hence, it remains a bone of contention.

Way Forward

• If TFA is strictly implemented, it has the potential to generate $1 trillion in global economic activity, resulting in the creation of 21 million new jobs and a 10 to 15% reduction in the cost of doing international trade.
• As a result, TFA is a new policy decision area that will help small businesses integrate with international trade and reduce red-tapism in cross border trade.