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AfricaMoney | August 22, 2017

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WTO nods $1 trillion pact

WTO nods $1 trillion pact, vows to end customs delays

The ‘trade facilitation’ measures are widely expected by economists to add an estimated $400 billion to $1 trillion to the world economy. (Image: WTO)

The WTO ended its ninth ministerial conference in Bali a day later than expected, but with an outcome which surpassed all expectations – an agreement to simplify customs procedures aimed at reducing the cost of trade by about 10% to 15%.

The ‘trade facilitation’ measures are expected to add an estimated $400 billion to $1 trillion to the world economy.

“We did it! We have delivered an agreement on Trade Facilitation that will inject up to a trillion dollars into the world economy,” said Indonesia’s Trade Minister Gita Wirjawan, who chaired the conference, on Saturday.

The trade facilitation decision is meant to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances.

“For the first time in our history, the WTO has truly delivered,” said WTO Director-General Roberto Azevedo, as the organisation reached its first comprehensive agreement since it was founded in 1995.

The agreement also allows for aid to less developed countries to update infrastructure and train customs officials.

Take Africa, for example, which has some of the poorest nations across the globe and some of the longest customs delays in the world. In fact, according to the African Development Bank, it can take as much as 36 hours to get goods through the customs post at the Victoria Falls crossing from Zambia into Zimbabwe.

And, much too often, crossing the border is just the tip of the iceberg. There are more barriers to negotiate once goods are over the border. Take the case of the highway between Lagos and Abuja in Nigeria which has no fewer than 69 official checkpoints.

The time and money lost in dealing with these delays is of mammoth proportions and can be a complete disaster for a cargo of perishable goods. Reducing such delays and customs red-tape is what the WTO trade pact seeks to achieve. The trade pact, by making it cheaper for business to move goods across borders, ensures that companies will do more business in Africa.

Adoption of the agreement, however, isn’t final and legal language still needs to be checked, according to the WTO, which expects its general council to adopt it by the end of July 2014.

While most hailed the agreement as a victory, critics consider it a much-watered-down version of goals to streamline global commerce originally adopted at a meeting in Doha, Qatar back in 2001.

A small group of countries in particular — Cuba, Bolivia, Nicaragua, Venezuela — recorded serious reservations about what they considered to be imbalances in the package in favour of richer countries. They also noted the absence of provisions barring discrimination in the form of trade embargoes on goods in transit.

Moreover, humanitarian advocates said the accord produces few gains for the poor, while farm groups in the US – the world’s biggest agricultural exporter – had little reaction to the path-breaking agreement.

Still, the accord may help extend talks on the Doha Round of trade negotiations, which have dragged on for 12 years and stalled over agriculture, industrial tariffs and services.

The pact emerged after the US and India compromised on food subsidies and the Latin American bloc led by Cuba dropped its opposition to an agreement.

The Bali Package has sometimes been described as the first major agreement among WTO members since it was formed in 1995 under agreements from the 1986-94 Uruguay Round negotiations. The most significant for global commerce is the trade facilitation part of the package, while the rest of the package focuses on various issues related to development, including food security in developing countries and cotton and a number of other provisions for least developed countries.

Finally, the package also includes a political commitment to reduce export subsidies in agriculture and keep them at low levels, and to reduce obstacles to trade when agricultural products are imported through quotas.

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