Trade Facilitation Agreement
The World Trade Organization (WTO) Agreement on Trade Facilitation (TFA) reduces trade 'red tape', lowers costs and makes it easier for businesses to enter overseas markets. It entered into force on 22 February 2017, following acceptance by over two-thirds of WTO Members.
About trade facilitation
Trade facilitation helps the movement of goods across borders by simplifying, modernising and harmonising international export and import processes, including:
- customs and border regulations
- licensing and transit formalities
- administrative processes
- documentation requirements
The Agreement on Trade Facilitation (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. And it contains provisions for technical assistance and capacity building in this area. Under the TFA, Members must comply with international best practice including:
- publishing information on customs procedures
- providing advance rulings on the treatment of goods upon arrival
- providing appeal mechanisms to challenge customs decisions
- limiting fees and charges related to import and export and to penalties
- establishing procedures for customs authorities to clear goods (e.g. electronic payment, establishing authorised operator schemes, among others).
The TFA is the first WTO agreement in which developing country and least developed country (LDC) members can determine their own implementation schedules, as well as seek and receive implementation-related technical assistance.
Australia and the TFA
Australia co-sponsored the TFA in the WTO and played a key role in its successful conclusion after almost 10 years of negotiations. Australia pushed for obligations to provide advance rulings and to prioritise clearance of perishable goods – key benefits for Australian exporters.
Benefits of the TFA
The TFA provides a global boost for jobs and growth.
According to WTO estimates released in March 2023, in the first 2 years of its implementation (2017-2019), the TFA led to a US$231 billion increase in trade, particularly in agriculture. The WTO attributes an average increase of 5 per cent in global agricultural trade and 1.17 per cent in total trade to the TFA during this period. The WTO concludes that these increases were largely driven by the trade growth in LDCs, where agricultural exports rose by 17 per cent, manufacturing exports by 3.1 per cent, and total exports by 2.4 per cent under the TFA.
The TFA also reduces trade costs. In 2018, the OECD estimated the Agreement would generate trade cost reductions of between 14 per cent and 18 per cent. However, in 2022, UNESCAP, using the updated ESCAP-World Bank Trade Cost dataset, found that implementation of the TFA reduced trade costs by 1 to 4 per cent on average. They found the strongest trade cost reductions occurred between OECD and non-OECD economies, where reductions ranged between 3 to 5 per cent. Participation in regional trade agreements reduces trade costs by 2 to 10 per cent on average, demonstrating that regional and global trade facilitation initiatives complement one another. These findings suggest that greater trade cost savings could be achieved if WTO Members were to fully implement the TFA.
Specific examples of practical measures that facilitate trade and support global economic growth include:
- allowing exporters to submit import documentation before physical goods arrive
- clearing goods before final duties and charges are calculated
- obtaining precise and binding information on the tariff classification of their goods before arrival
- mandating the quick release of perishable goods, which will reduce waiting times for clearance of agricultural exports in foreign ports
- requirements to publish relevant procedures and forms for importing goods online to streamline access to customs procedures and new export markets.
These measures reduce costs for exporters, reduce the time it takes for goods to get to their destination and make imported goods more affordable for consumers.
Implementing the TFA
Australian implementation
Australia complies with all substantive TFA terms and has designated a National Committee on Trade Facilitatio (NCTF) as required under the agreement.
The NCTF is chaired by the Department of Home Affairs. It provides a forum for government and business to discuss issues related to the implementation the TFA and opportunities to reform the international trade environment.
Australia assisting developing countries
Australia is working to help developing country partners to implement the agreement.
Two-thirds of the expected benefits of the TFA are expected to flow to developing countries through boosting economic growth and job creation.
Australia has invested in several multilateral trade and development programs designed to support developing and least developed WTO Members to implement the TFA and access the benefits of trade facilitation including:
- the World Bank's Trade Facilitation Support Program (TFSP) to help developing countries undertake at-the-border reforms such as improving customs procedures, and
- the WTO Trade Facilitation Agreement Facility (TFAF) to help developing and least developed countries access the necessary assistance to implement the Agreement.
The Australian Government has also supported developing and least developed countries across Southeast Asia and the Pacific with trade facilitation through the provision of technical assistance and capacity building on e-commerce capabilities, including national e-commerce policy reform and the use of online marketplaces. Through such initiatives, MSMEs, and particularly women-led enterprises, have increased their specialised e-commerce skills.