THE Philippines has completed its ratification of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA), and sees reduced trade costs from the agreement that will benefit small and medium enterprises (SMEs) most.
The Department of Trade and Industry (DTI) made this announcement on Friday, reporting that the Philippines’s Instrument of Acceptance has been forwarded to the WTO through the Philippine Permanent Mission to the WTO in Geneva. The approval was lauded by Trade Secretary Ramon M. Lopez, who said that the ratification will result in substantial trade flows.
The instrument of acceptance means a WTO member has formally accepted the Protocol of Amendment, which inserts the TFA into the WTO’s founding agreement, thus, institutionalizing the TFA.
The DTI, in the past, has estimated the TFA to result to 25 percent to 30 percent cost reduction for traders due to the expected reduction of red tape measures and nontariff barriers.
This is a boon for micro and small traders in the country.
“The Philippines finds great value on the implementation of the TFA—not just for the big businesses—but also for local micro, small and medium enterprises (MSMEs) with the prospects of lowering trade costs and streamlining border procedures, which will enable them to participate more actively in international trade,” Trade Undersecretary Ceferino Rodolfo said in a news statement.
The TFA contains a list of trade-facilitation commitments that WTO members must commit to once they’ve agreed to be party to the agreement.
The agreement also contains provisions on technical assistance and capacity building, which are also included to help developing countries implement the agreement.
The Philippines, being a developing country, has applied for “special and differential treatment,” essentially allowing it to delay the implementation of each provision of the text according to their needs.
These commitments are divided into Category A, B and C, with A being measures that the Philippines can implement by the time the agreement enters into force.
Category B allows for more time after a determined transitional period following the agreement’s entry into force, while C contains the provisions that the country will implement on a future date after a transitional period.
For the TFA to come into force, two-thirds of the WTO membership must ratify the agreement by submitting its “instrument of acceptance” to the WTO, and only then will it apply but only to those who have agreed to it.
The TFA is significant as it can reduce trade costs and enhance trade flows
between countries. The WTO estimates that the TFA could increase total world trade to $23 trillion, from the current estimate of $22 trillion.
The Organization for Economic Cooperation and Development estimates that reduction in trade costs could range from 11.7 percent to 15.1 percent for lower-middle income countries, such as the Philippines.
Traders incur high costs of doing business due to vast amounts of “red tape”, absence of an automated system, and lack of coordination between traders and customs agencies.
The TFA is the first multilateral trade agreement to be concluded since the establishment of the WTO in 1995.
The Philippines is the 95th WTO member to accept the TFA.