THE full implementation of the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) will boost Philippine external trade and gross domestic product (GDP) growth, according to the Asian Development Bank (ADB).
In an ADB working paper titled Implementing the Trade Facilitation Agreement: From Global Impacts to Value Chains, ADB Senior Country Economist Utsav Kumar and Developing Trade Consultant Ben Shepherd used a new approach to evaluate the impact of the TFA on exports.
Based on their findings, a full implementation of the TFA will increase Philippine exports by 5.3 percent; imports by 4.3 percent; and real GDP growth by 0.447 percent.
“All income groups gain in terms of trade and real output from this scenario. Results show that the lower-middle-income group has the most to gain, both in terms of exports and real output, from full Trade Facilitation Agreement implementation by all economies,” the authors said in an Asian Development Blog.
“Our results show that the gains from the Trade Facilitation Agreement are larger according to how much an individual economy reforms: bigger policy changes lead to bigger impacts,” they added.
The WTO explained that the TFA contained provisions that would expedite the movement, release and clearance of goods, including goods in transit.
It added the TFA prescribes measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It also contains provisions for technical assistance and capacity building.
Kumar and Shepherd said based on the scenario where all economies fully implement the Trade Facilitation Agreement, world trade could increase by $344 billion, or 3.5 percent of the 2015 baseline with a corresponding change of 0.15 percent in global real output.
The authors said full TFA implementation could also deepen value chains by promoting trade in intermediate relative to final goods. Results showed that trade in final goods could increase by 5.2 percent, compared with 5.4 percent for intermediate goods.
“Surprisingly, we also found that by streamlining their import regimes, economies tend to benefit in terms of export, as well. What is driving the results? As the Trade Facilitation Agreement is implemented, it brings down the price of imported goods relative to exported goods. As a result, there is an incentive for domestic production to shift from import-competing sectors to export sectors. Exports expand as a result,” the authors said.
The authors said ultimately, developing economies have much to gain from implementing the TFA. The Agreement, they said, gives the signatory economies significant latitude in deciding which elements to adopt and on what time frame.
From an economic standpoint, the authors said developing countries should strive for an implementation plan that is as complete as possible over a reasonable time frame, in order to enjoy maximum benefits in terms of increased trade and real output.
ADB is doing its part to support the TFA implementation. Work is also being done to simplify trade documentation, promote automation in border agencies, develop a national single window platform, develop trade-related infrastructure, and assist in a variety of other areas.
“In a time of great trade uncertainty, the WTO’s Trade Facilitation Agreement can help economies chart a course through the storm,” Kumar and Shepherd said.
WTO members concluded negotiations at the 2013 Bali Ministerial Conference on the landmark TFA, which entered into force on February 22, 2017, following its ratification by two-thirds of the WTO membership.
The WTO estimated that full implementation of the TFA could reduce trade costs by an average of 14.3 percent and boost global trade by up to $1 trillion per year, with the biggest gains in the poorest countries.