23 Nov 2015

WTI managing director discusses WTO Annual Report

The World Trade Organization released its flagship World Trade Report on 26 October in Geneva. Professor Joseph Francois of the WTI acted as discussant.

The report focused on the WTO Trade Facilitation Agreement (TFA) arguing that implementation has the potential to increase global merchandise exports by up to $1 trillion per annum. A WTO news release said a detailed study had also found that developing countries would benefit significantly from the TFA, capturing more than half of the available gains.

In opening remarks, WTO Director-General Roberto Azevêdo said in an interconnected world more and more developing countries were seeking to join global trade networks. “Yet, all too often, outdated and uncoordinated customs processes slow down the movement of goods and raise costs to prohibitive levels. By standardising, streamlining and speeding-up customs processes around the world, the WTO's Trade Facilitation Agreement will help to solve this problem. It is global trade's equivalent of the shift from dial-up internet access to broadband — and it will have a similar impact.”

The TFA was agreed by WTO members at a ministerial conference in Bali in December 2013.

Pro-development opportunity

Discussing the report after its presentation, Prof. Francois said the WTO membership was moving into an area that was quite difficult but important. Trade facilitation matters, he said. Regional value chains mean we can produce goods at lower cost and benefit from country and regional specialisations.

But for developing countries there is a risk of being locked out of these value chains by high border costs. “So in that sense, this is a real challenge but it also offers a pro-development opportunity for countries that can attach themselves to these networks,” Prof. Francois said.

This is where the TFA comes in, he said, as it addresses a number of issues related to integration in production networks, notably reducing uncertainty, regulatory burdens, sharing best practice and procedures and monitoring how trade facilitation is implemented.

“What do I take away from the report itself? First off, economic benefits are potentially quite substantial, mainly for low and middle income countries,” he said, adding the caveats that reported income gains may be overestimated and that the way the agreement is implemented matters.

“It’s one thing to talk about potential, it really does require commitment from the members, by international agencies and development agencies to ensure that the potential is realised,” Prof. Francois added.