WTO Trade Facilitation Agreement Enters into Force: Benefits Abound for Hong Kong, Other Traders on EU Market

On 22 February 2017 – for the first time since the establishment of the World Trade Organization (WTO) in 1995 – the WTO managed to enact a multilateral trade deal that has been negotiated among all 164 Members.

The Trade Facilitation Agreement (TFA) introduces several trade facilitation disciplines and obligations aimed at simplifying, modernizing and expediting trade and customs procedures. The TFA intends to enhance the transparency and predictability of import and export procedures on the one hand, and achieve a faster and less expensive system of customs clearance on the other hand. As a result, the TFA will increase possibilities for small and medium-sized companies to participate in global value chains and will encourage developing countries to diversify their economies.

Pursuant to the TFA, WTO Members are, for example, obliged to publish all trade information in a non-discriminatory and easily accessible manner, if possible through the internet. Members are also encouraged to establish a “single window” where traders can submit documentation in relation to the importation, exportation or transit of goods through one single entry point.

Estimates demonstrate that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to $1 trillion a year. This is a bigger impact on international trade than the elimination of all the world’s remaining tariffs. The biggest gains are expected to occur in least developed countries (LDCs), for which the implementation of the TFA could reduce trade costs by almost 17%.

Negotiations on trade facilitation started as part of the Doha Development Agenda, and the TFA was agreed upon during the WTO Ministerial Conference in Bali in 2013. Following ratification by two-thirds of the WTO membership, the TFA entered into force on 22 February 2017. Rwanda, Oman, Chad and Jordan were the last four WTO Members to ratify the agreement, bringing the total number of ratifications to 112.

The implementation of the TFA is now to follow. While developed countries are required to immediately implement the new rules, the TFA provides for a certain degree of flexibility with regard to developing countries and LDCs, directly linking the implementation of the TFA to the individual capacity of the Members to do so. Developing countries and LDCs must categorize the provisions of the TFA in three categories, indicating by when they are able to implement the provisions and whether they need technical and/or financial assistance or other capacity building support to do so.

Hong Kong traders should be aware of the fact that national governments are granted a certain degree of flexibility when implementing the provisions of the TFA, and that the benefits obtained by Hong Kong traders will largely depend on how such implementation is done. Thus, while implementation is mainly the responsibility of Members (WTO Members comprise states and customs territories such as the EU), Hong Kong traders should make use of the mechanisms provided by the TFA to consult with national authorities on how the trade laws and regulations are best applied in practice. By commenting on proposed trade laws and regulations before their entry into force and by regularly consulting with the competent authorities, Hong Kong traders can ensure their trade interests and preferences are taken into account.

The entry into force of the TFA was applauded by the European Commission, the US Chamber of Commerce and several trade and business associations around the world. Moreover, the EU has stated that the EU customs authorities will play a leading role in the implementation of the TFA, acting both as an example to follow and as an engine for further progress in trade facilitation within the EU and at international level.

As such, Hong Kong traders can expect the entry into force of the TFA to further facilitate import and export flows between the EU and Hong Kong.