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The Actuary The magazine of the Institute & Faculty of Actuaries

Historic WTO agreement comes into force to boost global economy by $1trn

The Trade Facilitation Agreement (TFA) came into force today following ratification by two-thirds of World Trade Organisation (WTO) members.

TFA is the "biggest reform of global trade in a generation" ©iStock
TFA is the "biggest reform of global trade in a generation" ©iStock

The multilateral deal will see burdensome red tape associated with exporting goods cut in 110 countries, potentially boosting global trade by $1trn (£800bn) each year, according to a previous WTO study.

Once fully implemented, the TFA is expected to provide the biggest benefit to the world’s poorest economies, with developing countries predicted to increase the number of new products they export by 20%, and by 35% for the least developed nations.

WTO director-general Roberto Azevêdo, said: “We can now start implementing the agreement, helping to cut trade costs around the world, and kick start technical assistance work to help poorer countries with implementation.

“This would boost global trade by up to $1trn each year, with the biggest gains being felt in the poorest countries. The impact will be bigger than the elimination of all existing tariffs around the world.

“This is the biggest reform of global trade in a generation. It can make a big difference for growth and development around the world. Now, working together, we have the responsibility to implement the agreement to make those benefits a reality.”

As a result of the TFA, the countries that ratified it will be required to publish fees and charges online, introduce a ‘fast track’ for perishable goods, allow pre-arrival processing of documentation, allow for the right to appeal customs decisions, and permit the use of copies of documents rather than originals.

The agreement is forecast to slash WTO members’ trade costs by an average of 14.3%, and reduce the time needed to import goods by over a day, with the UK economy expected to benefit by up to £1bn.

Secretary of state for international trade, Liam Fox, said: “We have fully supported this historic agreement which will remove some of the barriers to cross-border trade and could benefit the UK economy by up to £1bn.

“We will now work with other WTO members to ensure economies, both developed and developing, fully realise the benefits it will bring to their citizens.

“The UK has long supported initiatives that will make trade across borders easier, but despite the work that has already been done on border controls until now goods have continued to be delayed at borders slowing trade flows and adding costs to business which in turn might be passed on to consumers.

“We welcome this WTO success story.”