The WTO Trade Facilitation Agreement

By John Moccia, Regulatory Affairs, Canada

Nearly three years have passed since the 159 member states of the World Trade Organization (WTO) reached consensus and signed an Agreement on Trade Facilitation (TFA). The Agreement represents a significant milestone for the WTO as it is the first multilateral trade agreement to be concluded since the WTO was established, over 20 years ago.

The TFA will require member countries to adopt a host of measures aimed at streamlining their customs processes. The goal of the agreement is to modernize and simplify customs and border procedures in an effort to lower trade costs and boost trade, with most benefits accruing to developing countries.

As organizations around the world continually face many administrative barriers related to the complexities of import, export and transit formalities. Minimizing the burden of these procedures has been a long-standing priority for the WTO. According to the WTO, the TFA has a huge potential to reduce trade costs, thereby boosting trade between countries and raising world income.

The TFA will enter into force once two-thirds of WTO members (i.e. 108 of 162 countries) have ratified it and deposited their instruments of acceptance. To date, 92 members have completed their national procedures and notified the WTO of their ratification. These countries include, Hong Kong, China, the United States, Japan, Australia and Mexico.

What is the status of the TFA in Canada?

Canada is working towards ratifying the TFA; however, it must first amend the following six statues: Food and Drugs Act, Hazardous Products Act, Radiation Emitting Devices Act, Canadian Environmental Protection Act, Pest Control Products Act and the Canada Consumer Products Safety Act. On April 13, 2016, Bill C-13 introduced amendments to the above statues, which address two specific provisions required by the TFA – Article 10.8.1 Rejected Goods and Article 11.8 Goods in Transit.

Article 10.8.1 requires WTO members to allow importers to return to exporters goods rejected on account of their failure to meet prescribed sanitary, phytosanitary, or technical regulations, unless an alternative way is provided for in the laws and regulations. The proposed statutory amendments identify criteria under which non-compliant goods could be returned, re-consigned or handled in other ways (i.e. seizure, detainment, forfeiture and/or disposal).

Article 11.8 prohibits the application of a WTO member’s technical regulations to goods moving through its territory from a point outside its territory to another foreign point (i.e. goods in transit). Since certain Health Canada and Environment and Climate Change Canada statutes prohibit the transit of goods that do not comply with Canadian technical regulations, the proposed amendments would create the legal authority to allow the Government to exempt goods in transit through Canada from these technical regulations, thus helping to facilitate trade.

According to the WTO, the TFA has the potential to reduce total trade costs (by more than 14 percent for low-income countries and more than 13 percent for upper middle-income countries) by expediting and streamlining the movement of goods across borders. We have not seen such a multilateral agreement of this nature since the General Agreement on Tariffs and Trade (GATT). There is no doubt that trade facilitation remains a critical component for further reducing trade transactional costs on a global scale.