The Trade Facilitation Agreement (TFA), a landmark agreement in the realm of international trade, was signed in 2013 and came into force in 2017. This pivotal agreement, the first of its kind since the World Trade Organization’s (WTO) inception, sees wide participation, with 172 WTO members, including 42 African nations, as signatories. The TFA is designed to streamline international trade, encompassing aspects like information publication, advance rulings, and the establishment of procedures that adopt the least trade-restrictive measures, including ‘single-window’ systems and a prohibition on mandatory Pre-Shipment Inspections (PSI).
Of particular significance in the TFA is the freedom of transit provision, crucial for landlocked countries. This component, which involves the prohibition of non-transport related fees, is expected to facilitate smoother movement of goods across borders, a key factor for landlocked regions.
Flexibility and Challenges in TFA Implementation
The TFA adopts a bottom-up approach, granting considerable flexibility to signatories. However, this flexibility comes with its set of challenges. The absence of a legal enforcement mechanism through the WTO dispute settlement and the reliance on “should” rather than binding language means that the TFA operates more on promises than legal obligations. Nonetheless, the TFA’s specific nature allows for relatively straightforward monitoring of compliance at the country level.
The African Continental Free Trade Area (AfCFTA)
The AfCFTA, aiming to eliminate trade barriers within Africa, has seen almost universal sign-on from African nations. While the agreement was enforced in May 2019, critical aspects like negotiations on common rules of origin for certain high-tariff products remain unresolved. The time and cost associated with cross-border trade, best estimated from customs-level data, indicate that customs reforms in line with the TFA could substantially boost trade within Africa.
Case Studies and Estimated Benefits
Various case studies, such as those in Peru, Albania, and Uruguay, highlight the tangible benefits of customs reforms. For instance, shifting import shipments from inspection to no-inspection in Peru showed a significant tariff-reduction estimate. Similarly, in Albania and Uruguay, a decrease in customs time correlated with an increase in import volumes and export growth, respectively.
Prospects for Africa with TFA Implementation
Implementing the TFA’s disciplines could bring substantial benefits to developing countries, particularly those in Africa, which face geographical challenges. Estimates suggest that adopting the TFA could lead to a significant reduction in time at customs for the 38 African countries engaged in the AfCFTA. On the import side, a reduction of 2.7 days in customs time could equate to a tariff reduction of 3.6-7.0%, while on the export side, a reduction of 1.7 days could translate into an 8.1% increase in exports.
Conclusion: Quantitative Gains for African Trade
The implementation of the TFA, coupled with the ongoing efforts of the AfCFTA, presents an opportunity for significant enhancement of intra-African trade. By facilitating smoother and more efficient customs procedures, the TFA holds the potential to transform the African trade landscape, contributing to the continent’s economic development and integration into the global economy.