THE TRADE FACILITATION AGREEMENT: BUILDING FAITH IN INTERNATIONAL TRADE IN AN UNCERTAIN TIME.

Author:Lloyd, Ashley Kincaid
 
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  1. INTRODUCTION

    It is often theorized that multilateral trade can act as a stabilizing conduit for peace despite tumultuous governments, economic crisis, or social unrest. (1) Facilitating such trade in a pragmatic multilateral way has been a challenging project, but on February 22, 2017, the groundbreaking Trade Facilitation Agreement (TFA) entered into force. (2) The TFA is "the first new multilateral agreement in the nearly twenty-year history" of the World Trade Organization (WTO). (3)

    "Trade facilitation" is defined by the United Nations Economic Commission for Europe (UNECE) with the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) as "the simplification, standardization and harmonization of procedures and associated information flows" required to move goods from seller to buyer and to make payment. (4) In the WTO context, trade facilitation primarily refers to reforming "border management processes so as to make import and export transactions more transparent, predictable and efficient." (5) Bernard Hoekman states, "[a]n even broader view of trade facilitation is to include any measure that promotes trade." (6) Trade facilitation, generally, is "now widely considered a necessary complement to broader economic liberalization--essential to reap [trade facilitation's] full benefits." (7)

    One of the most beneficial aspects of trade facilitation is that it creates stability in markets and thus certainty and confidence in traders, importers, and exporters. (8) Extensive empirical data at this time exists to suggest trade facilitation can significantly boost trade, "diversification along the extensive margin of trade, and increase aggregate welfare." (9) Arguably, the TFA has far reaching effects, one is superseding the negative effects of high, as "trade facilitation has a larger effect than removing tariffs." (10) If one is inclined to embrace trade facilitation and accept the theory that trade at least encourages peace between nations, the TFA may be interpreted as a manifestation of the foregoing intuition that trade creates peace. Moreover, because the WTO's allows states to retaliate against any state that violates WTO agreements, and as the TFA is the first agreement that all WTO members signed, there are binding and legal repercussions that make the TFA indisputably unique.

    This Article is comprised of the following sections: (II) background of the TFA's creation; (III) the ways in which protectionism hinders trade facilitation; (IV) a discussion of the TFA including: (A) its projected benefits, (B) the role of the Global Alliance, (C) implementing the TFA, and (D) regulating and enforcing the TFA despite protectionism in 2017; (V) non-protectionist critiques of the TFA; and (VI) concludes that the TFA will serve a significant purpose.

  2. BACKGROUND

    The WTO created the TFA as a natural consequence of the WTO's work. This section will summarize the WTO's history from its inception, through the Doha Development Agenda discussions, and finally to the Bali Ministerial Conference that culminated in the TFA's creation and entry into force. The WTO is an intergovernmental organization (IGO) (11) created in 1995 in Geneva, Switzerland. (12) Its creation arose from the Uruguay Round Agreement, (13) but its establishment occurred through Article 1 of the Agreement Establishing the World Trade Organizations' entry into force. (14) At the WTO's inaugural Ministerial Conference in 1996, trade facilitation discussions arose as a top priority. (15) Trade increased presumably from the certainty that the WTO rules provided for businesses and countries. The rules also had positive effect on equality. (16) The WTO held ten Ministerial Conferences to date, with an eleventh scheduled for December 2017 in Buenos Aries, Argentina. (17)

    The Doha Conference was a landmark decision that paved the way for the TFA's creation. Controversy arising from popular movements against "megacorporations" prior to 200118 did not deter the WTO from continuing to strive towards its goals to work on efficient trade facilitation. (19) To this end, the WTO members attending the Doha Round focused on reducing import taxes, or "tariffs", on a variety of trade goods. (20) The Trade Negotiations Committee had leadership and a mission to begin crafting trade facilitation among WTO members. Following the Cancun Conference, "WTO members formally agreed to launch negotiations on trade facilitation in July 2004," based upon Annex D: Modalities for Negotiations on Trade Facilitation (Modalities), included in the July Package. (21) The Modalities also directed WTO members to improve and clarify freedom of transit, "fees and formalities connected with importation and exportation[,]" and ways to publish and administer trade regulations. (22)

    The United States found India and China's agricultural policies "unconscionable", (23) and this breakdown frustrated many WTO members. However, there was optimism. (24) The tone surrounding the Doha Agenda in 2012 and 2013 drastically changed. (25) Members, through alliances or individually, submitted hundreds of proposals for the Negotiating Group to consider. (26) At the 2013 Bali Ministerial Conference, Members worked collectively to complete the Bali Package, which included the TFA. (27) Finally, after years of disagreement and months of the Negotiating Group's revisions, the Bali proposals became the TFA's final text. (28) The momentum that began in Bali continued through to the 2015 Ministerial Conference in Kenya. At the Kenya Round, "WTO members agreed on several significant issues within the Doha Development Agenda and outlined the way forward in WTO negotiations." (29) Within two short years, the TFA entered into force on February 22, 2017. (30)

  3. PROTECTIONISM ADVERSELY AFFECTS TRADE FACILITATION

    Historically, any given state was skeptical of trusting its trade partners to have perpetually open markets and instead opted for "protectionism." (31) Protectionism refers to governmental efforts to restrict international trade. (32) The Great Depression, that began in 1929, caused competing states "to raise trade barriers and protect domestic production and employment[,]" which contributed to an impoverished international market. (33) The Great Depression was ruinous for trade, jobs, and industries, as the value of world trade--$3 billion USD in 1929--crashed to $1 billion USD by March 1933. (34)

    After the WTO's creation, its goals centered around stabilizing world economies and keeping markets open in the face of economic crisis. The WTO was partially credited with stabilizing the world economy in the wake of the 2007 financial crisis, despite domestic pressure on governments to succumb to protectionist policies. (35) Protectionism in domestic state policies has not disappeared, as evidenced in India's 2008 government, the United States' 2017 leadership, and in indigenous communities. India and the United States struggled to agree on trade facilitation mechanisms regarding agriculture. (36) As international criticism of India's domestic agriculture policies began to surface, (37) the more India's domestic citizenry began to agree that "the WTO issue is a relic of India's past with anti-trade bias." (38) Moreover, the previously-held belief that India was singled out by the WTO was abandoned in popular rhetoric. (39) While the attitude in India's government changed from protectionist to pragmatic in conformity with the global trend, the United States' 2017 policies abandoned liberalized trade in favor of protectionism.

    On January 23, 2015, the United States, through its then-existing Trade Representative Michael Froman, formally accepted the TFA citing its positive aspects for expedient trade. (40) This formal affirmation was confirmed by the WTO Director-General Roberto Azevedo on January 28, 2015. (41) The United States' acceptance was not merely based on global potential gains. The United States also encouraged speedy implementation of the TFA by offering to help developing nations implement TFA's policies. (42) In December 2016, United States Ambassador Michael Punke confirmed the United States' "commitment to open markets and to the rules-based multilateral trading system embodied in the WTO." (43)

    Despite Ambassador Punke's declaration that the United States continued to dedicate itself to open borders and multilateral pragmatism at the end of 2016, by January 2017, new leadership proved itself to be wholly protectionist. For example, on January 24, 2017, an executive order ended the United States' involvement in the Trans-Pacific Partnership (TPP); (44) an action diametrically opposed to Ambassador Punke's address to the WTO Trade Policy Review, which heralded the United States' "vigorous pursuit of bilateral and regional arrangements aimed at reinforcing and complementing the multilateral trading system." (45)

    Thus far, the United States' 2017 protectionist policies have both destroyed an opportunity for involvement in the TPP46 and directly contravened its officially stated commitment to pragmatic multilateralism (47) in favor of imposing high tariffs. (48) It is these protectionist steps, combined with a threat to "pull out" of the WTO, (49) that indicate "Donald Trump is prepared to risk precipitating a trade war" that creates worry. (50) Considering the current United States trade policies, it is ironic that the United States "became one of the first countries to try to reverse" the 1930's global protectionist movement. (51) Trade regimes and peace are interrelated. When trade barriers become insurmountable, war is imminent.

    Faith in liberalized multilateral pragmatism may win out over protectionism; for, at the end of the day, TFA is fully entered in force, and creates certain rights and obligations on its signatories.

  4. THE TRADE FACILITATION AGREEMENT

    The TFA is comprised of three main sections. Section I of the TFA (Section I) tells us that this...

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