Monday,22 October, 2018
Current issue | Issue 1355, (3-9 August 2017)
Monday,22 October, 2018
Issue 1355, (3-9 August 2017)

Ahram Weekly

Friendlier trade by agreement

Niveen Wahish finds out what the WTO’s new Trade Facilitation Agreement could mean for Egypt

Friendlier trade by agreement
Friendlier trade by agreement

Egypt stands at 168 among 190 economies on the ease of trading across borders in the World Bank’s Doing Business report for 2017. According to the report, importers spend 265 hours completing import documents. This is more than double the average for Middle East and North Africa. Exporters meanwhile spend an average of 88 hours completing export documents as compared to 77 hours in MENA. This ranking could improve as Egypt begins to implement the WTO’s Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA).

Egypt recently ratified the Trade Facilitation Agreement (TFA), one of the few items WTO members managed to agree upon among the much wider but now defunct Doha round of trade negotiations. 

The agreement came into force earlier this year after two-thirds of the WTO membership, or 110 member countries, completed their domestic ratification process. To date, 122 WTO members have ratified the TFA.

As its name implies, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. And it contains provisions for technical assistance and capacity building in this area.  

According to Yasser Korani, former negotiator of the TFA and a former delegate of Egypt’s Permanent Mission to the UN and WTO, the agreement will have a positive effect on Egypt, as its main aim is to remove barriers affecting the release of imported goods, meaning that Egyptian exports stand to benefit. 

The expedited release of goods by customs authorities will have a positive effect on reducing the cost of imported goods, eliminating the risks facing perishable goods.

According to Korani, Egyptian exports will particularly benefit from the TFA, as agricultural products figure as one of Egypt’s main export items. Egypt exported around $2 billion worth of agricultural goods in 2016.

The TFA is not related to tariff cuts, but is rather aimed at simplifying customs procedures. As a result, Egyptian exports to WTO member countries that have committed to implementing the agreement will benefit from its advantages.

Mustafa Al-Naggari, an agricultural exporter and secretary of the Egyptian Agricultural Exports Council, hopes the agreement will help in cutting waiting times for phytosanitary measures affecting agricultural exports. 

He acknowledged the right of countries to ensure the safety of imported goods, but said the measures should take place more quickly. “Fruit and vegetables are highly perishable, and when phytosanitary measures take time we lose the products,” he said.

According to Mena Hassan, trade policy analyst at the WTO , the agreement will help in the area of non-tariff barriers as well as beyond-border measures. For example, under the TFA a country must inform the importer in cases of the detention of goods declared for importation, for inspection by customs, or by any other competent authority. 

Regarding test procedures for imports, a country may grant a second test in cases where a first test result of a sample taken upon the arrival of goods declared for importation does not meet a specific standard.

The agreement could also help in fighting corruption. According to Hassan, the fact that it calls for transparency in relevant regulations and fees, as well as streamlining procedures, could prevent corrupt officials from demanding additional fees. 

However, “there needs to be a serious commitment and leadership from the authorities to apply the measures stipulated in the agreement for it to be effective in this regard,” she said.

Others are less optimistic about the agreement. Bahaa Al-Adli, head of the Badr City Investors’ Association, fears it could mean an influx of imports into Egypt. Many African countries were against the agreement because they felt it could mean a greater opportunity for access to their markets for exporters from developed and emerging markets such as China and India.

“For Egypt to benefit from the agreement, it must first be a strong exporter, which is not the case currently,” he said, adding that despite favourable terms for Egypt in its free trade agreement with Turkey, for example, the balance of trade had nevertheless ended up in Turkey’s favour because of the latter’s greater production and export capacity. 

“We need more facilitations for producers before looking at export markets,” Al-Adli said.  

Now that the agreement has been ratified, Egypt is in the process of officially submitting its notification document to the WTO. Egypt will also form a committee that will be the main contact point for any issues related to the implementation of the agreement, Korani explained. 

The agreement is binding on all WTO member countries. Therefore, Egypt, as a member of the WTO since 1995, is committed to implementing the agreement, he added.

Korani also clarified that the agreement contains certain provisions for the special and differential treatment of developing and least-developed countries. “Those countries have the right to postpone the implementation of certain provisions in it, and they can also link the implementation of certain other provisions with obtaining technical assistance from different donors,” he said.

In this respect, the TFA has broken new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, the requirement to implement the agreement has been directly linked to the capacity of countries to do so. 

In addition, the agreement states that assistance and support should be provided to both developing and least-developed countries in order to help them reach that capacity. All this has been possible as a result of Egypt’s efforts together with those of the Africa Group at the WTO, Korani said.  

As the agreement provides for technical assistance and capacity building to enable member countries to implement it, Korani said the authorities were working on preparing a list of the technical assistance necessary to help them implement certain provisions in it.

The WTO has estimated that the TFA could reduce trade costs by between 9.6 and 23.1 per cent for its members worldwide. This means export gains of between $750 billion and $1 trillion, it says.

According to the WTO, developing countries stand to gain the most from the new agreement. Some of the world’s 48 least-developed countries can expect to see an increase in the export of traditionally exported products to existing markets of between 13 and 36 per cent, it said.

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