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TFA regulations revolve around eliminating red tape in trade among member countries.
TFA regulations revolve around eliminating red tape in trade among member countries.

TFA Opens New Horizons as WTO Accession Bid Stalls

Unlike WTO, in which the applicant state’s accession bid should be accepted by all the member states of the organization, countries willing to join TFA only need to make their trade regulations compatible with those of the agreement
The World Trade Report 2015 shows that the full implementation of TFA could reduce trade costs for members by an average of 14.5%

TFA Opens New Horizons as WTO Accession Bid Stalls

Iran is making the case for joining WTO’s Trade Facilitation Agreement that offers the same advantages as membership of World Trade Organization, with the additional benefit of taking a shorter time, deputy secretary of the International Chamber of Commerce’s Iran Commission.
Malek Reza Malekpour added that the alternative option has been proposed, as Iran’s bid to join WTO remains grounded, depriving the country of the advantages of free trade with other countries.
“If anyone thinks Iran will easily integrate into the global economy through WTO membership, they should know that things have changed. This functionality can now be seen in the Trade Facilitation Agreement,” Malekpour was quoted as saying by the Persian daily Donya-e-Eqtesad.
He further said Iran should express its willingness to sign TFA “amid pointless insistence on becoming a WTO member”.
WTO members concluded negotiations on a Trade Facilitation Agreement at the Bali Ministerial Conference, as part of a wider “Bali Package” in December 2013. TFA will enter into force once two-thirds of WTO members (109 countries) have completed their domestic ratification process.
By early September, TFA was ratified by 92 countries, including Iran’s main trading the partners China, the UAE, the European Union and India. Other members include neighboring states of Afghanistan and Turkey, countries of Commonwealth of Independent States and other trading partners like Japan and South Korea.
Unlike WTO, in which the applicant state’s accession bid should be accepted by all the member states of the organization, countries willing to join TFA only need to make their trade regulations compatible with those of the agreement.
“If Iran, technically speaking, comes to the conclusion that it should not waste this new emerging opportunity, the private sector can accomplish the task of accommodating the conditions required for joining TFA,” Malekpour said.
WTO’s accession process is based on consensus, meaning a single veto by a member state could prevent a country from joining in. That has been the case for Iran, which has been struggling to become a member for almost two decades.
It was only in May 2005, after 21 failed attempts over the course of two decades—due to objections by the United States—that Iran’s application was finally approved unanimously to give it an observer status.
Yet Iran, the second largest economy in the Middle East and North Africa region, is still the largest economy excluded from WTO.
As part of Iran’s WTO accession bid, a working party has been formed while Tehran has taken a series of steps such as submitting a memorandum on its foreign trade regime in 2009 and replying to a set of questions in 2011.
However, “the working party has not yet met”, according to WTO.
Since Iran’s July 2015 landmark nuclear deal with the world powers, which resulted in relaxation of international sanctions in exchange for limits on Iran’s nuclear program, Oman and Switzerland have pressed for forming a special committee of WTO to address Iran’s bid. However, Iran’s regional rivals, particularly Saudi Arabia, have opposed that effort.
As history shows, WTO accession is a lengthy process, which on average takes nearly a decade. To complete its accession bid, Iran needs to take some painful measures to make its trade regime WTO-compliant. These steps include elimination or reduction of certain types of subsidies and lowering of tariffs, among other things.
While WTO is focused mostly on tariffs, TFA regulations revolve around eliminating red tape in trade among the member countries.
“The agreement contains terms that increase its effectiveness compared to tariff-related topics [of the WTO],” Malekpour said.
TFA offers provisions for expediting the movement and clearance of goods, including goods in transit. It also sets out measures for an effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.
“Our inbound and outbound customs management, in a way, poses obstacles to trade,” Malekpour says, adding that by reducing bureaucracy, the TFA will help Iran significantly reduce trade costs.
TFA aims to enable developing countries to increase their national competiveness and consequently their share of international trade. The Organization for Economic Cooperation and Development estimates that the potential total cost reduction from a “full” implementation of TFA is 16.5% for low-income countries, 17.4% for lower-middle-income countries and 14.6% for upper-middle countries. The World Trade Report 2015 shows that the full implementation of TFA could reduce trade costs for members by an average of 14.5%.
WTO suggests that TFA will boost exports for developing countries and help those countries diversify their economies in terms of both products exported and markets reached. For developing countries, TFA could increase the number of new products exported by as much as 20% and least developed countries are likely to see a much bigger increase of up to 35%.
According to Malekpour, in a meeting held in Tehran in September between Secretary of ICC Iran Commission, Mohammad Mehdi Behkish, and Iran’s Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh, the minister pledged to form a “national committee” for joining TFA. However, the ministry has not yet taken any concrete action in that regard.

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