A ray of hope for the global economy

Multilateralism seems down and out. So does trade liberalisation. Any suggestion that the UN or WTO may bring about meaningful progress increasingly falls onto disbelieving ears.  To be sure, the pace of globalisation has been rapid. The resulting feeling of nervousness is, therefore, comprehensible.

Given the present unease in various quarters, it is almost to be expected that no one really notices when significant progress is being achieved on the world stage. 

This is such a moment. The Trade Facilitation Agreement (TFA), agreed in 2013, is about to enter into force.  This will happen as soon as two-thirds of WTO members (110 nations) have ratified the agreement. Reaching that threshold is imminent.

However, perhaps due to its technocratic name, the TFA has so far failed to spark enthusiasm. Even observers interested in global trade have often little idea of what this acronym stands for. Yet, this is a big deal, especially for developing countries. 

The TFA is key to creating a level playing field for small and medium-sized businesses. It aims at promoting global inclusion by tackling inefficiency as well as rent-seeking behaviour at the borders. Even in today’s global economy, many entrepreneurs in developing countries cannot fully tap their cross-border potential due to red tape and complex procedures.

Look at the world from the perspective of one of these millions of merchants:  On the one hand, the world of e-commerce and the power of the Internet promise them direct access to the global market – and hence a larger number of potential customers than in their home market. 

On the other hand, they continue to confront a veritable “wall” of obstacles that stands in their way. Removing that wall is the principal goal of the TFA.

ACESS FAR AWAY MARKETS

The lack of transparent rules and the persistent requirement for paper documents are simply intolerable in the age of digitalisation and smartphones and in a world that is moving to same-day delivery. In a further key step towards the democratisation of trade, e-commerce is of particular importance for the so-called “micro entrepreneurs.” 

It enables them to access products and far-away markets. Overcoming these hurdles to global trade through steps such as the digital transformation of border procedures is what the TFA is all about. We live in an era when we must take a lot of little steps in order to make progress. 
If we achieve no more via the adoption of the TFA than that countries from Rwanda and Sri Lanka to Kyrgyzstan and Jamaica – by embracing transparent and simple rules – have a real shot at becoming an integral part of the global economy, we should be proud of that.  This is what the democratisation of global trade is all about.

And if these countries attract more foreign direct investment and develop into regional hubs through more transparency and efficiency, it would come as no surprise. 

One can only hope that their neighbours will see that as an incentive to do likewise. That is what triggers strengthening of the regional economy.

 If the TFA, by relying on IT-empowered automation and transparent regulation, reduces transaction costs that still take a sizeable cut out of the pockets of entrepreneurs, especially for micro, small and medium-sized enterprises, then everyone should be eager to achieve that. 

In fact, countries embracing transparent rules are bound to see higher public revenues from the increased volume of regional (and global) trade links. And if the TFA makes borders and long distances less of a factor in trade, then we should all welcome that as well. 

Globalisation has provided many people, especially in the developing countries, with more opportunities to lead a better life.  As a result, the global economic pie is not shrinking, but expanding. The TFA will ensure even more progress in that direction.

Mr Appel is Chief Executive Officer, Deutsche Post DHL Group, Bonn, Germany