A step towards freer trade

The Doha Round of the World Trade Organization (WTO) has been making little progress as many countries fail to agree to trade policy reform. Rather than wait for a general agreement the WTO agreed to implement a partial agreement known as the The Trade Facilitation Agreement (TFA).

The TFA essentially makes customs procedures easier, saving time and other costs. It is estimated that this will raise trade by $1trillion a year and be as effective as cutting all tariffs.

The benefits of free trade are well known. There is greater specilization and trade, resources are allocated more efficiently and consumer surplus will rise. Of course there will be losers, as resources are reallocated and some structural unemployment is caused. The key is to look at this as long-term gain at the price of some shorter term pain in a few sectors.

Note how long this agreement has taken however. At least fifteen years in the making, including three years to get countries to ratify the agreement. A big plus is that Developing countries will probably be winners from this agreement. Critics of the WTO have often suggested that they favour the developed countries, but this seems to make life easier to access the markets of the richer countries.

The BBC covers the story here

This story is most directly useful to IB students as it deals with global trade agreements and the WTO. However VCE students need to understand the benefits of trade and Australia is a party to all WTO agreements, so is also an example of Australian trade policy.