News / Economic Divide

WTO's $1 trillion trade accord

Friday, 24 March 2017 11:56 AM [ Last Update: Friday, 24 March 2017 11:56 AM ]

World Trade Organization (WTO) Director-General Roberto Azevedo attends a news conference in Geneva, Switzerland, November 24, 2016. (Photo by AFP)

A trade accord that will boost global exports by $1 trillion? That is what the WTO, the World Trade Organization has said has come into effect. It will be the largest and first multilateral agreement that has been put in place: ten years in the making. This edition of Economic Divide looks at the impact this will have on trade, the role of the WTO overall when it comes to trade, and the timing of this, coinciding with Trumps which has clouded the outlook for global trade.

This is what the news is which has caused quite a bit of excitement: WTO says $1 trillion global trade treaty about to come into force. For many who don't follow the business news: that seems to be a lot of money for a global treaty. By definition, it is a A trade accord that will boost global export by $1 Trillion. In WTO's history, it is the biggest agreement ever reached.

The impact that this trade facilitation agreement or TFA will have is huge on many fronts. This will have a major impact on poorer countries, because it standardizes and simplifies customs procedures, slashing the time, cost and complexity of taking goods over borders. It will also reduce the corruption that takes place, the main reason being that there will be almost no contact between the client and the (customs) authority. And the biggest effect of it all: An impact of almost 3% on trade all over the world every year until the year 2030.

Perhaps at no other time in the WTO's history is the organization feeling threatened in its philosophy, that world trade is the way to go, or as the WTO Director General states, that multilateral system is the way to go.

Two reasons why the WTO director general is worried: one, what is happening in Europe, first with Brexit, then with the other elections that may steer towards bilateral trade relations. The other: US President Donald Trump's push for just that: recently he again repeated his complaints against the WTO, and China, that ever since China joined the WTO, more than 70 thousand US manufacturing factories have shut down.

That sounds like an awfully big number of US factories to shut down: is that an accurate number? Actually, no. The number could be higher. Between 1993 and 2012, the number of factories closed were 71,525. Using the other census data set, the # of factories that closed was over 90,000 (the totals vary due to different survey methods). So the 70 thousand number is a safe number that is relatively accurate.

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