In January 2015, the U.S. passed the Global Trade Facilitation Agreement, and last month, four more countries, Chad, Oman, Rwanda and Jordan, passed authorization to enter the agreement as well. In order for the agreement’s bylaws to be enforced, 110 countries had to enter into it, and the ratification by those countries last month brought the total to 112, making it a game charger for global trade, reports Supply Chain 24/7. But, exactly what does it represent and how will it impact global trade?
For more than 20 years, the World Trade Organization (WTO) relied on its establishing principles as the integral global trade agreement. But now, the creation of the Global Trade Facilitation Agreement (GTFA) will change how low-income and middle-income countries enter the international market for the first time since the WTO was formed.
The GTFA creates means of moving goods across international boards faster. In other words, paperwork and customs requirements are lowered among the countries participating. Thus, the overall cost of engaging in international trade will decrease, allowing less-economically available countries to enter the global market faster than historically possible.
In 2014, the timeline for exporting goods ranged from six and 86 days, and involved two to 11 documents. Meanwhile, imports could take up to 130 days, and as many as 17 documents were needed for crossing international borders.
Among underdeveloped or emerging markets, this meant significant costs in inventory, warehousing, processing and local shipping of goods before they were shipped to the destination. Because demand and supply could change on a dime with great frequency, inventory levels were required to be much higher, and forecasting demand versus supply was almost impossible. However, the GTFA could reduce these costs by up to 15 percent, reports the World Trade Organization.
The GTFA functions by connecting grants with possible recipients, companies in foreign countries that wish to export or import goods. Among developing countries, Category A, Category B and Category C measures set forth provisions to allow such countries to enter global trade faster through the reception of grants.
Your competition just got an upper hand by giving them access to more goods and possible countries faster, but it means something beneficial too. Accessing more markets will help drive your company forward, putting your products and services in front of more people than ever before. However, global trade can be complicated, so let Flash Global’s worldwide footprint and team of experts help do the hard work for you. Contact us online today.