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Signing of the much-hyped pact on trade facilitation under the Doha round of global trade talks in World Trade Organization (WTO) is crucial for the development of global value chains, which is gradually emerging as a predominant factor for seamless global trade concerning both the developed and developing worlds.
An agreement on trade facilitation basically refers to reduction in red tape and enhancing customs cooperation. For the first time in last 12 years, since the talks have started in 2001 in Doha (Qatar), there is going to be an agreement on the issue of trade facilitation.
According to WTO director general Pascal Lamy there is “considerable progress” happening in trade facilitation agreement and a deal on this might result in a $1 trillion boost to world economy, while the OECD (Organization for Economic Co-operation and Development) says that trade facilitation can reduce the cost of trade by 15%.
“Trade facilitation reduces one% of world trade cost. Right now the Doha talks are at an impasse but an agreement on trade facilitation can reduce the cost by 15%,” said Richard Boucher, deputy secretary general, OECD.
Boucher said that while China and Philippines are moving up the value chain in goods trade, India can leverage its position and benefit from trade in services, especially in relation to its thriving IT industry.
Growing fragmentation of production across borders highlights the need for countries to have an open, predictable and transparent trade and investment regime as tariffs, non-tariff barriers and other restrictive measures impact not only foreign suppliers, but also domestic producers. Hence, reaping the full benefits of global value chains will require adjustments that go beyond the realm of trade policy to include policies aimed at promoting increased competition and investment, Boucher added.
The OECD is currently undertaking comprehensive statistical and analytical work that aims to shed light on the scale, nature and consequences of international production sharing in collaboration with the WTO.
