TFA essential to unlock trade potential of Landlocked Developing Countries: WTO

The Dollar Business Bureau | @TheDollarBiz

Over 80% of LLDCs are in Africa and Asia (Pic. Source - UN)

  The World Trade Organisation (WTO) has urged members to adopt the TFA to help Landlocked Developing Countries (LLDCs) benefit from the multilateral trading system. Speaking at the second UN conference on LLDCs’ issues in Vienna, yesterday, Roberto Azevêdo, Director-General WTO, said that the world today has the transport and communications to eliminate distance as a barrier to economic growth, but millions still live in poverty due to lack of resources and the development benefits that trade and foreign direct investment can bring. According to the UN, there are about 32 LLDCs in the world (16 in Africa, 10 in Asia, 4 in Europe, and 2 in Latin America). Together, these account for just 1.2% of global exports, and the average cost to export from LLDCs is a prohibitive $3,040 per container (compared to $450 per container in Singapore, and around $1,520 per container in India). On an average, the nearest seaport is around 1,370 km away from LLDCs. The WTO chief says that the main obstacle for LLDCs is high transaction costs, and TFA can help address this in practice. He said, “An excellent illustration of this is the corridor in East Africa linking Burundi, Congo, Rwanda, Uganda and South Sudan to the Kenyan port of Mombasa. The achievements here have been remarkable. For example, the cost of moving a container from Mombasa to Kampala has been cut by almost 50%. And the time taken for goods to complete this journey has been cut from 18 days (the same as in India) to just 4.”

There is a concern that for LLDCs, trade partners outside the region are replaced with trade partners inside the region (Source: WTO, UNCTAD, IMF Direction of Trade Statistics)

  LLDCs like Mongolia are in favour of the early adoption of the TFA. According to Monogolia’s Minister of Foreign Affairs Mr. Luvsanvandan Bold, TFA can help landlocked countries become land-linked by improving customs efficiency, lowering trade costs, and reducing delays at border crossing. TFA requires the support of two-thirds of its 160 members and has the strong support around 48 countries which includes 6 LLDCs and 10 transit countries. “It shows that transit measures would likely be put in place as soon as the agreement is implemented. This would be a crucial step for LLDCs,” Azevêdo said. However, he added that WTO members must first find a solution to the impasse on the implementation of the TFA. Earlier, he had admitted that implementation of the full Bali Package remains the best option, but it is blocked. He had also mentioned that going ahead with the TFA without the approval of some countries (India) is an option to explore.      

This article was published on November 4, 2014.