Multilateralism seems down and out. So is trade liberalisation. Any suggestion that the United Nations or World Trade Organisation (WTO) may bring about meaningful progress increasingly falls onto disbelieving ears.
As nationalism seems to be on the rise, it is worth recalling that, a few decades ago, it was mainly nations in the developing world that resisted more openness to trade. Instead, they sought their salvation in the pursuit of national economic solutions. Before long, many of them recognised that they had manoeuvred themselves into a dead end and changed course.
Now that the roles are somewhat reversed, and the temptation to opt for national solutions has become more prominent among the OECD (Organisation for Economic Co-operation and Development) countries, all of us are well advised to remember the most profound lesson of the 20th century — that nationalism is not the road to salvation.
To be sure, the pace of globalisation has been rapid. The resulting feeling of nervousness is, therefore, comprehensible. But globalisation has also provided many people, especially those living in developing countries, with more opportunities to lead a better life and participate in the global economy. As a result, the global economic pie is not shrinking, but expanding.
To maintain forward progress, we need to rely on countries’ willingness to undertake domestic reforms and continue on a path of global integration. In tandem, they advance human welfare.
Given the present unease, it is almost to be expected that no one really notices when significant progress is being achieved on the world stage. This is such a moment.
Remember all the attention that was justifiably paid to the Paris Agreement on Climate Change? There was a global countdown to the point when the required number of countries ratifying the deal was reached. That day, Oct 5, 2016, made global news headlines.
There is, however, no drum roll whatsoever for the ratification of the Trade Facilitation Agreement (TFA). As agreed in 2013, it enters into force as soon as two-thirds of WTO members have ratified the agreement. Reaching that threshold is imminent.
However, perhaps due to its technocratic name, the TFA fails to spark enthusiasm. Even observers interested in global trade have often little idea of what this acronym stands for.
Yet, this is a big deal, especially for many developing countries. Properly understood, the TFA is key to creating a level playing field for small- and medium-sized businesses operating there.
In a nutshell, the TFA aims at promoting global inclusion. It does so by tackling a lot of the inefficiency as well as rent-seeking behaviour at the border in a sizeable number of countries.
Even in today’s global economy, many entrepreneurs in developing countries cannot fully tap their cross-border potential due to red tape and complex procedures at the border.
Look at the world from the perspective of one of these many millions of merchants: on the one hand, the world of e-commerce and the power of the Internet promises them direct access to the global market and, hence, a vastly larger number of potential customers than they can find in their home market. On the other hand, they continue to confront a veritable “wall” of obstacles that stands in their way. Removing that wall is the principal goal of the TFA.
The lack of transparent rules and the persistent requirement for paper documents are simply intolerable in the age of digitalisation and smartphones, and in a world that is moving to same-day delivery.
In a further key step toward the democratisation of trade, e-commerce is of particular importance for so-called “micro entrepreneurs”. It enables them to access products and far-away markets that have been closed off to them in the past.
Overcoming these hurdles to global trade through steps such as the digital transformation of border procedures is what the TFA is all about.
Granted, this is not an earth-shaking deal. As a matter of fact, there are no more earth-shaking deals to be had. We live in an era when we must take a lot of little steps in order to make progress. That may seem unsatisfactory to some, but is ultimately an apt reflection of the human condition.
If we achieve no more via the adoption of the TFA, then that countries from Rwanda and Sri Lanka to Kyrgyzstan and Jamaica — by embracing transparent and simple rules — have a real shot at becoming an integral part of the global economy. We should be proud of that. This is ultimately what the democratisation of global trade is all about.
And, if these countries attract more foreign direct investment and develop into regional hubs through more transparency and efficiency, it would come as no surprise. One can only hope that their neighbours will see that as an incentive to do likewise. That is what triggers a strengthening of the regional economy.
If the TFA, by relying on information technology-empowered automation and transparent regulation, reduces transaction costs that currently still take a sizeable cut out of the pockets of entrepreneurs, especially those running micro-, small- and medium-sized enterprises , then everyone should be eager to achieve that. In fact, countries embracing transparent rules — and, hence, efficiency — are bound to see higher public revenues from the increased volume of regional and global trade links.
And, if the TFA finally makes borders and long distances — still the biggest impediment to the growth opportunities of many developing countries — less of a factor in global trade, then we should all welcome that as well.
Frank Appel is chief executive officer, Deutsche Post DHL Group, Bonn, Germany