The U.S. and India have reached an agreement that promises to pave the way toward global implementation of the WTO Trade Facilitation Agreement (TFA). The breakthrough agreement between India and the U.S. should now make it possible for member countries to begin implementing the requirements of the agreement, providing potentially significant financial benefits to businesses trading goods around the world as local customs procedures are streamlined. The target date for ratification of the agreement is 31 July 2015. Upon ratification by two-thirds of the membership, the agreement will enter into force for all WTO states. Member state will then begin the process of adopting conforming legislation.

The Trade Facilitation Agreement

Concluded in December 2013, the TFA is intended to streamline, and to some extent harmonize, customs clearance procedures around the world by imposing new multilateral disciplines on customs procedures in all member countries. The agreement imposes basic globally applicable principles for transparency, due process, and reasonableness in the development and implementation of customs clearance requirements across a broad spectrum of activities related to importing, exporting, and transiting of goods.

The U.S.-India agreement

While the specific details of the bilateral agreement are not publicly available at this time, a press release from the Office of the U.S. Trade Representative states that there are two key elements of the deal:

• the U.S. and India agree that the multilateral TFA should be implemented without conditions, on the basis of a standard legal instrument for implementing new WTO agreements; and
• the “peace clause” agreed upon by WTO members in December 2013, under which WTO members will refrain from initiating challenges to certain food security programs under the WTO dispute settlement process, will remain in place “until a permanent solution is found.”

Since announcement of the agreement last December, India has raised concerns that developing countries need greater assurances regarding their ability to maintain government agricultural buying programs and other farm subsidies until an agreement could be reached among WTO members on how to bring such programs into conformity with the body’s trade rules. The U.S. and India had previously disagreed on the form such assurances should take.

Under the new bilateral agreement, the U.S. and India will seek a General Council decision on the two key elements outlined above. A General Council decision will require the consensus of all WTO members. Source: Hogan Lovells International Trade Alert