Assessing the Impact of WTO Trade Facilitation Agreement on Oman’s Economy

Oman - 6 December 2018

Trade topics: International Trading System

The WTO Trade Facilitation Agreement recently went into force following its ratification by two third of WTO members on 22 February 2017. The world trade report 2015 estimates showed that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to $1 trillion per year, with the biggest gains in the poorest countries. Oman is aiming to diversify its economy away from oil while boosting the trade and logistics sector. The objective of this paper is to study the possible effects of WTO trade facilitation agreement on Oman’s economy. The paper used the standard GTAP Computable General Equilibrium (CGE) model using the latest GTAP database v9 and additional data. The GTAP database was modified to include Ad-valorem equivalents of non-tariff barriers (AVE) calculated for the GCC countries considering Oman as part of the GCC common market. The simulation considered two main scenarios: I) Oman increase in trade facilitation by 10% because of the important investment in logistics and II) the GCC increase trade facilitation by 7% due to enforcement of WTO Trade Facilitation Agreement in 2017. The overall results showed significant positive increase in trade and welfare. The first scenario yielded 4.3 per cent gain in Oman's GDP and boosted export sales of many food commodities, transport equipment and other manufacturing. The second scenario showed relatively moderate results. UAE and Bahrain gained significantly in terms of welfare and GDP as they are trade driven economies with good logistic sectors. The welfare gains among all the GCC countries varied from 2 to 4.9%. Overall all the sectors showed significant positive increase in exports, most especially the food commodities. However, the same food commodities showed a significant decrease in imports while gas products showed dramatic increase in importation.