Post on 30-Mar-2015
EPAs, Trade and EPAs, Trade and DevelopmentDevelopment
Paul BrentonTrade DepartmentWorld Bank
Key Issues
The new global economy presents challenges and The new global economy presents challenges and opportunities for ACP countriesopportunities for ACP countries
To realize the opportunities, ACP has to reverse past trends To realize the opportunities, ACP has to reverse past trends toward declining world market shares of goods and servicetoward declining world market shares of goods and service
ACP countries can use EPAs to leverage global ACP countries can use EPAs to leverage global competitiveness and sustained export growth … if they seize competitiveness and sustained export growth … if they seize the opportunity to forge a pro-reform negotiating strategythe opportunity to forge a pro-reform negotiating strategy
Developing countries share of world trade will rise as Developing countries share of world trade will rise as global integration intensifies…global integration intensifies…
0
5
10
15
20
25
30
1980 2005 2030
US$2001 trln.
Source: World Bank simulations with Linkage model.Source: World Bank simulations with Linkage model.
Exports from developing and developed countries, 2005-2030Exports from developing and developed countries, 2005-2030
Developing countries
High-income countries
$27 trln
32%
45%
22%
The global contextThe global context
Growth will raise incomes and reduce absolute povertyGrowth will raise incomes and reduce absolute poverty Average incomes are likely to doubleAverage incomes are likely to double
……and sharp reductions in dire absolute poverty and sharp reductions in dire absolute poverty
But if current trends persist, Africa will host most of the worlds poorBut if current trends persist, Africa will host most of the worlds poor
0
200
400
600
800
1,000
1,200
1,400
1990 2003 2015 2030
East AsiaEast Asia
South AsiaSouth Asia
Sub-Saharan Sub-Saharan AfricaAfrica
OtherOther28%28%
20%20%
8%8%
12%12%
Millions of peopleMillions of people
The global contextThe global context
0.00%
0.01%
0.01%
0.02%
0.02%
0.03%
0.03%
0.04%
0.04%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Source: Bank staff calculations, based on data from IMF World Economic Outlook, Ethiopia and Eritrea counted as one country
Global market share has fallen for the last 25 yearsGlobal market share has fallen for the last 25 yearsAverage ESA countries’ share of world merchandise Average ESA countries’ share of world merchandise
exports (% of US current dollars)exports (% of US current dollars)
Average ESA Countries’ share in Average ESA Countries’ share in world world
merchandise exports merchandise exports
The Trade Problem for Africa: the example The Trade Problem for Africa: the example of ESAof ESA
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
0.00%
0.01%
0.01%
0.02%
0.02%
0.03%
0.03%
0.04%
0.04%
In comparison, 16 fast growing economies gained market In comparison, 16 fast growing economies gained market share…share…
Average ESAAverage ESA
Average share of world merchandise exports (% of US$ Average share of world merchandise exports (% of US$ current)current)
Average HP 16Average HP 16
Average HP Average HP 1616
ESAESA
Source: Bank staff calculations, based on data from IMF World Economic Outlook, Ethiopia and Eritrea counted as one country
The Trade Problem for Africa: the example The Trade Problem for Africa: the example of ESAof ESA
0.00%
0.01%
0.01%
0.02%
0.02%
0.03%
0.03%
0.04%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Source: Bank staff calculations, based on data from World Economic Outlook, Ethiopia and Eritrea counted as one country.
Average ESA Countries’ Share in Average ESA Countries’ Share in world world
service exportsservice exports
Performance in services trade has been equally disappointing Performance in services trade has been equally disappointing
Average ESA countries’ share of world services Average ESA countries’ share of world services exports (% of US current dollars)exports (% of US current dollars)
The Trade Problem for Africa: the example The Trade Problem for Africa: the example of ESAof ESA
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
0.00%
0.01%
0.01%
0.02%
0.02%
0.03%
0.03%
0.04%
Source: Banks staff calculations, based on data from World Economic Outlook, Ethiopia and Eritrea counted as one country
Average for HP 16 Average for HP 16
... Whilst fast growers have used trade in services to drive ... Whilst fast growers have used trade in services to drive growthgrowth
Exports of service as share of world services Exports of service as share of world services tradetrade (% of US current dollars) (% of US current dollars)
Average for ESAAverage for ESA
The Trade Problem for Africa: the example The Trade Problem for Africa: the example of ESAof ESA
The EU will decline in importance as a destination for exports The EU will decline in importance as a destination for exports
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Asia EU Americas Asia EU Americas
ESA SADC
2030
2004
Destination of ESA and SADC exports (in percent)
SADCESA
The Trade Problem for Africa: the example The Trade Problem for Africa: the example of ESAof ESA
Trade and tax reforms to encourage exports and allow access to key inputs at world prices
Openness to FDI, especially in services Sound macroeconomic and supportive business climate Sustained investments in education and skill enhancement Support to firms and labour to move resources out of inefficient sectors
into efficient ones
Countries everywhere are adopting reforms to take Countries everywhere are adopting reforms to take advantage of new global opportunitiesadvantage of new global opportunities
Successful Successful programs have had five key characteristics…programs have had five key characteristics…
Reform is necessary in ACP countries to attain global Reform is necessary in ACP countries to attain global competitivenesscompetitiveness
Ways ACP countries could use EPAs to promote growth……Ways ACP countries could use EPAs to promote growth……
To leverage national and regional reforms Tariffs, transportation, and border barriers Tax structures Services Investment climate
To leverage changes in EU policies Rules of origin Other market access issues (eg standards) Offensive interests in “rules agenda”
Let’s elaborate on the national and regional objectives…
Reform is necessary in ACP countries to attain global Reform is necessary in ACP countries to attain global competitivenesscompetitiveness
Use EPAs to phase down high MFN tariffs, Use EPAs to phase down high MFN tariffs, NTBs and transport barriersNTBs and transport barriers
0 5 10 15 20
6 CEMAC
5 ECOWAS
4 ESA
3 CARCOM
2 SADC
1 Pacific
AFTA
NAFTA
Note: EPA Tariffs are import-weighted at the country level, then weighted by GDP at EPA averagesSource: UN TRAINS, accessed through WITS
Average MFN weighted tariffs
Because high border barriers: undermine Because high border barriers: undermine competitiveness, risk trade diversion, and impede competitiveness, risk trade diversion, and impede intra-African trade…intra-African trade…
0 5 10 15 20 25 30
SS Africa
South As.
ECA
MNA
Latin Am
East Asia
OECD
Source: World Bank, Doing Business 2006
Days through ports to warehouse
Use EPAs to reduce trade costsUse EPAs to reduce trade costs
Use EPAs to improve regional investment climate and Use EPAs to improve regional investment climate and lower costs of backbone services lower costs of backbone services
Liberalize transport, telecoms, and other trade-related services
Regional regulatory frameworks – e.g., power, air transport
Regional infrastructure investments
A Program of phased variable geometry for MFN tariffs consistent A Program of phased variable geometry for MFN tariffs consistent with regional development programs, e.g.:with regional development programs, e.g.: Phase 1 & 2: Eliminate all Phase 1 & 2: Eliminate all internal barriersinternal barriers in CU/FTA in CU/FTA Phase 1-2: Bring down MFN Phase 1-2: Bring down MFN peak tariffspeak tariffs to average to promote to average to promote
intra-African and other efficient trade intra-African and other efficient trade Phase 2-3: Bring down Phase 2-3: Bring down averageaverage MFN average levels to East Asian MFN average levels to East Asian
levelslevels Phase 3: Allow EU duty free access to EPA markets Phase 3: Allow EU duty free access to EPA markets
Less restrictive rules of origin (choice of satisfying either a 10% Less restrictive rules of origin (choice of satisfying either a 10% value-added requirement or change of tariff heading)value-added requirement or change of tariff heading)
A program of trade facilitation measures – to reduce costs of trading, A program of trade facilitation measures – to reduce costs of trading, with special attention to lowering transit costs of land-locked with special attention to lowering transit costs of land-locked countriescountries
A program of technical and financial assistance for trade facilitation, A program of technical and financial assistance for trade facilitation, SPS, and supply side measures (e.g., infrastructure)SPS, and supply side measures (e.g., infrastructure)
From objectives … to a pro-development agreementFrom objectives … to a pro-development agreement
An illustration…An illustration…
A program of gradual but purposeful reforms of tax administration A program of gradual but purposeful reforms of tax administration and intra-regional tax policy to harmonise tax structures and intra-regional tax policy to harmonise tax structures
A program of services liberalization on MFN basis that supports A program of services liberalization on MFN basis that supports regional development… regional development…
Phase 1: Open services where markets discipline sellers (e.g, Phase 1: Open services where markets discipline sellers (e.g, retailing, professional services)retailing, professional services)
Phase 2 & 3: Open services where regulations are required (e.g, Phase 2 & 3: Open services where regulations are required (e.g, telecoms, finance, electricity, transport) telecoms, finance, electricity, transport)
Make no concessions on investment, competition and IPR beyond Make no concessions on investment, competition and IPR beyond what is in EU- Mexico or EU-S. Africa arrangements. Disciplines can what is in EU- Mexico or EU-S. Africa arrangements. Disciplines can entail significant risks, but disciplines in existing EU-led free trade entail significant risks, but disciplines in existing EU-led free trade agreements have been mild. agreements have been mild.
A program, however small, of temporary movement of personsA program, however small, of temporary movement of persons
From objectives … to a pro-development agreementFrom objectives … to a pro-development agreementAn illustration…An illustration…
In conclusion… In conclusion… ACP countries are confronting the challenge of moving from ACP countries are confronting the challenge of moving from
preference dependence to being more dynamic exporters in a preference dependence to being more dynamic exporters in a competitive global environmentcompetitive global environment
Need to create incentives to move private resources into Need to create incentives to move private resources into internationally competitive activities – and release those now bottled internationally competitive activities – and release those now bottled up in low productivity sectors…up in low productivity sectors…
……and up-grade essential service industries, including introducing and up-grade essential service industries, including introducing new competition and efficient regulation … new competition and efficient regulation …
……together with safety nets to support workers (not jobs) and together with safety nets to support workers (not jobs) and measures that provide training and education to allmeasures that provide training and education to all
If EPAs can be designed to support such an agenda then they will be If EPAs can be designed to support such an agenda then they will be effective tools toward competitiveness, integration into the global effective tools toward competitiveness, integration into the global economy, growth and developmenteconomy, growth and development
Paul Brenton “Preferences for Africa: How Much are They Paul Brenton “Preferences for Africa: How Much are They Worth?” in Worth?” in Trade, Doha, and Development: A Window into Trade, Doha, and Development: A Window into the Issues the Issues R. Newfarmer (ed.) World Bank: Washington R. Newfarmer (ed.) World Bank: Washington
Hinke, L.. M. Hoppe, and R. Newfarmer 2005 “Beyond Hinke, L.. M. Hoppe, and R. Newfarmer 2005 “Beyond Cotonou: Economic Partnership Agreements in Cotonou: Economic Partnership Agreements in Trade , Doha, Trade , Doha, and Development: A Window into the Issues and Development: A Window into the Issues R. Newfarmer R. Newfarmer (ed) Washington: World Bank.(ed) Washington: World Bank.
World Bank, World Bank, Global Economic Prospects, 2005: Trade Global Economic Prospects, 2005: Trade Regionalism and Development Wasington: World Bank, Regionalism and Development Wasington: World Bank, 2004. 2004.
Further Reading and ReferencesFurther Reading and References
Global Economic Prospects, 2007Global Economic Prospects, 2007Managing the Next Wave of Managing the Next Wave of
GlobalizationGlobalization