ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations 20 – 24 August 2012...

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ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations 20 – 24 August 2012 Bangkok, Thailand Roberto Fiorentino

Transcript of ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations 20 – 24 August 2012...

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

20 – 24 August 2012

Bangkok, Thailand

Roberto Fiorentino

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Objectives:

– Explain the WTO framework that applies to RTAs

– Provide and overview of the various approaches to RTAs negotiations

Programme:

1. WTO rules and procedures related to RTAs

2. WTO monitoring and transparency of RTAs

3. Facts, figures and landscape of RTAs

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

• Monitoring and Transparency

– Notifications and consideration of RTAs

– Compliance with WTO rules and DS

• Body of Rules

– Sets out the rules and procedures for Members engaging in RTAs

• Forum for trade negotiations

– Negotiations of WTO rules and procedures applying to RTAs

WTO and RTAs: roles and functions

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

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ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

A cross-cutting and consistent architectural approach underpinning the MTS

•Disciplines and basic principles

– Aimed at facilitating market access (e.g. tariff bindings) and countering trade discrimination (e.g. MFN & National Treatment)

•Attenuated or modulated by a complex system of exceptions and derogations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

The Rights (derogations and exceptions)

•WTO agreements grant to WTO Members the possibility to derogate from the basic principles, under specific circumstances and specific conditions

•These rights constitute therefore derogations to or exceptions from the basic principles

•One of these exceptions is Regional Integration

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

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Article XXIV +Understanding

Enabling Clause

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Transparency Mechanism

for RTAs

RTAs in goods

RTAs in services

All RTAs

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

What is an RTA in the WTO context?– An exception to the MFN principle

The WTO provides for a series of conditional exceptions which Members can invoke when departing from their MFN commitment :

Since 1947 → Article XXIV of the GATT

Since 1979 → “Enabling Clause"

Since 1994 → Understanding on GATT Article XXIV

Since 1994 → GATS Article V

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

1. The purpose of an RTA is to facilitate trade among the parties to the agreement

2. An RTA must not raise barriers towards third parties higher than those existing before the formation of the RTA

3. An RTA must provide for mutual/reciprocal trade concessions

The RTA exceptions are based on common principles*:

*GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Free Trade Areas (FTA)

Customs Unions (CU)

It also provides for:

Interim agreements

GATT Article XXIV + the Understanding

Provides for the establishment of two types of preferential trade arrangements:

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

1. Substantial trade liberalization among the parties to the agreement (Article XXIV:8)

2. Neutrality vis-à-vis other WTO Members not party to the agreement (Article XXIV:5)

Establishes two conditions with which RTA parties must comply in order to benefit from the exception provided

GATT Article XXIV + the Understanding

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Some questions about these criteria:

What is the meaning of “substantially” and “ORRCs” (XXIV:8(a)(i) & (b)) ?

GATT Article XXIV + the Understanding

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

How can compliance with the criterion of “trade policy neutrality” vis-à-vis non-parties be assessed?

Standstill in MFN (applied) duties and Standstill in MFN (applied) duties and “other regulations of commerce” (Article “other regulations of commerce” (Article XXIV:5(b))XXIV:5(b))

On average, no increase in applied On average, no increase in applied MFN duties (Article XXIV:5(a))MFN duties (Article XXIV:5(a))

Possible individual analysis of “other Possible individual analysis of “other regulations of commerce”regulations of commerce”

Parties to a Free Trade Area

Parties to a Customs Union

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Average imports in

2001-03* (US$ million)

National weighted average tariff rates**

Average customs duties collected in 2001-2003***

($ million)

Pre-2004 Post-2004 Pre-2004 Post-2004

Botswana 376 6.87 6.64 26 25 Lesotho 140 15.35 14.93 21 21 Namibia 252 6.15 5.67 15 14 South Africa 15,008 5.00 4.75 750 713 Swaziland 69 15.2 14.60 10 10 SACU 15,845 5.20 4.94 824 783

Pre-2004 Post-2004

Weighted average tariff rates 5.20% 4.94%

Average customs duties collected $824 million $783 million

Committee on Regional Trade Agreements (Extract from WTO Document WT/REG231/1 - 3 October 2008)

SOUTHERN AFRICAN CUSTOMS UNION

Weighted Average Tariff Rates and Customs Duties CollectedNote by the Secretariat

1.In the context of "[t]he evaluation under paragraph 5(a) of Article XXIV of the general incidence of the duties and other regulations of commerce applicable before and after the formation of a customs union", paragraph 2 of the Understanding on the Interpretation of Article XXIV of the GATT 1994 (the Understanding) directs the Secretariat to calculate "the weighted average tariff rates and customs duties collected" and elaborates on the approach to be used.

Results of the calculations

2.Major parameters underlying the results are shown below:

3.The mandated calculations for the SACU, according to the described methodology and on the basis of available data, brought out the following results:

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

With respect to a Customs Union, Article XXIV also provides that:

•Tariffs and other trade measures are substantially harmonized among the parties (Article XXIV:8(a)(ii))

•If in doing so a party breaks its MFN bindings then:

• The Customs Union has to enter into a re-negotiation of tariff bindings with interested Members (Article XXIV:6)

• In accordance with the procedures set out in paragraphs 4 to 6 of the Understanding

GATT Article XXIV + the Understanding

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

“Interim agreements” must: Lead to either a free-trade area or a customs union.

Contain a plan and schedule (Article XXIV:5(c))

Achieve that aim through a maximum transition period of 10 years, except for exceptional circumstances (para 3 of Understanding)

Include any WTO recommended modification (para 10 of Understanding)

GATT Article XXIV + the Understanding

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

“Paragraph 2(c)” provides for:

1.Preferential regional or global arrangements among developing countries;

2.Containing mutual trade concessions;

3.Regarding reduction or elimination of duties;

4.Reduction or elimination of non-tariff measures may be subject to WTO criteria and conditions

The Enabling Clause

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Common aspects1. Goods only – (Only GATS covers trade in services)

2. Reciprocity – (All parties to the RTA to exchange concessions)

3. Neutrality criterion – (RTA not to raise barriers to 3rd parties)

Differences1. Enabling Clause only an option for developing countries

2. Reduction OR elimination of tariffs (Enabling Clause) vs. elimination of duties (GATT XXIV)...

3. ...and reduction OR elimination of NTBs vs. elimination of ORRCs

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Provides for two types of preferential agreements on trade in services:

1.Economic Integration Agreements (EIA);

2.And EIAs implemented on the basis of a time-frame (V.7(a))

GATS Article V

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Establishes two main conditions:

1.Trade liberalization among the parties must cover a broad range of services activities (V:1)

2.Neutrality vis-à-vis other WTO Members not party to the agreement (V:4)

GATS Article V

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Article V:1 – internal requirement

•Substantial sectoral coverage;

•No a priori exclusion of any modes of supply;

•In the sectors covered, absence or elimination of substantially all discrimination in the sense of national treatment (V:1(b))

GATS Article V

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

1. EIAs among developed and developing countries:

• Flexibility for the developing countries parties with respect to the requirement of substantial sectoral coverage (para V:3a)

2. EIAs among developing countries:

• Preferences may be granted to services suppliers of the parties (para V:3b)

GATS Article V: S&D

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Parties to an RTA

Developed countries

Developing countries

Developed/ developing countries

Trade in

goods

Trade in services

• So which provision applies?

All RTAs must be notified!!!

GATT XXIVGATT XXIV

Enabling clauseGATT XXIV

GATS V GATS V GATS V

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Multilateral negotiations on WTO rules and procedures relating to RTAs

Doha Ministerial Declaration (14 November 2001) contains two references to RTAs:

Recognize the WTO as unique forum for global trade rule-making and liberalization and ... RTAs’ role in trade liberalization and development

Calls for negotiations to clarify and improve WTO rules and procedures on RTAs ... taking into account RTAs’ developmental aspects

Para 4

Preamble

Para 29

Negotiating mandate

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Why negotiate WTO rules & procedures on RTAs?

•Lack of transparency:

– WTO/RTA provisions were vague with respect to transparency procedures

– Failure to comply with notification obligations and lack of data

•Systemic concerns:

– Proliferation of RTAs

•Institutional deadlock:

– No effective WTO surveillance mechanism of RTAs

– No consistency assessment of the RTAs in force

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Issues of a Procedural nature:• Improve RTA Transparency

• Improve procedures for the consideration and surveillance of RTAs by the WTO

Systemic questions:• Clarify and improve existing WTO rules on RTAs

DDA negotiations on RTAs: two track approach

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

DDA negotiations on RTAs: state of play

RTA Transparency:

• Review of the Mechanism - § 23 of WT/L/671

• Permanent application (Single Undertaking)

• Database on RTAs - http://rtais.wto.org

Systemic Issues:

• On-going process but little progress

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

1. Monitoring and Transparency

– Notifications and consideration of RTAs

2. Conformity

– Compliance with WTO rules and DS

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Ministerial Conference

Secretariat

Appellate Body

DS Panels

Committees Committees

GoodsCouncil

ServicesCouncil

TRIPSCouncil

CommitteesCTD CTE CRTABOPBudgetWorking Groups

General CouncilTPRB DSB

Director-General

Trade Neg.CommitteeNGR: MA, Rules, TFSpecial Sessions:Services, TRIPS, DSB, Ag. CTD, TEC

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Ministerial Conference

Appellate Body

DS Panels

RTAs notified under:

•GATT Article XXIV

•GATS Article V

General CouncilTPRB DSB

RTAs notified under:

•The Enabling Clause

are reviewed by the

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

GATT Article XXIV GATS Article VEnabling Clause –

Paragraph 2 c)

Transparency Mechanism for RTAsGeneral Council’s Decision of 14 December 2006 (WT/L/671)

(Provisional application pending conclusion of the Doha Round)

Monitoring and Transparency

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Objectives of the Transparency Mechanism:

•Clarifies and strengthens existing transparency provisions

•Introduces new procedures to enhance transparency

•Outlines specific guidelines for the provision of RTA data

•Charges the WTO Secretariat with a transparency role with respect RTAs notified to the WTO

•Establishes a new database on RTAs

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Monitoring and Transparency

• Steps of the process

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Monitoring and Transparency: Notification•What?

• Full text RTA including annexes and protocols• Schedules

•When?• At the latest before the application of the preferential treatment

•By whom?• Parties to the RTA (jointly or individually)

•How?• Goods: Article XXIV (CRTA) or Enabling Clause (CTD)• Services: Article V GATS (CRTA)• Notification template

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Notification template

NOTIFICATION OF REGIONAL TRADE AGREEMENT

1. Member(s) notifying:

2. Date of notification:

3. Notification pursuant to:

[ ] Article XXIV:7(a) of GATT 1994

[ ] Article V:7(a) of GATS

[ ] Paragraph 4(a) of the Enabling Clause

4. Parties to the Agreement:

5. Date of signature:

6. Date(s) of entry into Force:

7. Brief description of the Agreement:

8. Text and related schedules, annexes and protocols are:

[ ] submitted to the WTO Secretariat (electronic format)

[ ] available from the following official Internet link(s):

__________

Document symbol: WT/REG/16

http://www.wto.org/english/tratop_e/region_e/trans_mecha_e.htm

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Notification

Provision of Data

Factual Presentation(by WTO Secretariat)

Schedules, trade and tariff data, RoO, etc. as in Annex to WT/L/671

Circulation to Members

Written questions and replies

CRTA (CTD) Meeting

Max 1

ye

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• G/L/834• WT/COMTD/63• S/L/310

Before application of preferential treatment

• 10 wks after notification• 20 wks (RTAs among

developing countries only)

Monitoring and Transparency: process

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Factual Presentations completed (126)

• Factual Presentations: to be done (107) / on hold (4)

Armenia - Moldova (G) EFTA - SACU (G) Japan - Thailand (G&S) Peru - Korea, Rep. Of (G&S)

Armenia - Ukraine (G) EFTA - Serbia (G) Japan - Viet Nam (G&S) Peru - Singapore (G&S)

Australia - Chile (G&S) EFTA - Tunisia (G) Jordan - Singapore (G&S) SACU (G)

Brunei Darussalam - Japan (G&S) Egypt - Turkey (G) Korea, Rep. of - Chile (G) SADC (G)

Canada - Colombia (G&S) EU - Albania (G&S) Korea, Rep. of - Singapore (G&S) MERCOSUR (S)

Canada - Peru (G&S) EU - Chile (S) Kyrgyz Republic - Ukraine (G) Thailand - Australia (G&S)

Chile - China (G&S) EU - Croatia (S) Mexico - El Salvador (G&S) Thailand - New Zealand (G)

Chile - Colombia (G&S) EU - Egypt (G) Mexico - Guatemala (G&S) Trans-Pacific SEP (G&S)

Chile - India (G) EU - FYROM (S) Mexico - Honduras (G&S) Turkey - Albania (G)

Chile - Japan (G&S) EU - Montenegro (G&S) Mexico - Nicaragua (G) Turkey - Chile (G)

China - New Zealand (G&S) EU - Rep. of Korea (G&S) Nicaragua - TPKM (G&S) Turkey - Georgia (G)

Colombia - Mexico (G&S) EU - Serbia (G) Pakistan - China (G&S) Turkey - Montenegro (G)

Costa Rica - Mexico (G&S) Georgia - Ukraine (G) Pakistan - Malaysia (G&S) Turkey - Morocco (G)

EC (25) Enlargement (S) Hong Kong, China - New Zealand (G&S) Pakistan - Sri Lanka (G) Turkey - Serbia (G)

EC (27) Enlargement (G&S) India - Singapore (G&S) Panama - Chile (G&S) Turkey - Tunisia (G)

EFTA - Albania (G) Japan - Indonesia (G&S) Panama - Costa Rica (G&S) Ukraine - FYROM (G)

EFTA - Canada (G) Japan - Malaysia (G&S) Panama - El Salvador (G&S) Ukraine - Moldova (G)

EFTA - Chile (G&S) Japan - Mexico (G&S) Panama - Singapore (G&S) US - Australia (G&S)

EFTA - Egypt (G) Japan - Philippines (G&S) Panama - TPKM (G&S) US - Morocco (G&S)

EFTA - Korea, Rep. of (G&S) Japan - Switzerland (G&S) Peru - China (G&S) US - Peru (G&S)

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

WTO RTAs database: Mandate – (Para 21 of WT/L/671)

•The aim is to provide an RTA Information System (RTA-IS), to store, maintain, analyse and disseminate information on RTAs

•Enhance the transparency and accessibility of information on RTAs through its dissemination on the WTO website

•Provide statistical indicators for RTA analysis

•Long term goal to provide up to date information, including data on trade and tariffs covered by individual agreements

•URL address: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

GATT Article XXIV

GATS Article VEnabling Clause – Paragraph 2 c)

WTO Dispute Settlement provisions can be invoked

2. Conformity In order to benefit from the derogation to MFN the RTA must be in conformity with the requirements contained in…

Any disputes on RTA ?

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Free Trade Area

PartialScope

a group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries continue to apply their existing tariffs on external goods.

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Country A & B sign a FTA

Tariffs are eliminated on most goods

Each party maintains its tariff structure

A Roo regime is put in place

Reciprocal concessions (possible asymmetrical implementation)

Negative list approach (in most cases)

Beyond tariff concessionsBB

Country AUniform MFN tariff of 6%

Country BVariable MFN 0–30 %

AA

0%duties

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Customs Union

Free Trade Area

PartialScope

a group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries replace their individual MFN tariffs with a single tariff applied to third countries.

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Country A & B sign a CUTariffs are eliminated on most goodsA common external tariff is adoptedA mechanism to share customs revenues is devisedA temporary Roo regime may be put in placeCompensation is paid to third countries if bound MFN rates are raised

BB

Country AUniform MFN tariff of 6%

Country BVariable MFN 0–30 %

AA

0%duties

CE

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– 10

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ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Economic Union

Common Market

Customs Union

Free Trade Area

PartialScope

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WTO Legal Provisions

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Some economic & political motivations

• slow progress on multilateral agenda

• policy of additive regionalism (Chile, Singapore, Mexico...)

• access to markets in areas other than goods

• more secure access to developed markets than unilateral programs (GSP, AGOA, Cotonou, EBA)

• facilitate trade among neighboring countries

• support foreign policy goals, including development

• framework for regional cooperation

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

ASEAN

SAFTAEACNAFTA

MERCOSURCAN

CARICOMCACM

EUROPEAN UNION EFTA PAFTA ECOWAS

CEMAC SADC

SACUCOMESAWAEMU

GCC

CIS

CEFTA

PICTA

Cambodia

Indonesia

Thailand

Laos

Malaysia

Viet Nam

Bangladesh

Myanmar

Brunei Darussalam

Singapore

ASEAN

Australia

New Zealand

BhutanIndia

Maldives

Nepal

SAFTA

Pakistan Sri Lanka

APTA

China

Rep. of Korea

PICTA

Cook Islands

Fiji

Kiribati

Micronesia

NauruNiue

Pap. New Guinea

Samoa

Solomon Islands

Tonga

Tuvalu

Vanuatu

SPARTECA

Japan

PATCRA

MSG

EFTA

EFTA / EU

MERCOSUR

Trans-Pacific SEP

ANZCERTA

Philippines Marshall Islands

EU

ASEAN

Singapore

Macao, China

PICTA

PATCRAMSG

SPARTECA

CER

South Asian Free Trade Area

ASEAN Free Trade Area

Pacific Islands Countries Trade Agreement (PICTA)

Asia-Pacific Trade Agreement

Jordan

United States

Mexico

Panama

Chile

Brunei, Chile,New Zealand &

Singapore

Nicaragua

Honduras

Switzerland

Peru

MERCOSUR

El Salvador

Costa Rica

Guatemala

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Scheduling tariff commitments

1. Negative list: the RTA rules related to trade liberalization apply to all products except those indicated by each party

• Example: Armenia-Moldova FTA

2. Positive list: trade liberalization only applies to the products listed by the parties

• Example: U.S.-Singapore

3. Mix list: a combination of 1 & 2 – i.e. industrial goods may be subject to 1 and agricultural goods to 2

• Example: EFTA-Egypt FTA

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Timing and types of commitments

1. “big bang”

• Example: Singapore various RTAs

2. Linear or specific reductions

• Example: Japan – Malaysia EPA

3. Frontloading vs. backloading

4. Variable transition periods (asymmetric)

• Example: Trans-Pacific SEP 4

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Measuring market access (I)• Proportion of fully liberalized tariff lines - tradeable goods

• Share of imports at duty-free rates - traded goodsExample: Tariff elimination commitments under A&B FTA and corresponding average trade values for 2003-05*

Duty phase-out period

Numberof lines

% of total lines in A Tariff Schedule

Value of A imports from B (US$ million)

% of A total imports from B

MFN duty free 313 2.7 1,024.4 38.1

2006 252 2.2 271.7 10.1

2009 2,178 18.7 722.8 26.9

Remain dutiable 8,886 76.4 665.0 24.7

Total 11,629 100.0 2,691.5 100.0

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Measuring market access (II): sectorial liberalization

HS section and description Total no.of lines MFN duty free lines Duty free lines in 2007 Remain dutiable

I Live animals and animal products 445 123 27 295 II Vegetable products 1,068 144 165 759 III Animal or vegetable fats and oils 189 34 44 111 IV Prepared food etc. 651 79 77 495 V Minerals 182 119 63 VI Chemicals and chemical products 1,020 407 574 39 VII Plastics and rubber 241 30 211 VIII Hides and skins 74 15 59 IX Wood and articles 130 14 116 X Pulp, paper etc. 181 24 157 XI Textiles and textiles articles 1,094 34 1,060 XII Footwear, headgear 61 61 XIII Articles of stone 160 2 158 XIV Precious stones, etc. 61 7 54 XV Base metals and base metals products 913 39 874 XVI Machinery 1,234 204 1,030 XVII Transport equipment 196 18 178 XVIII Precision equipment 257 55 202 XIX Arms and ammunition 28 28 XX Misc. manufactured articles 176 34 142 XXI Works of art, etc. 10 8 2 Total 8,371 1,390 5,282 1,699

Example country A: Tariff elimination under the A&B FTA, by HS section

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

HS tariff line code (description) TRQ at entry into force (2005) Liberalization scheme

Quantity in-quota duty Quantity in-quota

duty Dairy products 0401.30.25, 0403.90.16, 2105.00.20 (9913.04.05)

7,500,000 L 0 19,053,000 L Plus 6% every year thereafter, compounded annually

0

Table B.I.A - United States: USAFTA FTA-preferential Tariff-rate quotas for agricultural products

Measuring market access (III): TRQs

• Example: U.S. - Australia FTA

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Rules of Origin and market access

• RoO are an essential feature of virtually all RTAs in order to avoid trade deflection

However:

• Production costs may increase due to technical requirements or need to source from intra-RTA partners

• Administrative costs may rise due to certification requirements, both for exporter and customs officials

• Restrictive RoO may result in trade diversion even if extra-RTA inputs are cheaper.

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Rules of Origin: product specific• Example: Trans-Pacific SEP

Rules of origin Trans-Pacific SEP Agreement HS Section and Description HS Ch. Rule Technical rule RVC

IV - Prepared Foodstuffs; Beverages, Spirits and Vinegar

16 CC

45%

17 CTH 18 CC - CTH 19 CTH or RVC 20 CC - CTH or RVC - CTSH+RVC 21 CTH or RVC - CTSH 22 CC - CTH 23 CC - CTH or RVC 24 CTH or RVC

VI - Chemical Products

28 CTH – CTSH - CTH or RVC Chemical reaction or standard materials

45%

29 CTH – CTSH - CTH or RVC Chemical reaction or standard materials or isomer separation

30 CTH - CTSH Chemical reaction

31 CTH or RVC

32 CTH – CTSH - CTH or RVC Chemical reaction or standard materials

33 CTSH or RVC - CTH or RVC

Chemical reaction

34 CTSH or RVC - CTH or RVC - CTH 35 CTSH or RVC - CTH or RVC 36 CTH 37 CTH - CTSH 38 CTSH or RVC - CTH or RVC - CTSH

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Scheduling framework

•Usage of the CPC List to classify the services sectors

•Generally, modes approach – alternatives found in non-GATS type schedules

•In a number of cases, separate Chapter on temporary movement of natural persons

•Some services are covered in separate Annexes or Chapters (e.g. financial, telecommunication)

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

Approaches to services commitments

•Positive list – modeled on GATS

(e.g. EFTA-Korea, Japan-Malaysia, Jordan-Singapore, India-Singapore, Trans-Pacific, Thailand-Australia, China-New Zealand)

•Negative list – modeled on NAFTA

(e.g. Japan-Mexico, Japan-Chile, Panama-El Salvador)

•Mixed list approach

(e.g. Korea-Singapore – negative list approach except for financial services taking positive list approach)

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

• Coverage

– national policy objectives to decide how many sectors will be covered out of 12 broad sectors from the CPC List

– generally, EIAs go beyond GATS commitments by adding new services (sectors/sub-sectors)

– rendezvous clauses for further services coverage

– preferential relaxation of limitations

• Exclusions:

– air traffic rights

– services supplied in the exercise of the government authority

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

• Examples of Preferences

– Preferential allocation of the number of service providers

– Preferential treatment through licensing and qualification requirements

– Relaxation of restrictions on foreign ownership

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

1. Anti-dumping and RTAs:

• Few prohibit AD on intra-trade

• Some apply AD with more stringent criteria than WTO

• Most apply AD in accordance with WTO rules

2. Safeguards:

• Generally permitted on intra-trade

• Most retain safeguards during the product transition period

• Several provide for special/agricultural safeguards

• Lack of clarity on the treatment of partners in case of global safeguards

ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations

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