Institution-BUILDING IN RTAs: Transparency, INTEGRITY and PARTICIPATIVE DECISION-MAKING

INSTITUTION-BUILDING IN RTAS: TRANSPARENCY, INTEGRITY AND PARTICIPATIVE DECISION-MAKING

Iza Lejárraga

OECD Trade and Agriculture Directorate

Expert Group Meeting on Preferential Trade Agreements and Regional Integration

Tunis, 5-6 December 2012

Presentation

Overview of OECD work on RTAs

Importance of transparency in trade

Emerging best practices in RTAs

Quantitative impact

3

BE

ST

PR

AC

TIC

ES

Agriculture

Standards

Export restrictions

Govt procurement

Services

E-commerce

TR

AD

E IM

PAC

T WTO-plus

WTO-beyond

WTO-minus

Enforceability

Homogeneity

MU

LTIL

ATE

RA

LIS

ATIO

N

Bottom-up (non-parties)

Top-down (WTO)

Convergence

Consistency

Political Econ.

OECD work on “Multilateralising Regionalism”:What can be multilatrealised – and how?

Presentation



Best practices in regional transparency

Quantitative impact

OECD Trade and Agriculture Directorate 5

Institution-building in RTAs

‘Positive integration’ (Tinbergen 1954): the creation of inter-governmental public goods in regional integration schemes is also welfare-enhancing

Beyond liberalization, countries are deploying RTAs to build trust and develop mechanisms for informational exchanges and predictability: market opacity

Greif (1993) 11-th century Mediterranean trade was facilitated by informal reputation and information mechanisms within the ‘Maghribi trading coalition.’

Effects of transparency in regional trade

Trade Reduces

market entry costs

Improves implementa-

tion

Lowers expropriatior

risksPromotes

cooperation

Reduces trade

disputes


From shallow to deep integration: Behind-the border agenda requires greater transparency

Along with NT and MFN, transparency is one of the key pillars of the global trading system (Art X GATT 1947) In recent years, has migrated from the periphery to the

core of WTO jurisprudence: from ‘dormant provisions,’ “subsidiary” to “substantive“ commitments

Remains narrow in scope and undefined.

Quest for ‘deep integration’ in RTAs has gone hand in-hand with greater demands for transparencyBehind-the-border agenda call for more sophisticated

mechanisms for information and for influenceNon-tariff barriers require greater information and

predictability in domestic rule-making & enforcement


Transparency goes a long way in making NTMs less trade-restrictive

Introducing a distortion

(trade-restrictive)

Addressing a market failure

(welfare-enhancing)

9

• Not huge financial resources• Coordination, administrative culture

Costs

• Avoids second-best complications• Lower trade diversion

Impact

• de jure preferential• de facto MFN!!!

Multilateralisation

Transparency: Public Goods in RTAs

Presentation




Quantitative impact

Transparency features as a core objective of an RTA: an end in itself, rather than a means

ResolvedResolved to promote transparency as regards all relevant interested parties, including the private sector and civil

society organisations… EU-Korea FTA 2010

The objective of this chapter is to establish a mechanism to strengthen transparency...

SPS Chapter, AANZFTA 2010

56% of RTAs cite transparency as a core objective in preambles

WTO-plus definition of transparency

Fighting corruption

Information

• Crimininalization• Sanctions • Whistleblower

• Foreign party• Publish comments• Consideration

• E-Publication• Rationale• Explanations

• Peer review• Dispute settlement• Cooperation

30% of RTAs signed by OECD and key emerging economies endorse these four elements.

RTAs horizontalize transparency: harmonizing and streamlining procedures for all sectors & measures

Transparency Chapter

SPS TBT GATS

Rules

Over 40% (52 RTAs) have a horizontal transparency chapter

Recent APEC Ministerial endorsed inclusion of transparency chapters.

In most jurisdictions, regulated horizontally in administrative law

...while deepening WTO-plus area-specific transparency in corresponding chapters

AustraliaBrazil (MERCOSUR)

Canada

Chile

China

EFTA

EUIndia

Indonesia (ASEAN)

Japan

Korea

New Zealand

Turkey

US

0

5

TBT

SPS

Cross-border services

Movement of persons

Level of enforceability of WTO-plus transparency

CB

MP

WTO-plus Regulatory Transparency in Agriculture & non-Agricultural Goods

WTO-plus Regulatory Transparency in Services

& Investment

78% of WTO-plus SPS transparency obligations are enforceable,, while less than 7% in TBTs are subject to DSU

80% of services and 92% investment transparency provisions are enforceable, while 59% of transparency measures for movement of persons are mandatory.

16

WHAT?

WHEN?

HOW?

WHOM?

Specificity

RTAs provide transparency procedures with greater operational specificity

WHAT?

Relevant measures(GATS ArtII)

+Non-exhaustive list

Central, local, regiona; goverm, non-governml

Justification or policy rationale

Statistical information

WHEN?

Promptly (GATT Art X)

+Prior to enactment

Timing specified (30-60-90 days)

Prior consultation with RTA partners

Opportunity for comment

HOW?

Publish or otherwise make available (GATT Art X)

+Available on the

internet

English translation

At no cost

Technical assistance

RTAs introduce more precision and specificity: Example of Prior Publication

WHOM?

Private sectors is a direct receiver, and often supplier, of transparency

Member A (Exporter)

Member B (Importer)

Enquiry Point A

Enquiry Point B

“contracting party applying the restrictions shall provide, upon the request of any contracting party , information concerning ..”.GATT

Creating incentives: Aid-for-Transparency

Aid-for-transparency Technical assistance to help administrations

coordinate and collect information Support to SMEs on foreign market information Cooperation chapters address transparency

Contextualization: Adapting procedures to administrative culture and

regime

Making transparency safeDe-linking transparency from litigation

Austra

lia (2

004)

Bahra

in (2

005)

CAFTA-DR (2

004)

Chile (

2003

)

Colombia

(200

6)

Korea

(200

7)

Morro

cco (

2004

)

Oman (2

006)

Panam

a (20

07)

Peru (

2006

)

Singap

ore (

2003

)0

1

2

3

4

5

6

7

Mandatory Best-endeavour

No.

of A

nti-c

orru

ptio

n M

easu

res

Anti-corruption Measures in US FTAs

New Frontiers: Combating corruption and bribery in regional arrangements

Number of anti-corruption obligations in RTAs signed by United States

Presentation




Quantitative impact


Can countries stand to gain from negotiating transparency disciplines in their RTAs?

Transparency provisions in RTAs are associated with trade-boosting effects:A marginal improvement in transparency

(additional transparency obligation) is associated with an increase in trade of over 1 percent.

Sensitivity of trade flows to transparency can vary by specific sectors and products:The elasticity of trade with regards to RTAs

transparency provisions is slightly higher in agricultural than in industrial goods.


Transparency is not free: where is the biggest bang for the buck of transparency obligation?

Horizontal measures on transparency are more impactful than area-specific procedures Ag: horizontal transparency chapters are more

important that WTO-plus SPS/TBT transparencyAmong area-specific transparency, rules of

origin emerges as the most significant.

Transparency related to the implementation of obligations in the RTA, including dispute settlement, are also important.


What factors could contribute to a wider diffusion of WTO-plus transparency norms?

Democracy

Regulatory quality

Rule of law

Political stability

Control corruption

Distance in incomeDistance in culture

Size of country

Accesion to the WTO

Common legal familiy/colony

Differentiatted produtcts

Factors facilitating WTO-plus

transparency

Countries with good governance negotiate more transparency-friendly treaties

North-South RTAs have more comprehensive transparencyprovisions

Reflections for multilateralsing regionalism

Critical mass?

Homogeneity & consistency with WTO?

Legally enforceable obligations?

Public goods: non-excludable, de facto MFN?

Trade-boosting effects?

In some areas, WTO-plus transparency provisions are

“regionalising multilateralism”

Thank you for your attention.Chokran jasilan!

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Institution-BUILDING IN RTAs: Transparency, INTEGRITY and PARTICIPATIVE DECISION-MAKING

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