L. Price - Overview Of Trade Agreements

TRADE AGREEMENTSTRADE AGREEMENTS 101Lincoln Pricewww.crnm.org

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Strategic BusinessStrategic Business Considerations in Trade Agreements

Strategic Business Considerations in Trade Agreements

What are trade agreements?3

Legal contracts to facilitate trade. Agreements can be t t t b i t b i ( lgovernment to government or business to business (or also

business to government). This presentation focuses on Government FTAs.

These agreements usually commit to eliminating/reducing customs duties on products of interest of the parties and to dispute settlement if there are breachesdispute settlement if there are breaches

Modern trade agreements cover trade in services, as well as investment, and commit to no exclusive special treatment (Most Favored Nation‐MFN and National Treatment‐NT)


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WTO trade Report 2009

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Why are trade agreements i t t f b i ?

7important for business?

Trade agreements can reduce the cost of doing international g gbusiness, eg duties, licences (via eliminating quotas), transparency and market access for services providers

Trade agreements can make your product more attractive to overseas distributors via preferencesoverseas distributors via preferences

FTAs can provide you with a first mover advantage into major p y g jmarkets

FTAs also allow more competition on your home soilStrategic Business Considerations in Trade Agreements

Why are trade agreements i t t f b i ?important for business?

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The volume of trade is so large and dynamic, that tariffs (even “nuisance ones” < 5%) have large impact on profits

Firms are operating on a more global scalei t d t i limported raw materials

Imported capital/technology

Imported human resources (staff/consultants)

Exported final and intermediate products in a value chain




taste/preferences more global so more international /p gbusiness opportunities

Even SMEs are becoming more trade oriented as theyEven SMEs are becoming more trade oriented as they depend on external markets for inputs/markets

Even though trade duties are being reduced globallyEven though trade duties are being reduced globally, there are many regions, including LATAM that still have high tariffs. So FTAs are important to target regions with high tariffs.high tariffs.




Trade agreements can eliminate tariffs escalation, i h l dd d d h ii.e. where value added products, such as cigars and cigarettes, are charged high tariffs, and raw/unmanufactured tobacco duty free. (other

l i l d ff bexamples include green coffee beans vs roasted/ground coffee)

Do you have other examples?

Trade agreements allow countries that have received unilateral preferences to convert those to WTO compliant trade agreements and preserve market access for exporters




FTAs assist in attracting efficiency seeking FDI as Multilateral firms seek countries that have the best FTA coverage

TNCs export from the countries with theTNCs export from the countries with the most favorable trade regimes.

In these times, TNCs are consolidating in countries with best market access


Structure of a modern trade g t

12agreement

Market Access for goodsAgricultureManufacturingRules of origin

Services Market accessTrade Facilitation (customs procedures)( p )Investment Protection/PromotionTechnical Barriers/SPSCompetition policyCompetition policyDispute settlement


Structure of a modern trade g t

13agreement

Government ProcurementElectronic CommerceDevelopment CooperationIntellectual property rights (IPR)/i ti(IPR)/innovationPersonal Date Protection L bLabourEnvironmental protection (climate change now considered)(climate change now considered)


How are trade agreements negotiated?14

How are trade agreements negotiated?How are trade agreements negotiated?FTA text

1) ↑ sales

2) Improved b l

Consultation

Regional positions

balance sheet

3) ↑ long term fit bilitConsultation

TWGs, COTED, etc

OTN(CRNM)

profitability

Government

Consensus Private sector positions

farmer services

manufacturerStrategic Business Considerations in Trade Agreements

Pyramid of existing trade agreements

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agreements

CSME

Regional agreement: e.g. CARICOM-DR

Unilateral preferences:

WTO

Caribcan

WTO


Timing of trade negotiations16

g g

Green Light: (negotiate now) Canada NegotiationsWTO negotiations

Yellow: (lets wait a little)USA MercosurAndean

Red: (No mandate to negotiate)Central AmericaChileTurkey

Do you agree with this lineup?Do you agree with this lineup?


WTO17

Legally binding trade agreement established g y g gamongst 153 member countries in 1995

CARICOM (exc the Bahamas) are WTO members (most export markets are also WTO members)

Established to prevent global protectionism which has had severe consequences on qbusiness development


WTO18

Commitments include:Commitments include:MFN (no preferences)National treatment (treat foreign asNational treatment (treat foreign as local)Binding “capping” tariffsEliminating quotas periodicallyListing services sectors which will be opened to foreign participationopened to foreign participationProgressively liberalizing trade through future “rounds” of negotiations


WTO19

Doha Round seeks to:Further reduce tariffs Eli i t t d b idiEliminate trade subsidiesFurther reduce obstacles to trade in servicesin servicesSDT: Allows Special products which are exempt from tariff

d tireductionsThe round is deadlocked in issues including industrial tariffs and gsubsidies (the same issues which stalled the FTAA)Strategic Business Considerations in Trade Agreements

CBTPA-CBI20

Unilateral trade preference granted byUnilateral trade preference granted by USA to most Caribbean and Central American countries (WTO illegal without

i )waiver)

E g Cigarettes and other tobaccoE.g. Cigarettes and other tobacco products duty free in USA under CBTPA. MFN duties, 1.89/kg+4.7%

US FTA negotiations on hold until after Canada FTACanada FTA


CBTPA21

l h d 1983launched 1983

Expanded in 2000 through the US‐Caribbean Basin Trade Partnership Act (CBTPA)(CBTPA).

However, under US legislation the termination of the effect of CBTPA was scheduled 30 September 2008scheduled 30 September 2008.


CBTPA22

WTO d i t fWTO approved waiver request from the US on the CBERA.

The approval of the waiver which will remain valid until 2014will remain valid until 2014, provides the legal authorization for CARICOM to export goods coveredCARICOM to export goods covered under CBERA to the US duty‐free.


CARIBCAN23

non reciprocal preferential trade arrangement thatnon‐reciprocal preferential trade arrangement that grants unilateral duty free access to eligible goods from beneficiary countries in the English‐speaking Caribbean up to 2011 (WTO illegal without waiver);

Caribcan covers almost all our trade with CanadaCaribcan covers almost all our trade with Canada (except dairy, poultry etc)

E Ci d h b d dE.g. Cigarettes and other tobacco products duty free in Canada under Caribcan or GSP. MFN duties, 8%


CARIBCAN24

FTA with Canada to cover:FTA with Canada to cover:Market access (goods and services)Investment protectionpTrade facilitation Trade Remedies (i.e. safeguards, AD/CVD)No agreement on side agreements on

LabourEnvironmentEnvironment

first round was in Nov 9‐12, 2009 in Barbados. Next round for Q1 2010


Economic Partnership Ag t (EPA)

25Agreement (EPA)

Trade and Development Cooperation deal between p pCF and the EU

Deal provides DFQF access to EU for all originating products (e.g. tobacco pays no duties into EU. ROW pays 26%, other developing countries pay 9.1%)pays 26%, other developing countries pay 9.1%)

Jamaica will begin reducing duties on select g gproducts from Europe by 2011


EPA26

Prior to the EPA there were fivePrior to the EPA, there were five agreements Lome 1‐4 and the Cotonou agreement, all temporary and needingagreement, all temporary and needing WTO waivers

EPA, now a more permanent arrangementarrangement

Europe is the worlds largest trade areaEurope is the worlds largest trade area


LATAM is negotiating FTAs: C t l A i

27Central American

CACM‐ Customs Union: members include Costa Rica, El Salvador, l d dGuatemala, Honduras, and Nicaragua

CACM‐ChileCACM‐DR‐USACACM‐ PanamaMexico‐NicaraguaGuatemala‐MexicoGuatemala MexicoHonduras‐MexicoEl Salvador‐MexicoC t Ri M iCosta Rica‐MexicoCosta Rica‐CanadaEl Salvador, Guatemala, Honduras and Nicaragua negotiating with Canada


LATAM is negotiating FTAs: D i i R

28Dominican Rep

DR‐CARICOMDR CARICOM

DR CACMDR‐CACM

EPA (E U i )EPA (European Union)

Canada‐Underway


How do I understand FTAs?29

1. Know your products tariff code

K th t iff lib li ti h d l d2. Know the tariff liberalization schedule and whether your company's product is liberalized or not (in trade most favored nation (MFN) means no special tariff treatment)special tariff treatment)

3. Know the rules of originh h d i /h iThese are the production/harvesting

techniques/procedures that must be followed for the product to be considered as originating (“made in”) in the country that is supposed to be getting the duty

iconcessions


Tariff Codes: E.g. Cigarettes

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NB: More digits means more details

Rules of Origin31

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Wholly produced

Tariff jump

Value added

Product specific

Cumulation


Caricom-Venezuela FTA32

Caricom Venezuela FTA

P id d t i f l tProvides duty concessions for select Jamaican/CARICOM exports to Venezuela from date 1993

E.g. Caricom Cigarettes made from Virginia tobacco (240220) duty free.tobacco (240220) duty free.

ROW pays 20%


Tariff liberalization 33


Reading tariff schedules in FTAs34

g

Health Health certificate required

Rules of Origin

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e.g. Cigarettes must be made from CARICOM made from CARICOM or Venezuela tobacco


CARICOM-DR FTA36

Provides duty concessions for select Jamaican/CARICOM products with the DR / peffective 2001

Cigars imports duty free for the world to the DR.

i i l d d i d fcigarettes not included in duty free treatment so Caricom and ROW pays 20%. Also, imports of cigarettes into JA pay 30%.


Tariff liberalization

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Reading tariff schedules in FTAs38

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CARICOM-Colombia FTA39

id d i f lProvides duty concessions for select Jamaican/CARICOM products with Colombia effective 1998

Unmanufactured tobacco allowed duty free into Ja

T b d d f iTobacco products not duty free into Colombia


CARICOM-Cuba FTA40

When ratified will provide duty p yconcessions for select Jamaican/CARICOM products with Cuba

Raw Tobacco liberalized in this tagreement

Ci tt / i t t lib li dCigarettes/cigars etc not liberalized, so products still dutiable.


CARICOM-Costa Rica FTA41

When ratified Provides duty concessions forWhen ratified Provides duty concessions for select Jamaican/CARICOM exports to Venezuela

Cigarettes not liberalized by either party. Ci l lib li d i S i dCigars only liberalized in Suriname and Trinidad

prospective cigarette exports are liable for 40% duties in CR and 30% in JA


Tariff liberalization42

Reading tariff schedules in FTAs

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FTAs

Rules of Origin44

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Sources of trade information45

www.crnm.org

www.caricom.org

www.wto.org

www.intracen.org

www.oas.orgg


Thank You46

Please visit our Website:

http://www crnm orghttp://www.crnm.org

C t tContact:Mr. Lincoln Price

Private Sector Liaison

[email protected]

Tel: +1876 908 3922 Fax: +1876 754 2998


L. Price - Overview Of Trade Agreements

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