Presentation TSIAs DCFTAs between EU and respectively ... · Overall impacts at macro level:...

Trade Sustainability Impact

Assessment (TSIAs) in support of

negotiations of DCFTAs between the

EU and the Kingdom of Morocco and

the Republic of Tunisia

Civil Society Meeting - EU

Brussels, 17 October 2013

By:

Koen Berden, Nora Plaisier, Jurgen Vermeulen, Katelyn Price

http://www.case-research.eu/en

http://www.case-research.eu/en

1. Introduction

2. Results of the CGE modelling

3. Additional quantitative and qualitative analysis

4. Stakeholder consultations

5. Policy recommendations

Agenda

1. Introduction

TSIA methodology consists of 4 main phases:

Phase 0: Inception

Phase 1: Overall analysis of the sustainability impacts

• In-depth analysis of selected sectors and horizontal issues

• Causal Chain Analysis (CCA)

• Literature review, Partial Equilibrium modelling, consultations, interviews

Phase 3: Policy recommendations and flanking measures present phase

• Causal Chain Analysis

• Consultation and dissemination (throughout all phases)

• Final report

Consultation and dissemination (throughout all phases)

Phase 2: Sectoral analysis

• Scenario analysis and CGE modelling

• Additional quantitative and qualitative analyses: social / HR / environmental

• Screening and scoping analysis

1. Introduction

• Liberalisation of trade:

Tariff liberalisation

Services non-tariff liberalisation

Reduction of other non-tariff measures (NTMs)

• NTM reduction through regulatory approximation, mainly in following fields:

Sanitary and Phytosanitary measures (SPS)

Technical Barriers to Trade (TBT)

Intellectual Property Rights (IPRs)

Competition

Trade Facilitation (customs)

Investment Protection

Public Procurement

What does a Deep and Comprehensive Free Trade Agreement (DCFTA) entail?

1. Introduction

• Computable General Equilibrium (CGE) modeling

• CGE takes into account all economic linkages

• CGE compares the situation with and without DCFTA

• The results from the CGE model are obtained in multiple levels of detail:

› Macro – economic results

› Sector - specific results

› Short-run

› Long-run

› Effects on 3rd countries

How do we estimate effects of DCFTA?

1. Introduction

• A scenario is developed that tries to imitate the outcomes of the negotiations:

How do we estimate the impacts of the DCFTA for Morocco?

No further tariff

liberalisation

(after October 2012

agreement)

Asymmetric liberalisation and three levels of ambition (High,

Medium, Low)

- 3% reduction in trade costs for exports into EU

- 13% reduction in trade costs for exports into Morocco

Goods

NTMs Tariffs

Services

liberalisation

Trade liberalisation

1. Introduction

• A scenario is developed that tries to imitate the outcomes of the negotiations:

How do we estimate the impacts of the DCFTA for Morocco?

Agricultural tariff

liberalisation (95%

towards EU; 80% towards

Tunisia

Asymmetric liberalisation and three levels of ambition (High,

Medium, Low)

- 3% reduction in trade costs for exports into EU

- 8% reduction in trade costs for exports into Tunisia

Goods

NTMs Tariffs

Services

liberalisation

Trade liberalisation

Variable EU Morocco EU Morocco

Short Run Long Run

National Income, Million € 834 1,145 1,403 1,300

GDP, % change 0.0 1.3 0.0 1.6

Consumer prices, % change 0.0 0.4 0.0 0.4

Wages, less skilled % change 0.0 1.4 0.0 1.5

Wages, more skilled % change 0.0 1.6 0.0 1.9

Total Imports, % change 0.0 8.0 0.0 8.4

Total Exports, % change 0.0 15.3 0.0 15.3

2. Results of CGE Modelling

• The macroeconomic effects for the EU are negligible

Macroeconomic effects in the short run and long run: Morocco


Short Run Long Run


GDP, % change 0.0 1.3 0.0 1.6







• National income gain for Morocco €1,3 billion in the long run, equal to a 1.6%

change in GDP



Short Run Long Run


GDP, % change 0.0 1.3 0.0 1.6







• Trade flows for Morocco increase significantly



Short Run Long Run


GDP, % change 0.0 1.3 0.0 1.6







• Purchasing power in Morocco will increase: consumer prices increase, but wages

increase more



• The largest effects are due to reductions in NTMs in goods

Overall impacts at macro level: Morocco

1,402.9

832

1,403

872 969

38

54

33

43

-36 -54

241

288

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

EU short run EU long run Morocco short run Morocco long run

National Income, million €

Spillover

NTBs reductionin services

NTBs reductionin goods

Variable EU Tunisia EU Tunisia

Short Run Long Run


GDP, % change 0.0 4.1 0.0 7.4






2. Results of CGE modelling

• The macroeconomic effects for the EU are negligible

Macroeconomic effects in the short run and long run: Tunisia


Short Run Long Run


GDP, % change 0.1 4.1 0.1 7.4







• National income gain for Tunisia €2,5 billion in the long run, equal to a 7.4%

change in GDP



Short Run Long Run


GDP, % change 0.1 4.1 0.1 7.4







• Trade flows for Tunisia increase significantly



Short Run Long Run


GDP, % change 0.1 4.1 0.1 7.4







• Purchasing power in Tunisia will increase: consumer prices increase, but wages

increase more


1,402.9

473

935 1,074

1,208

16

17

24

28

-118

401

-133

568

269

480

380

694

-250

250

750

1,250

1,750

2,250

2,750

EU short run EU long run Tunisia short run Tunisia long run

National Income, million €

Tariffs

Spillover

NTBs reduction inservices

NTBs reduction ingoods


• The largest effects are due to reductions in NTMs in goods

Overall impacts at macro level: Tunisia


• Expanding and Declining sectors due to the DCFTA

Expected impacts on value added: Morocco

other machinery

vegetables and fruit

vegetable oils

motor vehicles

other processed foods

wearing apparel

public and other services

grains and crops

electrical machinery

textiles

lumber, paper

leather goods

-500

0

500

1,000

1,500

2,000

2,500

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11

Exp

ort

s t

o t

he E

U (

baselin

e)

% changes in value added, LR

Winning sectors Losing sectors

other machinery

electrical machinery

trade

other transport equipment

textiles

petrochemicals

non metallic mineral products

grains and crops

leather goods

-500

0

500

1,000

1,500

2,000

2,500

3,000

-20 -10 0 10 20 30 40 50

% changes in value added

Export to EU baseline Winning sectors Losing sectors

vegetable oils;

223%

• Vegetables and Fruits: 3rd largest sector in value added (8.1%); Long run: +4,7% (8)


• Expanding and Declining sectors due to the DCFTA

Expected impacts on value added: Tunisia

+ employment share increase in sectors where Morocco has a competitive advantage;

+ closer cooperation between Moroccan and EU companies;

+ the pressure from businesses for education system reforms.

+ certain sectors will need to comply with EU production regulations;

+ EU pressure to improve labour standards;

+/- Moroccan businesses might put pressure to relax rigidity of labour mkt.

- Potential pressure on labour rights if not protected

+ increase in living

standards might lead to increased demand for more social protection

+ higher economic

growth, higher average living standards gradually increase the engagement of the social partners in the design of employment and

social policies.


standards and changes in attitude

towards equality issues;

- shift in employment

opportunities among sectors may disproportionally affect weakest groups of workforce.

Job

creation

Rights at

work

Social

protection

Social

dialogue

Gender

equality

DCFTA impact on Decent Work Agenda


Social effects: qualitative analysis for Morocco


+ employment share increase in sectors where

Morocco has a competitive advantage;

+ closer cooperation between Moroccan and EU

companies;

+ the pressure from businesses for education system

reforms.


Job

creation


+ certain sectors will need to comply with EU production

regulations;


+/- local business may pressure the government to

create more flexibility in labour legislation.

− potential pressure on labour rights if not protected


Rights at

work


+ increase in living standards might lead to increased

demand for more social protection.


Social

protection


+ higher economic growth, higher average living

standards → gradually increase the engagement of

the social partners in the design of employment and

social policies.


Social

dialogue


+ increase in living standards and changes in attitude


− shift in employment opportunities among sectors may

disproportionally affect weakest groups of workforce.


Gender

equality

Indicator Short run Long run

Poverty rate Declines by about 1.5 %-points as wage

effect outweighs price effect. Extreme

poverty also falls. Relative poverty

increases slightly.

Stronger wage increase drives further

decline in poverty and extreme poverty.

Poverty depth Measures how far the poor fall below the

poverty line. This aspect of poverty

remains stable.

Same as short run impact.

Dispersion Fewer people at risk of (extreme) poverty.

Small increase of people at risk of

relative poverty.

Similar in direction to short run impact.

Higher impact, mostly due to wage effect.

Gini Income inequality hardly changes. Slight

tendency to increase, both due to price

and wage effect.


Richest versus

poorest

Some increase of inequality between the

extremes of the income distribution at the

household level. Reflects the impact on

average disposable incomes and

differences in spending patterns.



• In general, small net impact on main indicators below. Certain groups more

vulnerable for price increases.

Social analysis (quantitative): Poverty and income inequality for Tunisia

+ employment share increase in the vegetable oil sector, other machinery sector, the vegetables and fruits sector as well as the trade sector;

- employment shares decrease in grains and crops, textiles, and air transport sectors;

+ the pressure from businesses for education system reforms.

+ certain sectors will need to comply with EU production regulations;


+/- local business may pressure the government to create more flexibility in labour legislation.

- Potential pressure on labour rights if not protected


standards might lead to increased demand for more social protection.

+ higher economic

growth, higher average living standards gradually increase the engagement of the social partners in the design of employment and

social policies.


standards and changes in attitude


- shift in employment

opportunities among sectors may disproportionally affect weakest groups of workforce.

Job

creation

Rights at

work

Social

protection

Social

dialogue

Gender

equality

DCFTA impact on Decent Work Agenda


Social effects: qualitative analysis for Tunisia


• DCFTA is expected to mainly affect economic and social rights and not

cultural, civil or political rights

• Overall, effects on HR are expected to be small but positive:

– Expected increase in income is likely to improve HR situation

– Regulatory approximation may in some cases also improve HR (e.g. food

safety, working conditions)

– Expected decline in poverty (based on data only available for Tunisia) reduces

some of the root causes of child labour

Although no a priori negative effects expected, good to pay attention to:

- Vulnerable groups

- Sectors that face significantly increased competitive pressure

Human rights effects for Morocco and Tunisia


• Change in emissions of classical pollutants in Morocco due to DCFTA, %

Air pollution Morocco


• Change in external costs due to DCFTA

Air pollution Morocco

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

S-R L-R

€ m

illi

on

NOx SOx PM2.5 PMcoarse Total

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

NOx SOx PM2.5 PMcoarse Externality NOx SOx PM2.5 PMcoarse Externality

Composition effect Scale effect Total effect

Short run Long run


• Change in emissions of classical pollutants in Tunisia due to DCFTA, %

Air pollution Tunisia

-9.0

-0.6

-20.1

15.3 8.4

25.1

-€ 40

-€ 30

-€ 20

-€ 10

€ 0

€ 10

€ 20

€ 30

€ 40

€ 50

S-R L-R€ m

illi

on

s

PMcoarse

PM2.5

SOx

NOx

Total


• Change in external costs due to DCFTA

Air pollution Tunisia

+ Chemical and

petrochemical industries responsible for 40% waste

+ Reduction in output in these sectors

+ decrease in output of the chemicals, and petrochemicals, the textile and leather industries;

+/- decrease in output of water transport services;

- due to an increase in output of the agricultural sector.

- due to an increase

in output of the agricultural industry;


in fisheries output;

+/- the (illegal)

trade in wildlife.

+ the estimated

reduction in external costs of carbon by €2,000 (short-run) and €12,000 (long-run).

+ due to internal reorganisation of economic activities;

+ possible pressure for green products from the EU side;

+ due to potential increase in international exchange and investment.

Waste

DCFTA impact on environmental indicators

Water Ecosystem

&

biodiversity

Climate

change

‘Greening’

the

Economy


Environmental effects: qualitative analysis for Morocco


+ Chemical and petrochemical industries responsible

for 40% waste

+ Reduction in output in these sectors


Waste


+ decrease in output of the chemicals, and

petrochemicals, the textile and leather industries;

+/- decrease in output of water transport services;

− due to an increase in output of the agricultural

sector.


Water


− due to an increase in output of the agricultural

industry;

− due to an increase in fisheries output;

+/- the (illegal) trade in wildlife.


Ecosystem

&

biodiversity


+ the estimated reduction in external costs of carbon by

€2,000 (short-run) and €12,000 (long-run).


Climate

change



+ possible pressure for green products from the EU

side;

+ due to potential increase in international exchange

and investment.


‘Greening’

the

Economy

- more waste pollution from households;

+ reduction in industry sector output;

+ promoting private sector development, enhance activities of SMEs in the waste sector.

- Sea pollution from industrial and household waste;

- due to an increase in output of the agricultural sector(vegetables and fruit).


in the use of land and air pollution;


in output of the agricultural industry and forestry products.

- the estimated

increase in external costs of carbon by €9.4 million in the short run and €25 million in the long run.


+ possible pressure for green products from the EU side;

+ due to potential increase in international exchange and investment.

Waste

DCFTA impact on environmental indicators

Water Ecosystem

&

biodiversity

Climate

change

‘Greening’

the

Economy


Environmental effects: qualitative analysis for Tunisia

4. Consultations and stakeholders

Electronic consultation

Public meetings EU

Workshops

Attendance of other conferences

Personal interviews

Consultation activities undertaken so far

• Website

• Facebook

• Newsletters (2 sent out)

• 9 April 2013

• 17 October 2013 (today)

• Rabat: 27 June 2013

• Tunis: 19 June 2013

• Presentation at EESC on Trade

SIA EU - Morocco

• Continuously, for example with

Ministries, private sector,

NGOs. Includes SME survey

5. In-depth sectoral analysis

Morocco

1. Fruits and vegetables;

2. Textiles, clothing and leather;

3. Offshoring in business support services;

4. Energy (with a focus on renewable energy).

Tunisia

1. Fruits and vegetables;

2. Textiles, clothing and leather;

3. Retail trade;

4. Water scarcity and quality.

The following sectors were analysed

6. Policy Recommendations

• Although the DCFTA is expected to enhance economic growth in Morocco, it is

clear that some sectors will gain while other will lose.

Recommendations for the economic pillar: Morocco

Policy measure Potential to address

Within DCFTA Outside DCFTA

Facilitation of technical assistance and capacity building in regulatory approximation process (e.g. SPS, TBT, trade facilitation, etc.) based on a thorough needs assessment.

Provision of technical assistance and capacity building in sectoral and business upgrading, especially SMEs to increase their competitiveness

Stimulate on-going improvements in business and investment climate.

Enhance public-private dialogue through well-structured mechanisms.

Support regional and local economic development

Enhance governance and fight against the informal economy


• Part 1: Recommendations 1 - 5

Recommendations for the social pillar: Morocco

Policy measure

Potential to address


Allow for phasing in of regulatory approximation at sector level, especially for those sectors where the social impact will be high.

Support flexibility of labour market to facilitate the reallocation between sectors while ensuring that worker’s rights are respected in law and practice

Further develop social protection system, with attention for coverage, financial management and price levels.

Support entrepreneurship and training programmes to allow easier update and upgrade of human capital, with a clear link to labour market requirements

Provide assistance in upgrading education and training programmes and improving institutional and regulatory environment in the social policy sphere to address the skill gaps.



Recommendations for the social pillar: Morocco

Policy measure



Provide assistance to improve the educational links with the labour market to address the mismatch between supply and demand

Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. by effective implementation and enforcement of relevant ILO and by approximating domestic legislation to EU acquis in the area of labour.

Effective implementation of HR treaties, with a focus on vulnerable groups (e.g. children, women, minorities, disabled, etc.)

Enhance policies to reduce the scale of youth unemployment

Provide assistance to improve the educational links with the labour market to address the mismatch between supply and demand


Recommendations for the environmental pillar: Morocco



Create incentives for environmentally friendly production

Maintain or further improve incentives to improve efficient use of water in agricultural and industrial production

Improve waste collection and waste management systems

Ensure effective implementation and enforcement of CITES

Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Morocco relations)

Provision of (technical) assistance in environmental policy


Recommendations for the economic pillar: Tunisia

Policy measure



Allow for phasing in of tariff reduction or regulatory approximation at sector level, especially for those sectors where the economic impact will be high

Facilitation of technical assistance and capacity building in the regulatory approximation process, based on a needs assessment

Develop a strategy to increase the value added of exports

Increase awareness of the DCFTA and its implications

Provide internationalisation support to SMEs



Recommendations for the social pillar: Tunisia



Allow for phasing in of tariff reduction or regulatory approximation at sector level, especially for those sectors where the social impact will be high

Support flexibility of the labour market- easing reallocation between sectors while ensuring that workers’ rights are respected in law and practice

Support education and training programmes to allow easier update and upgrade of human capital, with a clear link to labour market requirements, and promote life-long learning

Further develop social protection system, with attention for coverage, financial management and price levels.

Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. by effective implementation of relevant ILO conventions, and by approximating domestic legislation to the EU acquis in the area of labour



Recommendations for the social pillar: Tunisia

Policy measure



Effective implementation of HR treaties, with a focus on vulnerable groups (e.g. children, women, minorities, disabled, etc.)

Consider creating monitoring mechanisms of the social (including human rights) impact of the DCFTA (and more broadly EU-Tunisia relations in these areas).

Promotion of social dialogue and civil society involvement

Provide technical assistance in improving education as well as the institutional and regulatory environment in the social policy sphere


Recommendations for the environmental pillar: Tunisia

Policy measure



Create incentives for environmentally friendly production

Maintain / further improve incentives to improve efficient use of water in agricultural and industrial production

Improve waste collection and waste management systems

Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Tunisia relations)

Thank you

Morocco

www.trade-sia.com/morocco

[email protected]

Tunisia

www.trade-sia.com/tunisia

[email protected]

http://www.trade-sia.com/morocco



mailto:[email protected]

http://www.trade-sia.com/tunisia



mailto:[email protected]

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