Trade SIA in support of negotiations on a plurilateral Trade in...

Trade SIA in support of negotiations

on a plurilateral Trade in Services

Agreement (TiSA)

Draft Interim Report

Civil Society Dialogue

Nora Plaisier, Joseph Francois, Miriam Manchin,

Erik Merkus, and Stephanie Bouman

Brussels, 13 January 2017

1. Overall approach

2. Economic analysis

3. Social analysis

4. Environmental analysis

5. Sector selection

6. Consultations

7. Next steps

Agenda

Methodology applied

Overall approach

Case studies

Sector studies

Conclusions

and

recommendations

Preliminary in-depth

economic, social, human

rights and

environmental

analysis

Executing the

consultation plan

Screening and

scoping

Outlining

methodological

approach

Outlining consultation

plan

Preliminary screening

and scoping

Inception report Final report Interim report

Input, feedback, comments from stakeholders

Overall approach

Six methodological pillars applied

Study phase

Pillar 1

Screening/ scoping

Pillar 2 Gravity, CGE &

Scenario

Pillar 3

Additional analysis

Pillar 4

Sectoral analysis

Pillar 5 Causal Chain

Analysis

Pillar 6

Consultation & Dissemination

Inception X X X

Overall sustainability analysis

X X X X X

Sectorial analysis X X X X

Policy recommendations and flanking measures

X X

Economic analysis

Economic analysis

• We work with WB data (Service Trade Restrictiveness Index (STRI)).

• We apply a gravity analysis to calculate coefficients related to applied

policies (AVEs calculated by the WB) and to binding overhang (WB STRI

for bindings). This gives us price elasticities, and volume elasticities.

• These two coefficients let us determine the additional trade cost

equivalent (as an AVE) needed to give us the same volume effect as a

change in overhang.

• On average, the results of the analysis show that exporters are expected

to respond to more secure market access (by means of binding policies)

as if trade costs fell by 3.4 percent for OECD TiSA country’s markets and

5.8 percent for low and middle income country markets. This is effectively

the benefit of greater security of market access.

Challenge: measure the effect of reducing uncertainty related to

the binding overhang

Economic analysis

Scenarios and scope

Scenario A:

- TiSA countries commit to binding policies at current level of market access.

Scenario B:

- TiSA countries commit to binding policies at current level of market access;

- China, Vietnam, Malaysia, Philippines, Thailand also join TiSA.

• Outcomes provide a best estimate

• Due to data limitations, mode 3 and mode 4 not included in the

modelling, except to the extent that mode 3 and 4 commitments

(reduced uncertainty) would impact on mode 1 trade.

Economic analysis

EU macroeconomic effects – small but positive

Scenario A Scenario B

Real national income, % 0.1 0.1

Real national income, million € 8,645 11,461

GDP (quantity index), % 0.1 0.1

Consumer prices, % 0.0 0.0

Real wages of (%)

Low skilled 0.1 0.1

Medium skilled 0.1 0.1

High skilled 0.1 0.1

Terms of trade, % 0.0 0.0

Real household consumption, % 0.1 0.1

Exports, % 0.2 0.3

Imports, % 0.2 0.3

Economic analysis

Other country’s macroeconomic effects – TiSA participants

0.0

0.0

0.0

0.2

0.0

0.1

0.1

1.2

0.1

0.0

0.0

0.5

0.0

0.1

0.1

0.0

0.0

0.0

0.1

0.1

0.1

0.0

0.0

0.0

0.0

0.2

0.0

0.1

0.1

1.4

0.1

0.0

0.0

0.6

0.0

0.1

0.1

0.1

0.0

0.0

0.2

0.1

0.2

0.0

-0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Australia

Canada

Chile

Taiwan

Colombia

CostaRica

EuropeanUnion

HongKong

Israel

Japan

Korea

Mauritius

Mexico

NewZealand

Norway

Pakistan

Panama

Peru

restofEFTA*

Switzerland

Turkey

UnitedStates

Realnationalincome,%change,2025benchmarkyear

experimentB experimentA

Economic analysis

Other country’s macroeconomic effects – third countries

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.1

0.0

0.0

0.0

0.1

0.0

0.0

0.0

0.0

0.0

-0.1

0.0

0.1

0.0

0.0

0.0

0.0

-0.2 -0.1 0.0 0.1 0.2

Brazil

China

Cambodia

India

Indonesia

Laos

Malaysia

Morocco

Paraguay

Philippines

Russia

Singapore

Thailand

Uruguay

Vietnam

EUneighbors

RestotASEAN

leastdevelopedcountries

Restofworld

Realnationalincome,%change,2025benchmarkyear

experimentB experimentA

Economic analysis

• Exports and imports of all ‘TiSA participants’ are estimated to

increase under both scenario A and B

• Largest changes for Mauritius (1.4 - 2.7 percent and Hong Kong

(1.3 – 2.1 percent). Trade of other TiSA participants grows on

average between 0.1 and 0.8 percent.

• Countries reaping the highest benefits in terms of real national

income increases are also the countries which are estimated to

have the highest increase in their trade

• Terms of trade changes are rather small for most countries,

below 0.05 percent

Changes in trade – TiSA participants

Economic analysis

Effects on real wages – TiSA participants

Economic analysis

• Sectoral effects are relatively small for both scenarios.

• Services sectors affected most as expected, mainly positively.

Largest increase in the insurance sector (0.2 percent), the sector

transport services by water contracts (-0.3 /-0.5 percent).

• Manufacturing and agricultural output predicted to increase only

little. Largest change in the motor vehicle sector (0.1 percent).

• Changes in sectoral employment are in general in line with

sectoral output changes. Reallocation ratio between 0.04 and

0.08 percent.

• EU exports and imports are expected to increase for all sectors,

with the exception of water transport services.

EU sectoral effects

Social analysis

Social analysis

General approach

• Baseline analysis – Current situation with regard to key social indicators for each TiSA

participant is presented

• Quantitative impact analysis – Discussion of the CGE results on social indicators

• Case studies – Selection of 5 case studies to analyse in-depth social issues in

selected in TiSA countries.

• Human rights impact analysis – Qualitative analysis of the expected impact of TiSA on human rights (in

the EU)

Social analysis

Baseline:

• Indicators have been chosen with respect to applicability,

comparability, and country coverage. ILO, OECD, and UN are

main sources: – Employment indicators (KILM);

– Wage and social protection indicators (ILO and ILOSTAT);

– Poverty and inequality indicators (KILM and World Bank).

Impact indicators:

• CGE indicators that will be presented are: – Wage effects;

– Consumer price effects;

– Labour displacement per sector

Indicator based assessment

Social analysis

• Employment: Chile, Colombia, Mauritius and Turkey are in the

bottom 33 percent for almost every indicator

• Australia and Iceland have the highest minimum wage (≈€1,650),

while lowest minimum wage is in Pakistan (€86)

• Mexico, Costa Rica and Colombia score lowest when looking at

social protection

• Colombia, Mexico, Costa Rica, Panama and Peru have low

performance on the poverty and inequality indicators

Quantitative baseline scenario – some facts

Social analysis

• More than half of the TiSA participants have ratified all ILO

Fundamental Conventions

• Only three countries have defined a Decent Work Programme

(Chile, Costa Rica, and Pakistan)

Qualitative baseline analysis – some facts

Social analysis

• Impacts directly stemming from provisions, but:

–No sustainable development chapter foreseen

–Based on EU proposals, offers and statements, no negative

impact expected on public services or right to regulate in the

EU.

• Indirect effects, stemming from economic impacts.

Impact assessment: Channels of impact

Social analysis

Quantitative impact analysis - EU

• Real household consumption and real wage changes for the EU

are around 0.1 percent

• Labour displacement in EU is lower than 0.1 percent

• Consumer prices in the EU are not expected to change

Social analysis

Quantitative impact analysis – TiSA participants

Country Value Rank Value Rank Value Rank Value Rank Value RankAustralia 0,0 0,0 0,0 0,1 0,0

Canada 0,0 0,0 0,0 0,0 0,0

Chile 0,0 0,0 0,0 0,0 0,0

Chinese Taipei -0,1 0,2 0,0 0,3 0,1

Colombia 0,0 0,0 0,0 0,0 0,0

Costa Rica 0,0 0,1 0,1 0,1 0,1

European Union 0,0 0,1 0,1 0,1 0,1

Hong Kong China 0,1 0,9 0,8 1,0 1,1

Iceland 0,0 0,2 0,2 0,1 0,1

Israel -0,1 0,1 0,1 0,3 0,1

Japan 0,0 0,0 0,0 0,0 0,0

Korea 0,0 0,0 0,0 0,1 0,0

Liechtenstein 0,0 0,2 0,2 0,1 0,1

Mauritius -0,8 0,4 0,4 0,9 0,1

Mexico 0,0 0,0 0,0 0,0 0,0

New Zealand 0,0 0,1 0,1 0,1 0,1

Norway 0,0 0,1 0,1 0,0 0,1

Pakistan -0,3 -0,4 -0,2 0,6 0,0

Panama 0,0 0,0 0,0 0,0 0,0

Peru 0,0 0,0 0,0 0,0 0,0

Switzerland 0,1 0,1 0,1 0,0 0,1

Turkey 0,1 0,1 0,1 0,1 0,2

United States 0,0 0,0 0,0 0,0 0,0

Effect (CGE) indicatorsC o nsumer prices H igh skilled wages M edium skilled wages Lo w skilled wages GD P

Social analysis

• Causal chain analysis: Establishment of links between the

baseline indicators and the changes reported in the CGE model: – Employment indicators: GPD and wages

– Wage indicators: wages

– Poverty and inequality: consumer prices and wages

• Selection based on: – Overview of most interesting linkages between social themes and TiSA

participants

– Discussion with the Steering Committee

Case study selection

Gender equality in the EU

Consumer effects in the EU

Poverty and inequality in Panama

Employment in Mexico

Wages in Korea

Social analysis

Human rights analysis

• Three documents used in framework for analysis: – EU guidelines on human rights impact assessments,

– Ecorys proposal and approved Inception Report,

– DG Trade Handbook for conducting Trade Sustainability Impact

Assessments.

• The human rights that warrant further investigation because of

potential impact from TiSA are: – Human right to health;

– Human right to access to health care;

– Human right to an adequate standard of living;

– Human right to work;

– Human right to education;

– Human right to information;

– Human right to the protection of personal data.

Social analysis

• Positive albeit small impact on right to an adequate standard of

living and the right to work

• Civil society organisations express concerns on the right to

health, the right to health care and the right to education.

Reservations made in the EU’s offer will be important.

• Right to information: transparency of negotiations could be

improved

• No official position of EU in negotiations regarding the issue of

data flows in negotiations, but commitment that EU data

protection and privacy rules will not change.

Human rights effects

Environmental analysis


1. Indicator-based baseline description;

2. Quantitative assessment;

3. Qualitative analysis ;

a. Trade in environmental services;

b. Screening and scoping;

c. Country-specific case studies.

General approach

Indicator-based

comparison of all

TiSA participants

Scale and

composition

effects (air

pollution) based

on CGE results

Qualitative

analysis

Review of trade in

environmental

services

Screening &

scoping Links of

issues and TiSA

effects

Case study

specific impact

assessment


• Both Pakistan and Israel currently have a much higher consumption

of water than available to them through natural replenishment (334%

and 261% respectively)

• Countries with high particulate matter exposure and a resulting

negative environmental effect are Pakistan, Korea, Hong Kong

China, and Taiwan

• Mexico, Peru, and the US rank highest in the number of endangered

species

• Panama, Peru and Costa Rica have the lowest percentage share of

population services by municipal waste collection (


• Sector emission coefficients: WIOD data on sector emission

matched with CGE sectors, projected percentage output change

and increase in total GDP

• Metals, transport services, agriculture, and construction are

impacted most in absolute changes

• Overall change in emission of air pollutants as a results of TiSA is

minimum (0.0 percent). Some large changes are expected in

Taiwan (0.0 - 0.9 percent)

Quantitative impact analysis


• Sum of scale effect and composition effect yields the total TiSA-

induced change in emissions

• Composition effect largely off sets the scale effect in the case of

all emissions

Quantitative impact analysis

-5,000

-4,000

-3,000

-2,000

-1,000

-

1,000

2,000

3,000

4,000

5,000

CO2 CH4 N2O NOX SOX CO NMVOC NH3

Th

ou

san

ds

Composition effect Scale effect Total effect


Qualitative impact analysis: benefits and concerns

Benefits (Stakeholder) concerns

Trade liberalization is vital in accelerating the

diffusion and uptake of environmental goods

and services

Inclusion of (semi-) public sector services in TiSA could decrease a government’s control over the quality of water and waste management services

These benefits accrue mostly to the developing countries, but developed countries can benefit economically by providing these services

TiSA may limit and possibly ban the return

to public control of privatised services

TiSA may increase the bargaining power of private economic interest


• Causal chain analysis: Establishment of links between the baseline

indicators and the changes reported in the CGE model


Issue Impacts of TiSA derived from CGE model (in percentage changes)

Reasoning

Water Agriculture, forestry, fishing Textiles Industry: Metals; Lumber, wood and paper

Agriculture is the most important water consumer. Textiles production can significantly contribute to water pollution.

Air pollution Industry, Transport Industry and transport are the main air pollution sources.

Climate change CO2 emissions CO2 is the most important greenhouse gas contributing to climate change.

Ecosystems & biodiversity

Agriculture, forestry, fishing Land use (Natural resource intensity)

Fisheries affect fish stocks and maritime ecosystems / biodiversity. Agricultural output and land use are closely related, both leading to pressure on natural habitat and thus affecting

ecosystems and biodiversity.

Waste GDP Waste production often increases with GDP.


• Selection based on: – Overview of most interesting linkages between social themes and TiSA

participants

– Discussion with the Steering Committee


Solid waste management and

FDI in and by the EU

Climate change indicators in

the EU

Air pollution and TiSA impact in

Costa Rica

Waste water treatment and TiSA

impact in Pakistan

Ecosystem and biodiversity in

Japan

Sector selection

Sector selection

• Based on 5 criteria and discussion with the Steering Committee – Initial importance for the economy

– Expected economic impact from TiSA

– Expected social, human rights and environmental impact from TiSA

– Stakeholder issues

– Importance in the negotiations

• Equal weighting of criteria

Screening and scoping

Sector selection

Output Export value Import value Low skilled

employment Medium skilled

employment High skilled employment

Sector Value Points Value Points Value Points Value Points Value Points Value Points

Water Transport -0.3 3 -0,2 1 0.4 1 -0.3 3 -0.3 3 -0.3 3

Air Transport 0.0 0.0 0.1 0.0 0.0 0.0

Other Transport 0.0 1 1.7 2 2.5 2 0.0 1 0.0 1 0.0 1

(Tele)communications

0.0 1 0.0 1 0.2 1 0.0 1 0.0 1 0.0 1

Trade (distribution) 0.0 1 0.3 1 0.6 1 0.0 1 0.0 1 0.0 1

Finance 0.1 2 4.2 3 4.2 3 0.0 1 0.0 1 0.0 1

Insurance 0.2 2 1.5 2 1.7 2 0.2 2 0.2 2 0.2 2

Business, professional services

0.0 1 0.4 1 0.6 1 0.0 1 0.0 1 0.0 1

ICT services 0.0 1 0.9 1 1.4 2 0.0 1 0.0 1 0.0 1

Construction 0.0 1 0.5 1 1.6 2 0.0 1 0.0 1 0.0 1

Personal Services 0.0 1 0.8 1 1.6 2 -0.1 2 -0.1 2 -0.1 2

Public Services 0.0 0.0 0.1 0.0 0.0 0.0

Sector selection

Sector

Criterion 1

Importance for the EU economy

Criterion 2

Expected economic impact

Criterion 3

Expected social / env. impact

Criterion 4

Stakeholder importance

Criterion 5

Importance in negotiations

Total

Water Transport 1.00 2.33 3 3 3 2.47

Other Transport 2.67 1.33 2 1 3 2.00

(Tele)communications 1.67 1.00 1 3 3 1.93

Trade (distribution) 3.00 1.00 1.5 1 1 1.50

Finance 2.67 1.83 1.5 1 3 2.00

Insurance 1.67 2.00 2 3 3 2.33

Business, professional services

3.00 1.00 1 1 1 1.33

ICT services - 1.17 1.5 3 3 2.17

Construction 1.33 1.17 1.5 1 1 1.20

Personal Services 2,00 1.67 1 2 1 1.53

Water transport ICT and telecommunications

Finance E-commerce

Insurance

Sector selection

• Four steps: – Analysis of the baseline situation;

– Analysis of market access conditions;

– Assessing the impact of TiSA;

– Conclusions and recommendations.

• Methods complementary to CGE: – Review of data and literature;

– Review of relevant legislation and regulation in the sector;

– Causal chain analysis;

– Survey to help in assessing the impact on business and SMEs in

particular;

– Interviews with stakeholders.

Approach to the sector studies in the final report

Consultations

Consultations

• Outreach: – Website: www.trade-sia.com/tisa

– Facebook, Twitter, LinkedIn

– Newsletters

– Email address: [email protected]

• Gathering input: – Civil Society Dialogue meetings

– Survey (open until 27 January 2017)

– Interviews

Activities conducted up to date

Some statistics

Over 17,000 website visits

≈ 70 percent are new visitors

Majority stems from Brussels

Peaks during newsletter/report

publication

http://www.trade-sia.com/tisahttp://www.trade-sia.com/tisahttp://www.trade-sia.com/tisamailto:[email protected]

Consultations

• Continuous updates on the communication platforms

• Civil Society Dialogue – Draft final report

• Interviews with stakeholders

Future consultation activities

Next steps

Next steps

Activity Deadline

Civil Society Dialogue meeting 13 January 2017

Deadline for providing comments draft Interim Report 27 January 2017

Closure of the stakeholder survey 27 January 2017

Publication Interim Report February 2017

Publication of the draft Final Report April 2017

Civil Society Dialogue meeting April 2017

Deadline for providing comments draft Final Report May 2017

Publication of the Final Report June 2017

Input, comments, or feedback can be send to [email protected]

Any questions?

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