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Negotiating an RTA Some Key C hallenges & Opportunities for Developing Countries. 16 April 2010 Taisuke ITO , UNCTAD. Outline. N orth-South RTA negotiations DCs m arket opening at home Market access in the partners Deep integration issues S outh-South integration & cooperation - PowerPoint PPT Presentation
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1
UNCTAD/CD-TFT 1
Negotiating an RTA
Some Key Challenges & Opportunities for Developing Countries
16 April 2010
Taisuke ITO, UNCTAD
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UNCTAD/CD-TFT 2
Outline
1. North-South RTA negotiations- DCs market opening at home- Market access in the partners- Deep integration issues
2. South-South integration & cooperation- State of play, its role & potential
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UNCTAD/CD-TFT 3
1. Policy Issues in RTAs (1)
RTAs here to stay – How to make them useful for development while minimizing the costs?
Trade creation & diversion = TC>TD leads to net welfare gains TC = source of efficiency gains but short-term adjustment
challenge (like any trade liberalization)
TD = efficiency loss, challenge for RTA members and affected non-members
Need to assess trade diversion relative to the non-static benefits of increased trade
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UNCTAD/CD-TFT 4
Policy Issues in RTAs (2)
Dynamic Effects Economies of scale, pro-competitive effects, FDI, ToT,
positive externalities from institutional changes Deep integration
Increase the likelihood of dynamic gains But upward regulatory harmonization entails
implementation costs (unlike tariffs) and can be sub-optimal for “non-best practice” DCs (WTO-plus)
And deeper commitments on broader coverage of behind-the-border regulatory issues may limit domestic “policy space”
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UNCTAD/CD-TFT 5
2. North-South RTAs: Why Significant?
1. Reciprocal, as against non-reciprocal Adjustment costs important as DCs tend to have
higher tariffs, import dependence, dependence on tariffs on government revenue
2. Limited scope for improved market access Low MFN rates & unilateral preferences in
DDCs
3. Deep integration under “new generation” RTAs Broader coverage of behind-the-border measures
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UNCTAD/CD-TFT 6
-300'000
-200'000
-100'000
0
100'000
200'000
300'000
Change in imports Change In Revenue Consumer Surplus
Effects of trade liberalization – Example
Nigeria’s 100% liberalization vis-à-vis the US (SMART simulation)
Source: TRAINS/WITS
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UNCTAD/CD-TFT 7
(1) Market Opening in Developing Countries
Import surge, de-industrialization /food security & revenue loss concerns
Lesser & slower liberalization as SDT in RTAs to mitigate adjustment costs, but
The degree of such flexibility constrained by GATT Art XXIV requirement (“Substantially all the trade”), ie, 90% over 10 years. EPAs evolved around 80% over 15 years (EU)
How to design product coverage & schedules under the WTO legal constraint? How does it matter?
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UNCTAD/CD-TFT 8
How to determine “Sensitive” Products?
Objectives To protect domestic industry from import competition To minimize tariff revenue loss SAT constraints = Min. 80-90% volume & t-line coverage
By which benchmarks? Products with high dutiable imports Products protected with high tariffs with high imports Products facing large theoretical tariff revenue loss (MFN
rates/100 *import value) Minimizing import surge (overall & by product) Minimizing tariff revenue loss Maximizing consumer surplus (welfare) - memo
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UNCTAD/CD-TFT 9
(a)Products with the highest dutiable import value
HS Product Name MFN Imports ($ '000) Share Cumulative Total Total Trade 7.51 3589772 100.0100190 Other, wheat 5 823699 22.9 22.9870310 Vehicles specially designed for travelling on snow12.5 104972 2.9 2.9890120 Tankers 5 87200 2.4 5.4252329 Other portland cement 15 82206 2.3 7.6100110 Durum wheat 5 74713 2.1 9.7871000 Tanks and other armoured fighting vehicles, motori20 74200 2.1 11.8390210 Polypropylene 10 68076 1.9 13.7730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 15.3870130 Track-laying tractors 5 49602 1.4 16.7890800 Vessels and other floating structures for breaking5 43741 1.2 17.9390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 18.9843143 Parts for boring or sinking machinery of subheadin5 32543 0.9 19.8
80% limit 1 180% limit 2 1190% limit 1 190% limit 2 4
Source: TRAINS/WITS
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UNCTAD/CD-TFT 10
(b) Products with the highest tariffs & imports
HS Product Name MFN Imports ($ '000) Share Cumulative Total Total Trade 7.51 3589772 100.0170199 Other, cane or beet sugar 50 8650 0.2 0.2730511 Longitudinally submerged arc welded50 4572 0.1 0.4690890 Other, glazed ceramic flags 50 3144 0.1 0.5732399 Other, table kitchen 50 2691 0.1 0.5690790 Other, unglazed ceramic flag 50 2262 0.1 0.6730300 Tubes, pipes and hollow profiles, of cast iron.50 1670 0.0 0.6240220 Cigarettes containing tobacco 50 1230 0.0 0.7730512 Other, tubes & pipes 50 1142 0.0 0.7401110 New pneumatic tyres 50 986 0.0 0.7721420 Other bars & rods of iron 50 942 0.0 0.8
80% limit 80290% limit 396
Source: TRAINS/WITS
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UNCTAD/CD-TFT 11
(c) Products with the highest theoretical tariff revenues
HS Product Name MFN Imports ($ '000) Share Cumulative Tariff Rev Share Total Total Trade 7.51 3589772 100.0 129472 100.0100190 Other, wheat 5 823699 22.9 22.9 41185 31.8871000 Tanks and other armoured fighting vehicles, motori20 74200 2.1 2.1 14840 11.5870310 Vehicles specially designed for travelling on snow12.5 104972 2.9 5.0 13122 10.1252329 Other, portland cement 15 82206 2.3 7.3 12331 9.5390210 Polypropylene 10 68076 1.9 9.2 6808 5.3730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 10.8 5925 4.6391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 11.6 5645 4.4730890 Other, structures of irons or steel 20 26606 0.7 12.4 5321 4.1850213 Of an output exceeding 375 kVA 18.75 24146 0.7 13.0 4527 3.5890120 Tankers 5 87200 2.4 15.5 4360 3.4170199 Other, cane or beat sugar 50 8650 0.2 15.7 4325 3.3870323 Of a cylinder capacity exceeding 1,500 cc but not 25 15793 0.4 16.1 3948 3.0100110 Durum wheat 5 74713 2.1 18.2 3736 2.9390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 19.2 3400 2.6
80% limit 1 1 31.880% limit 2 13 36.490% limit 1 1 31.890% limit 2 4 68.2
Source: TRAINS/WITS
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UNCTAD/CD-TFT 12
(d) Import Surge Minimization (SMART)
HS Product NameMFN Weighted AverageImports Value ($ '000)Share Cumulative Imp Change Share Total Total Trade 7.51 3589772 100.0 238793 100.0100190 Other wheat 5 823699 22.9 22.9 15690 6.6730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 1.7 10773 4.5390210 Polypropylene 10 68076 1.9 3.5 10768 4.5391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 4.3 9174 3.8390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 5.3 5377 2.3401693 Gaskets, washers and other seals20 4707 0.1 5.4 4566 1.9390110 Polyethylene having a specific gravity of less tha10 28750 0.8 6.2 4548 1.9730890 Other 20 26606 0.7 7.0 4257 1.8730429 (1996-) Other 10 22858 0.6 7.6 4156 1.7850213 Of an output exceeding 375 kVA18.75 24146 0.7 8.3 3851 1.6401120 Of a kind used on buses or lorries10 6568 0.2 8.4 3583 1.5170199 Other 50 8650 0.2 8.7 3287 1.4730511 Longitudinally submerged arc welded50 4572 0.1 8.8 3048 1.3271011 (2002-) Light oils and preparations10 24113 0.7 9.5 2652 1.1283620 Disodium carbonate 5 14791 0.4 19.9 1162 0.5
80% limit 1 1 6.680% limit 2 39 47.690% limit 1 1 6.690% limit 2 13 29.3
Source: TRAINS/WITS
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UNCTAD/CD-TFT 13
(e) Tariff Revenue Loss Minimization (SMART)
Source: TRAINS/WITS
HS Product NameMFN Weighted AverageImports ($ '000) Share Cumulative T Rev Change Share Total Total Trade 7.51 3589772 100.0 -219958 100.0100190 Other wheat 5 823699 22.9 22.9 -42226 19.2390210 Polypropylene 10 68076 1.9 1.9 -7530 3.4730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 3.5 -6539 3.0730890 Other 20 26606 0.7 4.3 -6315 2.9170199 Other 50 8650 0.2 4.5 -6145 2.8391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 5.3 -5683 2.6850213 Of an output exceeding 375 kVA18.75 24146 0.7 6.0 -5383 2.4390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 6.9 -3810 1.7100110 Durum wheat 5 74713 2.1 9.0 -3772 1.7850211 Of an output not exceeding 75 kVA25 11091 0.3 9.3 -3548 1.6730511 Longitudinally submerged arc welded50 4572 0.1 9.5 -3305 1.5150200 Fats of bovine animals, sheep or goats, other than5 15196 0.4 19.8 -796 0.4
80% limit 1 1 19.280% limit 2 45 47.690% limit 1 1 19.290% limit 2 10 23.7
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UNCTAD/CD-TFT 14
Summary
Source: TRAINS/WITS
Scenario Max excludable lines (20% & 10%, HS6) 1192 596Static 20% value lmit 10% value limit
1a Import value (t>0) 1 11b Import value (t>0) 11 42 High tariffs + Initial import values 802 396
3a Expected tariff revenue loss minimization 1 13b Expected tariff revenue loss minimization 13 4
Dynamic4a Overall import surge minimization 1 14b Overall import surge minimization 39 135 Line-by-line import surge minimization 699 453
6a Tariff revenue loss minimization 1 16b Tariff revenue loss minimization 45 107 Consumer surplus maximization 1525 1399
Import-surge minimization line-by-line basis captured products with very low level of initial imports Consumer surplus maximization - by design, captured lowest imported items, hence the large
numbers chosen. Caveat – only illustrative for estimates based on simulation
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UNCTAD/CD-TFT 15
Implications Not straightforward exercise – depends on individual trade &
tariff structures Static & dynamic perspectives complementary, to be
combined with other considerations – domestic production, direct competition, employment, social sensitivities etc
Import concentration in a few lines affect the choice High tariff protection approach, the favored one? SAT requirement limits the selection In case of regional groupings, harmonizing with other
countries further complicates the task – lack of overlap (EPAs)
Staging & speed of liberalization yet another issue WTO interface – Rules negotiations on SAT
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UNCTAD/CD-TFT 16
Note: EPA Liberalization Schedules (Value)
Source: ECDPM
Value 2008 2010 2012 2013 2017 2018 2022 2023 2033 TotalFiji 24.0% 37.0% 78.0% 81.5% 81.5%PNG 88.1% 88.1%EAC 64.0% 80.0% 82.0% 82.0%Comoros 21.5% 80.6% 80.6%Madagascar 37.0% 80.7% 80.7%Mauritius 24.5% 53.6% 95.6% 95.6%Seychelles 62.0% 77.0% 97.5% 97.5%Zimbabwe 45.0% 80.0% 80.0%Botswana, Lesotho, Namibia, Swaziland
86.0% 86% + 47 lines
Mozambique 78.5% 80.5%Cameroon 50.0% 80.0% 80.0%Cote d'Ivoire 69.8% 80.8% 80.8%Ghana 62.2% 80.5% 80.5%CARIFORUM 52.8% 56.0% 61.1% 82.7% 86.9% 86.9%
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UNCTAD/CD-TFT 17
Note: EPA Liberalization Schedules (Tariff Lines)
Source: ECDPM
T lines 2008 2010 2013 2015 2017 2018 2022 2023 2033 TotalFiji 9.0% 22.0% 78.0% 81.5% 80.0%PNG 82.1% 82.1%EAC 64.0% 80.0% 82.0% 82.0%Mauritius 26.0% 73.0% 96.6% 96.6%Botswana, Lesotho, Namibia, Swaziland
86.0% 44 lines 3 lines 86% + 47 lines
Mozambique 78.5% 100 linesCote d'Ivoire 84.0% 88.7% 88.7%Ghana 72.8% 80.0% 80.0%CARIFORUM 52.8% 56.0% 61.1% 85.1% 90.7% 90.7%
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UNCTAD/CD-TFT 18
(2) Market Access in RTA Partners
New MA opportunities limited due to already low tariffs in DDCs (SSA, LDCs). Not so much so for non-LDCs?
Excluded sectors often sensitive and politically difficult either in RTAs or MTN Statutory prohibition on “import sensitive AG product”
(US TPA) / Hierarchy of preferences (EU)
How have existing RTAs dealt with such “sensitive” products? Any lessons? 3 US RTAs - Bahrain, Jordan, Morocco (Oman) 6 EU RTAs - Algeria, Egypt, Jordan, Morocco, Tunisia,
Turkey
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UNCTAD/CD-TFT 19
US Tariff Treatment 2008 by Regime
(Total 10047)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
GSP Jordan Bahrain Morocco
Not covered
Non-Ad valorem
Non-DF wtih preference
Duty free
MFN DF
Source: TRAINS/WITS
84% for LDCs, 91% for AGOA (2007)
20
UNCTAD/CD-TFT 20
US RTA Product Coverage of MFN & GSP Dutiable Lines, 2008 (Total
3264)
1443; 44%
1295; 40%
272; 8%
254; 8%
DF in 3 RTAs
DF in 2 RTAs
DF in 1 RTA
DF in no RTAs
Source: TRAINS/WITS
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UNCTAD/CD-TFT 21
US - Frequency of “Sensitive” Products by HS Chapter (DF under
no or 1 RTAs, total 526)
0
10
20
30
40
50
60
70
80
90
100
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
4. Dairy 17-24. Prepared foodstuff (sugar, cereals, tobocco)
61-62. Apparel
Source: TRAINS/WITS
22
UNCTAD/CD-TFT 22
US MFN Tariffs 2007 (Simple Av, incl. AVEs)
0
20
40
60
80
100
120
140
0101
10
0705
21
1514
19
2520
20
2844
30
2927
00
3504
00
4001
10
4704
21
5208
59
5601
29
6116
91
6811
83
7215
90
7504
00
8410
12
8448
49
8506
40
8703
22
9102
11
Source: TRAINS/WITS
23
UNCTAD/CD-TFT 23
How do they affect actual exports?
US MFN & Effective Rates, 2007 (Weighted av.)
4.2
12.6
3.5
4.6
3.2
5.4
0.0
4.4
0.9 0.7
3.2 3.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Bahrain Jordan Morocco Oman United ArabEmirates
Tunisia
MFN AHS
Source: TRAINS/WITS
24
UNCTAD/CD-TFT 24
The “sensitive” products affect DC exports
Share of US Duty-Free Imports, 200799.7
39.3
75.5
42.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Bahrain Jordan Morocco Tunisia
Source: TRAINS/WITS
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UNCTAD/CD-TFT 25
US Tariff Treatment of Jordan’s Major Exports, 2007
HS Product MFN EffectiveImports (000) Share Cumulative
Total Total Trade 12.6 4.4 1341693 100.0611020 Of cotton 10.8 10.8 256104 19.1 19.1620462 Of cotton 8.2 0.0 173407 12.9 32.0611030 Of manmade fibres15.3 8.0 117576 8.8 40.8711319 Of other precious metal, whether or not plated or5.8 0.0 100764 7.5 48.3610610 Of cotton 19.7 6.0 69361 5.2 53.5620463 Of synthetic fibres11.8 1.2 59754 4.5 57.9610462 Of cotton 12.6 7.5 54377 4.1 62.0610520 Of manmade fibres22.8 5.0 47482 3.5 65.5610510 Of cotton 19.7 6.0 46429 3.5 69.0610910 Of cotton 16.5 0.0 38170 2.8 71.8
Source: TRAINS/WITS
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UNCTAD/CD-TFT 26
US Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,
% of dutiable imports)
5.5
8.3
4.3
2.2
5.5
12.8
5.86.3
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Bahrain Jordan Morocco Tunisia
Actual preference value
Potential preference value
Source: TRAINS/WITS
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UNCTAD/CD-TFT 27
Summary Tariff line coverage is high for all 3 RTAs. Morocco FTAs, &
other to a lesser extent, still in implementation All provide significantly greater coverage than GSP The coverage is lower in the import value terms Excluded or back-loaded are dairy, processed foodstuffs &
apparels, where tariffs are still high The exclusion of apparels have significant implications,
particularly for Jordan But it is also the sector where preference margins are high, &
concentration of exports in the sector resulted in high “value” of preferences for Jordan even if it has very low DF trade coverage
Fuller coverage could have increased preference value, particularly in Jordan
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UNCTAD/CD-TFT 28
EU Tariff Treatment by Regime, 2008
(Total 14238)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
GSPLDCs
Egypt
Alger
ia
Jord
an
Turkey
Tunisia
Moro
cco
Not covered
Non-Ad valorem
Non-DF wtih preference
Duty free
MFN DF
Source: TRAINS/WITS
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UNCTAD/CD-TFT 29
Note: EU DF Product Coverage by Regime (Total 14310)
DF Lines by EU Tariff Regimes (incl MFN) (2007)
26.5
55.6
88.4
99.489.7
0102030405060708090
100
MFN duty free Total DF forGSP
Total DF forGSP+
Total duty freefor LDCs
Total duty freefor ACP
Source: TRAINS/WITS
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UNCTAD/CD-TFT 30
EU RTA Product Coverage of MFN & GSP Dutiable Lines, 2008 (Total
6241)
3261; 53%
691; 11%
93; 1%
152; 2%
738; 12%
1119; 18%
187; 3%
6 RTA DF
5RTA DF
4RTA DF
3RTA DF
2RTA DF
1RTA DF
0 RTA DF
Source: TRAINS/WITS
31
UNCTAD/CD-TFT 31
EU - Frequency of “Sensitive” Products by HS Chapter, 2008 (DF in no or 1
RTAs, total 1308)
0
50
100
150
200
250
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
2. Meet 4.Dairy
8. Edible frut nut
20. Prep. vegetables, fruits
22. Beverages, spirits
Source: TRAINS/WITS
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UNCTAD/CD-TFT 32
EU MFN Tariffs 2007 (Simple Av, incl. AVEs)
Source: TRAINS/WITS
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
0101
10
0506
90
1207
20
2103
20
2804
50
2905
51
2934
20
3603
00
3921
13
4410
19
5105
31
5407
72
5901
90
6204
52
6903
10
7212
30
7403
21
8211
93
8428
90
8466
93
8517
18
8708
91
9101
19
33
UNCTAD/CD-TFT 33
How do they affect DC exports? Not so much?
EU MFN & Effective Rates, 2007 (Weighted av.)
0.6
3.84.3
8.5
6.87.2
2.2
8.9
0.00.6
1.2 1.31.7
0.2
1.0
6.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan
MFN Effective
Source: TRAINS/WITS
34
UNCTAD/CD-TFT 34
Share of EU Duty-Free Imports, 2007
99.893.2 94.8
91.894.8
97.5
80.9
17.8
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan
Source: TRAINS/WITS
35
UNCTAD/CD-TFT 35
EU Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,
$000)
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
5000000
Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan
Actual Preference Total Potential Preference Total
Source: TRAINS/WITS
36
UNCTAD/CD-TFT 36
EU Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,
% of dutiable imports)
2.8
5.65.1
8.1
6.7
8.1
2.1 2.22.9
6.7 7.0
9.68.9
8.3
3.9
9.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan
Actual Preference (% dutiable) Potential Preference (% dutiable)
Source: TRAINS/WITS
37
UNCTAD/CD-TFT 37
Source: TRAINS/WITS
Tunisia ($202mil)
80.8
11.6
2.7 4.9
150910 Virgin
150990 Other olive oil
151000 Other oils
Others
Jordan ($3.5 mil)
70.7
17.1
6.45.8 150910 Virgin
070700 Cucumbers andgherkins, fresh orchilled.
070200 Tomatoes, freshor chilled.
Others
Egypt ($58 mil)
15.8
13.0
11.4
10.16.55.9
37.4
080501 Oranges
080610 Fresh grpes
100640 Broken rice
070190 Other potatos
070820 Beans
100630 Semimilled orwholly milled rice
Other
Morocco ($141 mil)
60.4
7.3
7.3
5.0
3.6
2.2
14.3
070200 Tomatoes
080520 Mandarins
081110 Strawberries
080510 Oranges
070990 Othervegetables
200850 Apricots
Others
38
UNCTAD/CD-TFT 38
Summary Tariff line coverage in EU RTAs is lower than US RTAs, as
low as 80% for Egypt, less than 90% for Algeria, Morocco, Tunisia (may be yet to be implemented)
Significantly better than GSP but lower than LDCs “Sensitive” products concentrate on Agriculture By contrast, the coverage is higher on import volume terms,
unlike US RTAs, all above 90% (olive oils, vegetables, fruits) Significant preference margins, thus preference value,
especially for Turkey. Caveat – EU has competing RTAs, so preference margin & value can be an overestimate
Some potential remain for improved preference for Egypt, Morocco, Tunisia & Jordan, not so much for Turkey
39
UNCTAD/CD-TFT 39
Implications
The design of product coverage and staging matter for DC export opportunities
Innovative approach & lessons Tariff reduction, longer period, longer than 10
years for fuller liberalization? Preferential TRQ, expansion and tariff
elimination for key products MFN reduction – Preference erosion but may
gain where products not covered or utilized
40
UNCTAD/CD-TFT 40
Not all Preferences are utilizedTentative estimates of the utilization rates of
Quad unilateral preferential schemes by LDCs, 2007
Source: GSP database
0
10
20
30
40
50
60
70
80
90
100
Canada EU US Japan
41
UNCTAD/CD-TFT 41
Determine the eligibility for preferential treatment => can Determine the eligibility for preferential treatment => can be trade policy instrumentbe trade policy instrument Insulate an industry from the RTA consequences, to attract Insulate an industry from the RTA consequences, to attract
investment in strategic sectors like TRIMsinvestment in strategic sectors like TRIMs Raise production cost by protecting intermediate good Raise production cost by protecting intermediate good
producers (resultant distortion = 4.3% tariffs)producers (resultant distortion = 4.3% tariffs) Also compliance cost (1.8% under NAFTA)Also compliance cost (1.8% under NAFTA)
Restrictive rules hampers the use of preferences Restrictive rules hampers the use of preferences Often more restrictive in N-S than in S-S RTAsOften more restrictive in N-S than in S-S RTAs
Rules of Origin (1)
42
UNCTAD/CD-TFT 42
Rules of Origin (2)
Wholly obtained Substantial transformation, as measured by
Change in tariff classification Regional value-added Specific processing requirement
Some restrictive rules High local content requirement (60%) T&C – “yarn-forward”/double transformation Processed foodstuff – raw materials to be wholly obtained Fish taken outside territorial waters – “vessels” –
registration, flag, ownership, crew
43
UNCTAD/CD-TFT 43
Rules of Origin (3)
Facilitated use of non-originating input to qualify for RTA RoO in key products Time-bound exemption /“RoO-free quota” Phase-in implementation Lower thresholds in VA rules for DCs Use of non-originating row materials for processing Optional rules for processed AG Single transformation for apparels Broader & fuller cumulation (Paneuro) Higher tolerance rules
But RoO also reciprocal – balancing act needed
44
UNCTAD/CD-TFT 44
Other NTBs SPS/TBT Standards
Products may be covered but can be totally restricted (QR)
Harmonization/equivalence/MRAs => difficult in N-S context?
Cooperation in conformity assessment & certification?
SG/AD/CVM As per WTO requirement? Some eliminated AD for RTA partners
SG – bilateral SG with elements of asymmetry + exclusion from global SG?
AG subsidies Basically WTO issue, but need to be factored in
Not to target export subsidies to RTA partners exports, zero-for-zero (EPAs) & prohibition of new subsidies
45
UNCTAD/CD-TFT 45
(3) Deep Integration Issues Services
Binding existing regime, investment focus (M3), financial, telecom Limited M4 & labour mobility (high-skill labour, intra-corporate
transferees etc) Intellectual property rights
TRIPS-plus, to be applied on an MFN basis Investment
Liberation, investor protection vs Investment promotion & cooperation
Competition policy CP law (state aid, adoption of CPL) vs cooperation
Government procurement MA interests vs asymmetric supply capacity.
46
UNCTAD/CD-TFT 46
3. South-South RTAs
Reinvigoration of SS RTAs - broader economic cooperation
S-S trade dynamic, now nearly 50% of DC trade
Mostly intra-regional – distance matter. Role of regional arrangements
Limited complementarily, small markets, limited liberalization traditionally noted
More positive views as many engaged in SS RTAs
What are the “realities”?
47
UNCTAD/CD-TFT 47
Intra-RTA trade generally lower in SS RTAs
Intra-RTA Trade Share (2008)
Source: UNCTAD GlobStat
0.4
0.8
2.2
4.5
4.7
6.3
8.3
9.0
11.3
11.7
13.4
25.4
49.5
67.2
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0
ECCAS
CEMAC
UMA
GCC
COMESA
SAARC
ECO
ECOWAS
SADC
APTA
WAEMU
ASEAN
NAFTA
EU
48
UNCTAD/CD-TFT 48
But grew faster in many SS RTAs
Av Annual Change in Intra- & Extra-RTA Exports: 2000-08
Source: UNCTAD GlobStat
Av annual growth 2000-2008
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
ECO
APTA
SAARC
COMESA
ECOWAS
UMA
GCC
CEMAC
SADC
WAEM
U
ASEAN EU
NAFTA
Intra-Group
RoW
49
UNCTAD/CD-TFT 49
ATPA
0
2000
4000
6000
8000
10000
12000
199019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
ASEAN
0100200300400500600700800900
1000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
5.0
10.0
15.0
20.0
25.0
30.0
SAARC
0200400600800
10001200140016001800
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
ECO
0
500
10001500
2000
2500
3000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
2.0
4.0
6.0
8.0
10.0
Intra G share Intra-group Rest of the region Extra-region
Source: UNCTAD GlobStat
50
UNCTAD/CD-TFT 50
COMESA
0100200300400500600700800900
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
UEMOA
0
100
200
300
400
500
600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
GCC
0200400600800
10001200
1990
1991
1992
1993
199419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
0.0
2.0
4.0
6.0
8.0
10.0
Intra G share Intra-group Rest of the region Extra-region
UMA
0
100
200
300
400
500
600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Source: UNCTAD GlobStat
51
UNCTAD/CD-TFT 51
UMA
0%
20%
40%
60%
80%
100%
Developedeconomies
Africa UMA
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
UEMOA
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
Africa UEMOA
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
ECO
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
DevelopingAsia
ECO
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
GCC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
DevelopingAsia
GCC
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
S-S RTA have the potential to foster diversification of DC exports into more value-added & technology intensive products
Source: UNCTAD GlobStat
52
UNCTAD/CD-TFT 52
APTA
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
DevelopingAsia
APTA
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
SAARC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
DevelopingAsia
SAARC
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
CIS
0%
20%
40%
60%
80%
100%
Developedeconomies
Developingeconomies
CIS
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
ASEAN
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Developedeconomies
DevelopingAsia
ASEAN
High technology M
Medium technology M
Low technology M
Natural resource-basedM
Primary products
Source: UNCTAD GlobStat
53
UNCTAD/CD-TFT 53
Scope for intra-regional S-S Cooperation
by sectorIntra-regional tariffs by sector
Intra-regioanl tariffs by Sectors, 2008
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
High-incomenon-OECD
LMI Middle E &N Africa
LMI South Asia SSA
Agriculture
Industrial
Petroleum
Textile & Clothing
Source: TRAINS/WITS
54
UNCTAD/CD-TFT 54
Scope for intra-regional S-S Cooperation
by degree of processingIntra-regional tariffs by Degree of Processing
Av Tariffs applied to Intra-Regional Trade by Degree of Processing, 2008
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
High-incomenon-OECD
LMI Middle E&N Africa
LMI South Asia SSA
Raw materials
Intermediate goods
Consumer goods
Capital goods
55
UNCTAD/CD-TFT 55
Summary
Greater SS cooperation as opportunities for overcoming scale constraints & create greater markets
Platform for diversifying DCs into new markets & products, higher value addition, access to technology
Although still modest, SS integration as a tool for exploiting the potential
And, regional cooperative mechanism other than trade, like in infrastructures, transport networks, through regional resource pool, particularly useful
Competitive supply capacity essential
56
UNCTAD/CD-TFT 56
Conclusion Designing adequate terms of N-S RTAs represent
challenge Trade & revenue impact tend to be greater for DCs,
hence greater adjustment costs => Need for careful design of scope & pacing
Innovative approaches and lessons in realizing export interest to be explored
Deep integration can be conducive to greater dynamic gains but also constrain policy space - careful assessment important
S-S integration & cooperation can provide useful avenue
57
UNCTAD/CD-TFT 57
Thank You
ContactsTaisuke Ito
E-mail: [email protected]: +41 22 917 4893Fax: +41 22 917 0044