ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations 20 – 24 August 2012...
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ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
20 – 24 August 2012
Bangkok, Thailand
Roberto Fiorentino
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Objectives:
– Explain the WTO framework that applies to RTAs
– Provide and overview of the various approaches to RTAs negotiations
Programme:
1. WTO rules and procedures related to RTAs
2. WTO monitoring and transparency of RTAs
3. Facts, figures and landscape of RTAs
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
• Monitoring and Transparency
– Notifications and consideration of RTAs
– Compliance with WTO rules and DS
• Body of Rules
– Sets out the rules and procedures for Members engaging in RTAs
• Forum for trade negotiations
– Negotiations of WTO rules and procedures applying to RTAs
WTO and RTAs: roles and functions
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
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ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
A cross-cutting and consistent architectural approach underpinning the MTS
•Disciplines and basic principles
– Aimed at facilitating market access (e.g. tariff bindings) and countering trade discrimination (e.g. MFN & National Treatment)
•Attenuated or modulated by a complex system of exceptions and derogations
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
The Rights (derogations and exceptions)
•WTO agreements grant to WTO Members the possibility to derogate from the basic principles, under specific circumstances and specific conditions
•These rights constitute therefore derogations to or exceptions from the basic principles
•One of these exceptions is Regional Integration
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
An
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Article XXIV +Understanding
Enabling Clause
An
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TS Article V
Dec
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Dec
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Transparency Mechanism
for RTAs
RTAs in goods
RTAs in services
All RTAs
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
What is an RTA in the WTO context?– An exception to the MFN principle
The WTO provides for a series of conditional exceptions which Members can invoke when departing from their MFN commitment :
Since 1947 → Article XXIV of the GATT
Since 1979 → “Enabling Clause"
Since 1994 → Understanding on GATT Article XXIV
Since 1994 → GATS Article V
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
1. The purpose of an RTA is to facilitate trade among the parties to the agreement
2. An RTA must not raise barriers towards third parties higher than those existing before the formation of the RTA
3. An RTA must provide for mutual/reciprocal trade concessions
The RTA exceptions are based on common principles*:
*GATT Art. XXIV:4; “Enabling Clause” para. 3(a); GATS Art. V:4
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Free Trade Areas (FTA)
Customs Unions (CU)
It also provides for:
Interim agreements
GATT Article XXIV + the Understanding
Provides for the establishment of two types of preferential trade arrangements:
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
1. Substantial trade liberalization among the parties to the agreement (Article XXIV:8)
2. Neutrality vis-à-vis other WTO Members not party to the agreement (Article XXIV:5)
Establishes two conditions with which RTA parties must comply in order to benefit from the exception provided
GATT Article XXIV + the Understanding
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Some questions about these criteria:
What is the meaning of “substantially” and “ORRCs” (XXIV:8(a)(i) & (b)) ?
GATT Article XXIV + the Understanding
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
How can compliance with the criterion of “trade policy neutrality” vis-à-vis non-parties be assessed?
Standstill in MFN (applied) duties and Standstill in MFN (applied) duties and “other regulations of commerce” (Article “other regulations of commerce” (Article XXIV:5(b))XXIV:5(b))
On average, no increase in applied On average, no increase in applied MFN duties (Article XXIV:5(a))MFN duties (Article XXIV:5(a))
Possible individual analysis of “other Possible individual analysis of “other regulations of commerce”regulations of commerce”
Parties to a Free Trade Area
Parties to a Customs Union
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Average imports in
2001-03* (US$ million)
National weighted average tariff rates**
Average customs duties collected in 2001-2003***
($ million)
Pre-2004 Post-2004 Pre-2004 Post-2004
Botswana 376 6.87 6.64 26 25 Lesotho 140 15.35 14.93 21 21 Namibia 252 6.15 5.67 15 14 South Africa 15,008 5.00 4.75 750 713 Swaziland 69 15.2 14.60 10 10 SACU 15,845 5.20 4.94 824 783
Pre-2004 Post-2004
Weighted average tariff rates 5.20% 4.94%
Average customs duties collected $824 million $783 million
Committee on Regional Trade Agreements (Extract from WTO Document WT/REG231/1 - 3 October 2008)
SOUTHERN AFRICAN CUSTOMS UNION
Weighted Average Tariff Rates and Customs Duties CollectedNote by the Secretariat
1.In the context of "[t]he evaluation under paragraph 5(a) of Article XXIV of the general incidence of the duties and other regulations of commerce applicable before and after the formation of a customs union", paragraph 2 of the Understanding on the Interpretation of Article XXIV of the GATT 1994 (the Understanding) directs the Secretariat to calculate "the weighted average tariff rates and customs duties collected" and elaborates on the approach to be used.
Results of the calculations
2.Major parameters underlying the results are shown below:
3.The mandated calculations for the SACU, according to the described methodology and on the basis of available data, brought out the following results:
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
With respect to a Customs Union, Article XXIV also provides that:
•Tariffs and other trade measures are substantially harmonized among the parties (Article XXIV:8(a)(ii))
•If in doing so a party breaks its MFN bindings then:
• The Customs Union has to enter into a re-negotiation of tariff bindings with interested Members (Article XXIV:6)
• In accordance with the procedures set out in paragraphs 4 to 6 of the Understanding
GATT Article XXIV + the Understanding
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
“Interim agreements” must: Lead to either a free-trade area or a customs union.
Contain a plan and schedule (Article XXIV:5(c))
Achieve that aim through a maximum transition period of 10 years, except for exceptional circumstances (para 3 of Understanding)
Include any WTO recommended modification (para 10 of Understanding)
GATT Article XXIV + the Understanding
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
“Paragraph 2(c)” provides for:
1.Preferential regional or global arrangements among developing countries;
2.Containing mutual trade concessions;
3.Regarding reduction or elimination of duties;
4.Reduction or elimination of non-tariff measures may be subject to WTO criteria and conditions
The Enabling Clause
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Common aspects1. Goods only – (Only GATS covers trade in services)
2. Reciprocity – (All parties to the RTA to exchange concessions)
3. Neutrality criterion – (RTA not to raise barriers to 3rd parties)
Differences1. Enabling Clause only an option for developing countries
2. Reduction OR elimination of tariffs (Enabling Clause) vs. elimination of duties (GATT XXIV)...
3. ...and reduction OR elimination of NTBs vs. elimination of ORRCs
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Provides for two types of preferential agreements on trade in services:
1.Economic Integration Agreements (EIA);
2.And EIAs implemented on the basis of a time-frame (V.7(a))
GATS Article V
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Establishes two main conditions:
1.Trade liberalization among the parties must cover a broad range of services activities (V:1)
2.Neutrality vis-à-vis other WTO Members not party to the agreement (V:4)
GATS Article V
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Article V:1 – internal requirement
•Substantial sectoral coverage;
•No a priori exclusion of any modes of supply;
•In the sectors covered, absence or elimination of substantially all discrimination in the sense of national treatment (V:1(b))
GATS Article V
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
1. EIAs among developed and developing countries:
• Flexibility for the developing countries parties with respect to the requirement of substantial sectoral coverage (para V:3a)
2. EIAs among developing countries:
• Preferences may be granted to services suppliers of the parties (para V:3b)
GATS Article V: S&D
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Parties to an RTA
Developed countries
Developing countries
Developed/ developing countries
Trade in
goods
Trade in services
• So which provision applies?
All RTAs must be notified!!!
GATT XXIVGATT XXIV
Enabling clauseGATT XXIV
GATS V GATS V GATS V
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Multilateral negotiations on WTO rules and procedures relating to RTAs
Doha Ministerial Declaration (14 November 2001) contains two references to RTAs:
Recognize the WTO as unique forum for global trade rule-making and liberalization and ... RTAs’ role in trade liberalization and development
Calls for negotiations to clarify and improve WTO rules and procedures on RTAs ... taking into account RTAs’ developmental aspects
Para 4
Preamble
Para 29
Negotiating mandate
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Why negotiate WTO rules & procedures on RTAs?
•Lack of transparency:
– WTO/RTA provisions were vague with respect to transparency procedures
– Failure to comply with notification obligations and lack of data
•Systemic concerns:
– Proliferation of RTAs
•Institutional deadlock:
– No effective WTO surveillance mechanism of RTAs
– No consistency assessment of the RTAs in force
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Issues of a Procedural nature:• Improve RTA Transparency
• Improve procedures for the consideration and surveillance of RTAs by the WTO
Systemic questions:• Clarify and improve existing WTO rules on RTAs
DDA negotiations on RTAs: two track approach
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
DDA negotiations on RTAs: state of play
RTA Transparency:
• Review of the Mechanism - § 23 of WT/L/671
• Permanent application (Single Undertaking)
• Database on RTAs - http://rtais.wto.org
Systemic Issues:
• On-going process but little progress
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
1. Monitoring and Transparency
– Notifications and consideration of RTAs
2. Conformity
– Compliance with WTO rules and DS
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Ministerial Conference
Secretariat
Appellate Body
DS Panels
Committees Committees
GoodsCouncil
ServicesCouncil
TRIPSCouncil
CommitteesCTD CTE CRTABOPBudgetWorking Groups
General CouncilTPRB DSB
Director-General
Trade Neg.CommitteeNGR: MA, Rules, TFSpecial Sessions:Services, TRIPS, DSB, Ag. CTD, TEC
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Ministerial Conference
Appellate Body
DS Panels
RTAs notified under:
•GATT Article XXIV
•GATS Article V
General CouncilTPRB DSB
RTAs notified under:
•The Enabling Clause
are reviewed by the
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
GATT Article XXIV GATS Article VEnabling Clause –
Paragraph 2 c)
Transparency Mechanism for RTAsGeneral Council’s Decision of 14 December 2006 (WT/L/671)
(Provisional application pending conclusion of the Doha Round)
Monitoring and Transparency
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Objectives of the Transparency Mechanism:
•Clarifies and strengthens existing transparency provisions
•Introduces new procedures to enhance transparency
•Outlines specific guidelines for the provision of RTA data
•Charges the WTO Secretariat with a transparency role with respect RTAs notified to the WTO
•Establishes a new database on RTAs
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Monitoring and Transparency
• Steps of the process
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Monitoring and Transparency: Notification•What?
• Full text RTA including annexes and protocols• Schedules
•When?• At the latest before the application of the preferential treatment
•By whom?• Parties to the RTA (jointly or individually)
•How?• Goods: Article XXIV (CRTA) or Enabling Clause (CTD)• Services: Article V GATS (CRTA)• Notification template
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Notification template
NOTIFICATION OF REGIONAL TRADE AGREEMENT
1. Member(s) notifying:
2. Date of notification:
3. Notification pursuant to:
[ ] Article XXIV:7(a) of GATT 1994
[ ] Article V:7(a) of GATS
[ ] Paragraph 4(a) of the Enabling Clause
4. Parties to the Agreement:
5. Date of signature:
6. Date(s) of entry into Force:
7. Brief description of the Agreement:
8. Text and related schedules, annexes and protocols are:
[ ] submitted to the WTO Secretariat (electronic format)
[ ] available from the following official Internet link(s):
__________
Document symbol: WT/REG/16
http://www.wto.org/english/tratop_e/region_e/trans_mecha_e.htm
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Notification
Provision of Data
Factual Presentation(by WTO Secretariat)
Schedules, trade and tariff data, RoO, etc. as in Annex to WT/L/671
Circulation to Members
Written questions and replies
CRTA (CTD) Meeting
Max 1
ye
ar
• G/L/834• WT/COMTD/63• S/L/310
Before application of preferential treatment
• 10 wks after notification• 20 wks (RTAs among
developing countries only)
Monitoring and Transparency: process
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Factual Presentations completed (126)
• Factual Presentations: to be done (107) / on hold (4)
Armenia - Moldova (G) EFTA - SACU (G) Japan - Thailand (G&S) Peru - Korea, Rep. Of (G&S)
Armenia - Ukraine (G) EFTA - Serbia (G) Japan - Viet Nam (G&S) Peru - Singapore (G&S)
Australia - Chile (G&S) EFTA - Tunisia (G) Jordan - Singapore (G&S) SACU (G)
Brunei Darussalam - Japan (G&S) Egypt - Turkey (G) Korea, Rep. of - Chile (G) SADC (G)
Canada - Colombia (G&S) EU - Albania (G&S) Korea, Rep. of - Singapore (G&S) MERCOSUR (S)
Canada - Peru (G&S) EU - Chile (S) Kyrgyz Republic - Ukraine (G) Thailand - Australia (G&S)
Chile - China (G&S) EU - Croatia (S) Mexico - El Salvador (G&S) Thailand - New Zealand (G)
Chile - Colombia (G&S) EU - Egypt (G) Mexico - Guatemala (G&S) Trans-Pacific SEP (G&S)
Chile - India (G) EU - FYROM (S) Mexico - Honduras (G&S) Turkey - Albania (G)
Chile - Japan (G&S) EU - Montenegro (G&S) Mexico - Nicaragua (G) Turkey - Chile (G)
China - New Zealand (G&S) EU - Rep. of Korea (G&S) Nicaragua - TPKM (G&S) Turkey - Georgia (G)
Colombia - Mexico (G&S) EU - Serbia (G) Pakistan - China (G&S) Turkey - Montenegro (G)
Costa Rica - Mexico (G&S) Georgia - Ukraine (G) Pakistan - Malaysia (G&S) Turkey - Morocco (G)
EC (25) Enlargement (S) Hong Kong, China - New Zealand (G&S) Pakistan - Sri Lanka (G) Turkey - Serbia (G)
EC (27) Enlargement (G&S) India - Singapore (G&S) Panama - Chile (G&S) Turkey - Tunisia (G)
EFTA - Albania (G) Japan - Indonesia (G&S) Panama - Costa Rica (G&S) Ukraine - FYROM (G)
EFTA - Canada (G) Japan - Malaysia (G&S) Panama - El Salvador (G&S) Ukraine - Moldova (G)
EFTA - Chile (G&S) Japan - Mexico (G&S) Panama - Singapore (G&S) US - Australia (G&S)
EFTA - Egypt (G) Japan - Philippines (G&S) Panama - TPKM (G&S) US - Morocco (G&S)
EFTA - Korea, Rep. of (G&S) Japan - Switzerland (G&S) Peru - China (G&S) US - Peru (G&S)
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
WTO RTAs database: Mandate – (Para 21 of WT/L/671)
•The aim is to provide an RTA Information System (RTA-IS), to store, maintain, analyse and disseminate information on RTAs
•Enhance the transparency and accessibility of information on RTAs through its dissemination on the WTO website
•Provide statistical indicators for RTA analysis
•Long term goal to provide up to date information, including data on trade and tariffs covered by individual agreements
•URL address: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
GATT Article XXIV
GATS Article VEnabling Clause – Paragraph 2 c)
WTO Dispute Settlement provisions can be invoked
2. Conformity In order to benefit from the derogation to MFN the RTA must be in conformity with the requirements contained in…
Any disputes on RTA ?
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Free Trade Area
PartialScope
a group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries continue to apply their existing tariffs on external goods.
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Country A & B sign a FTA
Tariffs are eliminated on most goods
Each party maintains its tariff structure
A Roo regime is put in place
Reciprocal concessions (possible asymmetrical implementation)
Negative list approach (in most cases)
Beyond tariff concessionsBB
Country AUniform MFN tariff of 6%
Country BVariable MFN 0–30 %
AA
0%duties
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Customs Union
Free Trade Area
PartialScope
a group of two or more customs territories that have eliminated all or most tariff and non-tariff measures affecting trade among themselves. Participating countries replace their individual MFN tariffs with a single tariff applied to third countries.
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Country A & B sign a CUTariffs are eliminated on most goodsA common external tariff is adoptedA mechanism to share customs revenues is devisedA temporary Roo regime may be put in placeCompensation is paid to third countries if bound MFN rates are raised
BB
Country AUniform MFN tariff of 6%
Country BVariable MFN 0–30 %
AA
0%duties
CE
T 5
– 10
%
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Economic Union
Common Market
Customs Union
Free Trade Area
PartialScope
Mor
e ec
onom
ic
and
polit
ical
inte
grat
ion
WTO Legal Provisions
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Some economic & political motivations
• slow progress on multilateral agenda
• policy of additive regionalism (Chile, Singapore, Mexico...)
• access to markets in areas other than goods
• more secure access to developed markets than unilateral programs (GSP, AGOA, Cotonou, EBA)
• facilitate trade among neighboring countries
• support foreign policy goals, including development
• framework for regional cooperation
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
ASEAN
SAFTAEACNAFTA
MERCOSURCAN
CARICOMCACM
EUROPEAN UNION EFTA PAFTA ECOWAS
CEMAC SADC
SACUCOMESAWAEMU
GCC
CIS
CEFTA
PICTA
Cambodia
Indonesia
Thailand
Laos
Malaysia
Viet Nam
Bangladesh
Myanmar
Brunei Darussalam
Singapore
ASEAN
Australia
New Zealand
BhutanIndia
Maldives
Nepal
SAFTA
Pakistan Sri Lanka
APTA
China
Rep. of Korea
PICTA
Cook Islands
Fiji
Kiribati
Micronesia
NauruNiue
Pap. New Guinea
Samoa
Solomon Islands
Tonga
Tuvalu
Vanuatu
SPARTECA
Japan
PATCRA
MSG
EFTA
EFTA / EU
MERCOSUR
Trans-Pacific SEP
ANZCERTA
Philippines Marshall Islands
EU
ASEAN
Singapore
Macao, China
PICTA
PATCRAMSG
SPARTECA
CER
South Asian Free Trade Area
ASEAN Free Trade Area
Pacific Islands Countries Trade Agreement (PICTA)
Asia-Pacific Trade Agreement
Jordan
United States
Mexico
Panama
Chile
Brunei, Chile,New Zealand &
Singapore
Nicaragua
Honduras
Switzerland
Peru
MERCOSUR
El Salvador
Costa Rica
Guatemala
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Scheduling tariff commitments
1. Negative list: the RTA rules related to trade liberalization apply to all products except those indicated by each party
• Example: Armenia-Moldova FTA
2. Positive list: trade liberalization only applies to the products listed by the parties
• Example: U.S.-Singapore
3. Mix list: a combination of 1 & 2 – i.e. industrial goods may be subject to 1 and agricultural goods to 2
• Example: EFTA-Egypt FTA
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Timing and types of commitments
1. “big bang”
• Example: Singapore various RTAs
2. Linear or specific reductions
• Example: Japan – Malaysia EPA
3. Frontloading vs. backloading
4. Variable transition periods (asymmetric)
• Example: Trans-Pacific SEP 4
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Measuring market access (I)• Proportion of fully liberalized tariff lines - tradeable goods
• Share of imports at duty-free rates - traded goodsExample: Tariff elimination commitments under A&B FTA and corresponding average trade values for 2003-05*
Duty phase-out period
Numberof lines
% of total lines in A Tariff Schedule
Value of A imports from B (US$ million)
% of A total imports from B
MFN duty free 313 2.7 1,024.4 38.1
2006 252 2.2 271.7 10.1
2009 2,178 18.7 722.8 26.9
Remain dutiable 8,886 76.4 665.0 24.7
Total 11,629 100.0 2,691.5 100.0
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Measuring market access (II): sectorial liberalization
HS section and description Total no.of lines MFN duty free lines Duty free lines in 2007 Remain dutiable
I Live animals and animal products 445 123 27 295 II Vegetable products 1,068 144 165 759 III Animal or vegetable fats and oils 189 34 44 111 IV Prepared food etc. 651 79 77 495 V Minerals 182 119 63 VI Chemicals and chemical products 1,020 407 574 39 VII Plastics and rubber 241 30 211 VIII Hides and skins 74 15 59 IX Wood and articles 130 14 116 X Pulp, paper etc. 181 24 157 XI Textiles and textiles articles 1,094 34 1,060 XII Footwear, headgear 61 61 XIII Articles of stone 160 2 158 XIV Precious stones, etc. 61 7 54 XV Base metals and base metals products 913 39 874 XVI Machinery 1,234 204 1,030 XVII Transport equipment 196 18 178 XVIII Precision equipment 257 55 202 XIX Arms and ammunition 28 28 XX Misc. manufactured articles 176 34 142 XXI Works of art, etc. 10 8 2 Total 8,371 1,390 5,282 1,699
Example country A: Tariff elimination under the A&B FTA, by HS section
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
HS tariff line code (description) TRQ at entry into force (2005) Liberalization scheme
Quantity in-quota duty Quantity in-quota
duty Dairy products 0401.30.25, 0403.90.16, 2105.00.20 (9913.04.05)
7,500,000 L 0 19,053,000 L Plus 6% every year thereafter, compounded annually
0
Table B.I.A - United States: USAFTA FTA-preferential Tariff-rate quotas for agricultural products
Measuring market access (III): TRQs
• Example: U.S. - Australia FTA
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Rules of Origin and market access
• RoO are an essential feature of virtually all RTAs in order to avoid trade deflection
However:
• Production costs may increase due to technical requirements or need to source from intra-RTA partners
• Administrative costs may rise due to certification requirements, both for exporter and customs officials
• Restrictive RoO may result in trade diversion even if extra-RTA inputs are cheaper.
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Rules of Origin: product specific• Example: Trans-Pacific SEP
Rules of origin Trans-Pacific SEP Agreement HS Section and Description HS Ch. Rule Technical rule RVC
IV - Prepared Foodstuffs; Beverages, Spirits and Vinegar
16 CC
45%
17 CTH 18 CC - CTH 19 CTH or RVC 20 CC - CTH or RVC - CTSH+RVC 21 CTH or RVC - CTSH 22 CC - CTH 23 CC - CTH or RVC 24 CTH or RVC
VI - Chemical Products
28 CTH – CTSH - CTH or RVC Chemical reaction or standard materials
45%
29 CTH – CTSH - CTH or RVC Chemical reaction or standard materials or isomer separation
30 CTH - CTSH Chemical reaction
31 CTH or RVC
32 CTH – CTSH - CTH or RVC Chemical reaction or standard materials
33 CTSH or RVC - CTH or RVC
Chemical reaction
34 CTSH or RVC - CTH or RVC - CTH 35 CTSH or RVC - CTH or RVC 36 CTH 37 CTH - CTSH 38 CTSH or RVC - CTH or RVC - CTSH
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Scheduling framework
•Usage of the CPC List to classify the services sectors
•Generally, modes approach – alternatives found in non-GATS type schedules
•In a number of cases, separate Chapter on temporary movement of natural persons
•Some services are covered in separate Annexes or Chapters (e.g. financial, telecommunication)
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
Approaches to services commitments
•Positive list – modeled on GATS
(e.g. EFTA-Korea, Japan-Malaysia, Jordan-Singapore, India-Singapore, Trans-Pacific, Thailand-Australia, China-New Zealand)
•Negative list – modeled on NAFTA
(e.g. Japan-Mexico, Japan-Chile, Panama-El Salvador)
•Mixed list approach
(e.g. Korea-Singapore – negative list approach except for financial services taking positive list approach)
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
• Coverage
– national policy objectives to decide how many sectors will be covered out of 12 broad sectors from the CPC List
– generally, EIAs go beyond GATS commitments by adding new services (sectors/sub-sectors)
– rendezvous clauses for further services coverage
– preferential relaxation of limitations
• Exclusions:
– air traffic rights
– services supplied in the exercise of the government authority
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
• Examples of Preferences
– Preferential allocation of the number of service providers
– Preferential treatment through licensing and qualification requirements
– Relaxation of restrictions on foreign ownership
ESCAP/ITD/DTN/WTO Capacity Building for Free Trade Agreement Negotiations
1. Anti-dumping and RTAs:
• Few prohibit AD on intra-trade
• Some apply AD with more stringent criteria than WTO
• Most apply AD in accordance with WTO rules
2. Safeguards:
• Generally permitted on intra-trade
• Most retain safeguards during the product transition period
• Several provide for special/agricultural safeguards
• Lack of clarity on the treatment of partners in case of global safeguards