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UNCTAD/CD-TFT 1

Multilateralism & Regionalism

- The Development Interface -

Short Course on Key Issues on the International Economic Agenda for Permanent Missions in

Geneva, 23 November 2007

Taisuke ITO

DITC/UNCTAD

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UNCTAD/CD-TFT 2

Context & Questions

WTO Doha Negotiations go slowly More movement towards RTAs?

RTAs already proliferated. What is new? Implications for development & MTS? RTAs are here to stay. How to make them

more useful for developing countries given evolving MTS?

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Outline

I. Recent trends & issues in RTAs

II. Interface between WTO & RTAs:

Developmental perspective

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Part I

Recent Trends & Issues in RTAs

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Number of Notified RTAs by Year of Entry into Force: 1948-2007

Source: WTO

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RTA MEMBERSHIP ACROSS THE WORLD (March 2002)RTA MEMBERSHIP ACROSS THE WORLD (March 2002)

Source:

WTO

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RTA MEMBERSHIP ACROSS THE WORLD (2007)RTA MEMBERSHIP ACROSS THE WORLD (2007)

Source:

WTO

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BahamasHaiti

USA

Canada

Uruguay

Paraguay

ArgentinaBrazil

Chile

Bolivia Ecuador

Peru

Venezuela

Colombia

Panama

Nicaragua

CostaRica

El Salvador

GuatemalaHonduras

Dominican Republic

Dominica, Suriname,Jamaica, St. Lucia, Belize,St. Kitts & Nevis, Grenada, Barbados,Guyana, St. Vincent & the Grenadines,Antigua & Barbuda, Trinidad & Tobago

Korea

Philippines

New Zealand

Indonesia

Australia

Brunei Darussalam

Chinese Taipei

Malaysia

Japan

People’s Rep. of China

Hong Kong, China

India

Russia

Singapore

ThailandBangladesh

Papua New Guinea

Laos

Fed. States of Micronesia,Marshall Islands, Kiribati, Palau,W. Samoa,Tonga, Vanuatu, E. Timor,Cook Islands, Nauru, Niue, Tuvalu

Bhutan, Maldives,Nepal, Pakistan

Mexico

Viet Nam

Fiji, Solomon Islands,Vanuatu

MyanmarCambodia

Sri Lanka

ASIA AMERICAS

FUTURE PROSPECTS

Source: A. Estevadeordal , “New perspective on North-South RTAs”, presentation at a pre-UNCTAD XI seminar on regionalism, Rio de Janeiro, 8 June 2004.

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Trends in RTAs

RTA proliferated worldwide since 1990s with WTO & accelerated with bilateral “hub-&-spoke” FTAs

=> “spaghetti bowl” 367 notified to WTO of which 214 in force (Dec 2006)

(400 by 2010?) DCs active in RTAs => Overlapping (SSA) & multiple

membership (av. 8 RTAs per country in LA, 4 in SSA) [Continental scale (FTAA, ACP-EU EPAs)] Inter-regional RTAs, mostly bilateral (US-FTAs) Block-to-block RTAs (EU-Mercosur, EPAs)

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Trends in RTAs (2)

Chile, Mexico & Singapore emerged as semi-hubs Non-traditional regionalists (India, JPN, KOR, China,

Singapore, Aus, NZ) entered the scene N-N RTAs (US-AUS, EU enlargement) re-emerged N-S RTAs significant => transform unilateral preferences

to reciprocal preferences Emerging DCs got involved (China, US-KOR, EU New

Strategy towards South & SE Asia) S-S RTAs reinvigorated, including inter-regional,

plurilateral initiatives

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Why RTAs? Some Motivations

Political considerations (EU, US FTAs) Change in the 1990s in conventional wisdom on economic

policy management and development strategies => trade integration as key development tool

RTAs as a platform to participate in expanded international supply chains (input manufactures ↑ )

Protection of regional markets from outsiders Quicker and deeper than WTO as negotiations easier with

limited number of partners (less free rider problem) Lock-in unilateral preferences (N-S RTAs)

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Why RTAs? Some Motivations (2)

“Domino effects” Large RTAs increase the incentive for non-members to

join the RTA to avoid trade creation/diversion (EU enlargement) Incentive for insiders to resist

Countries have incentive to react to the formation of an RTA by the formation of new RTA, rather than seeking multilateral approach, in order to maintain competitive edge vis-à-vis its competitors in key export markets => Hub & spoke bilateral FTAs (US, EU & JPN with Mexico)

Greater bargaining power at multilateral level Any effect of the slow pace of the Doha Round?

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RTA proliferation means increased share (%) of world trade under

RTAs

Note: Estimate based on 113 RTAs in force in 2000 with trade data of 1999. Source: WTO, World Trade Report 2003.

0

5

10

15

20

25

30

35

40

45

50

2000 2005

43.2%

51.2%

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0

5

10

15

20

25

30

35

Including all trade Excluding 0% MFN Excluding <3% MFN

Share of trade covered (%), 2003Share of trade covered (%), 2003

New market access under RTAs may be more limited than it might

appear

Note: Not include intra-EU 15 trade. Source: World Bank, Global Economic Prospects 2005. Reported in S. Andriamananjara, “Regional Integration: Systemic issues from a global perspective” in an UNCTAD Ad-hoc expert meeting in 15-16 March 2007.

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S-S RTAs proliferate but North’s RTAs dominate trade covered, not

surprisingly

0

5

10

15

20

25

30

35

1990 1996 2002

0

50

100

150

200

250

1990 1996 2002

South-South-SouthSouth

EUEU

USUS

South-South

EUEU

Percent of World Trade CoveredPercent of World Trade CoveredNumber of RTAsNumber of RTAs

USUS

Source: World Bank (2005), ibid.

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US/EU markets large (NAFTA=8%, EU25= 23%) & have

higher intra-RTA trade share than S-S RTAs (2005)

Note: Exports. Source: UNCTAD

4.9

8.2

9.1

11.7

12.9

26.2

55.8

60.3

66.5

0 10 20 30 40 50 60 70

COMESA

ANCOM

SADC

CARICOM

MERCOSUR

ASEAN

NAFTA

FTAA

EU 25

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For DCs, RTAs seem to be a relatively small driver of trade

reform in the past

Multilateral Agreements

25%

Regional Agreements

10%

Autonomous Liberalization

65%

Share of tariff reductionsShare of tariff reductions

Note: 33 largest DCs covering 90% of DC trade. Source: Martin and Ng, 2004, from World Bank (2005), op. cit.

0

5

10

15

20

25

30

1983 2003

Av. Tariffs in Developing CountriesAv. Tariffs in Developing Countries

29.9

9.3

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Simultaneous Preferential and MFN Liberalization in Latin America

50

40

30

20

10

0

1997199519931991198919871985

MFN Tariffs for 11 countries

Preferential Tariffs of 11 countries with respect to

their RIA partners in the region

Regionalism in the Americas Open Regionalism

Source: Estevadeordal & Robertson (2004). Reported in a presentation by Estevadeordal (2004), op.cit .

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26.5%

15.3%

6.4%3.5%

0.8%

5.3%

0%

5%

10%

15%

20%

25%

30%

Intra-regional trade as a share of GDP, 2002

East AsiaEast Asia Europe &Europe & Central AsiaCentral Asia

Middle East Middle East & N. Africa& N. Africa

SouthSouth AsiaAsia

Sub-Sub-Saharan Saharan AfricaAfrica

• Regional Regional trade trade significant significant in income in income generationgeneration

• With With greater greater integration integration into global into global supply supply chainchain

• Importance Importance of of competitive competitive supply supply capacitycapacity

LALA

East Asia has expanded its trade globally & regionally

Source: World Bank (2005), op. cit.

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0.0

100.0

200.0

300.0

400.0

500.0

600.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

5

10

15

20

25

30

ASEAN Intra % ASEAN Intra ASEAN RoW

0.0

100.0

200.0

300.0

400.0

500.0

600.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

2

4

6

8

10

12

SADC Intra % SADC Intra SADC RoWl

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1000.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

2

4

6

8

10

12

14

16

Andean Intra % Andean Intra Andean RoW

0.0

100.0

200.0

300.0

400.0

500.0

600.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

5

10

15

20

25

MERCOSUR Intra % MERCOSUR Intra MERCOSUR RoW

Intra-RTA trade yet grew faster in S-S RTAs

Note: 1990=100 (left) & intra-RTA import share (right). Source: UNCTAD

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Developing Countries and RTAs

Some DCs are highly dependent on some trading partners (West Africa with EU) and tariff revenue => significance of N-S RTAs for individual DCs

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0%

20%

40%

60%

80%

100%

UnitedStates

EuropeanUnion

Japan LACs Asia Others Total

Primary Products NN.RR. based manufactures Low technology intermediate technology high technology

S-S RTA have the potential to foster diversification of DC exports into more value-added & technology intensive products (Latin America

excluding Mexico)South-North South-South

52,5% 47,5%

Excluding Mexico

2000-2002

M. Kuwayama, “South-South Integration and Cooperation: A Latin American Perspective, presentation at a pre-UNCTAD XI seminar on regionalism, Rio de Janeiro, 8 June 2004.

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Trade Effects of RTAs Some 50% of world trade estimated under RTAs in

2005 as compared to 40% in 2000. Or over 30% (or 20% if MFN duty free excluded)

DCs liberalization driven mainly by unilateral lib & RTAs impacts may have been more limited than might appear & proceeded with MFN liberalization

Some large North RTAs account for the significant share given their market size & have higher regional intensity of trade

East Asia expanded intra-regional trade not necessarily relying on preferences => competitive supply capacity

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Trade Effects of RTAs

N-S RTAs important for individual DCs in terms of volume & pose adjustment given their import concentration

N-S RTAs tend to reinforce existing comparative adv (natural resource-based or lower value-added products with high import content)

S-S RTAs intra-RTA trade is relatively low but steadily increasing over the past decades with variation across groupings (ASEAN)

S-S RTAs (& trade) important for diversification into non-traditional new markets & fast-growing, more value-added, technology-intensive products (dynamic comparative adv)

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New Regionalism Deep (positive) integration = positive

harmonization of regulatory standards <=> Shallow (negative) integration = elimination of trade barriers (tariffs)

Broader policy coverage: “behind-the-border” measures (services, IPR, investment, CP, GP) => Greater implications for development policy options

WTO-plus in scope & depthPotential for dynamic gains, greater impact on national economy & development policies. Positive coherence with MTS matters

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Welfare Effects of an RTAPositive

RTAs creates trade (static trade creation) RTAs generates dynamic gains from scale

economy, greater competition, FDI inflows & technology transfer

Negative RTAs diverge trade from more efficient third

countries to less efficient RTA partners

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Trade Creation & DiversionSD

Q

P

Pw

0

PRTA

Pw + t

a b c d

e

S2 S1 D1 D2

Price ↓, C ↑, P↓, Imp ↑

Producer ↓ (a)

Consumer ↑(abcd)

Gov rev loss ↓(ce) Gains from TC (b+d) Loss from TD (e)

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Conditions for Trade Creation & Diversion

The higher the initial tariffs, the greater the effects, be it trade creation or diversion

The lower the post-RTA CET, the more likely it is that the RTAs is welfare increasing (less TD)

The greater the number of RTA partners, the more likely it is that there will be net trade creation

Wide differences in comparative advantage is likely to lead to net trade creation

The higher the share of trade with partner countries the greater the possibility of welfare enhancing RTAs

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Risk of trade diversion high in RTA with high external tariffs

0 5 10 15 20 25

SAPTA

ECOWAS

COMESA

MERCOSUR

EAC

SADC

AFTA

NAFTA

Note: Tariffs are import-weighted at the country level to arrive at RTA averagesSource: UN TRAINS/WITS, from World Bank (2005), op. cit.

Average weighted tariffs

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Policy Issues in Trade Creation & Diversion

Trade creation = trade adjustment (like any other liberalization) => Issues for DCs under NS RTAs

Trade diversion hurts both RTA members and non-members Non-members => Lost export sales. Also hurt by TC Members => Lost tariff revenue not compensated by

consumer gains

MFN reduction an answer? Trade diversion = static concept => Need to assess trade diversion relative to the non-static benefits of increased trade

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RoO determine the eligibility for preferential treatment of a good => can be a powerful trade policy instrument Insulate an industry from the consequences of FTA Protect intermediate good producers by favoring intra-PTA

supply links (resultant distortion = 4.3% tariffs) Be used to attract investment in strategic sectors

Restrictive rules hampers the use of preferences (e.g., double transformation rule for T&C: Yarns => fabrics => clothing)

Cost of compliance (1.8% under NAFTA) Often more restrictive in N-S RTAs

Rules of Origin

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Dynamic Effects

Economies of scale Greater specialization & increased production IRS => product differentiation => Intra-Industry

trade Competition => efficiency => innovation FDI inflows Transfer of technology Productivity & economic growth

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Deeper Integration for Dynamic Gains?

Potential for greater gains as eliminating NTBs and harmonizing regulatory standards lead to larger markets & economies of scale

Tariff first, NTB next? (S-S RTAs) Upwards harmonization entails costs and can be

sub-optimal for DCs Broader coverage of behind the border regulatory

issues have implications to domestic development policy options = policy space loss

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RTAs & Policy Space

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Summary

RTAs proliferated worldwide with impact on trade RTAs relevant to development as trade is increasingly

important for GDP & growth and trade policy as development policy instruments

New regionalism entail broader & deeper policy coverage thus affect DC policy space (more than the MTS)

Regional negotiations matter in determing terms and conditions of the agreement

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Part II

Interface Between WTO & RTAs Development

Perspective

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Questions

(1) How do RTAs affect WTO/MTS?

(2) How does WTO/MTS affect RTAs?

=> Implications for developing countries in regional trade negotiations

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(1)How Do RTAs Affect WTO?“Building block” Thesis

Quicker & deeper integration for global free trade: Same goal, different routes through open regionalism

Competitive liberalization thesis Large RTAs increase the incentive for the outsiders to advance

multilateral liberalization to minimize trade diversion (UR & Single European Market, UR conclusion & NAFTA/APEC)

Laboratories for testing new approaches (services, investment, competition policies)

RTAs as development tool: incubator of production and export diversification for gradual and strategic integration into world economy / MTS

Locking-in of domestic reform at regional level

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(1) How Do RTAs Affect WTO? “Stumbling block” Thesis

Inward-looking & protectionist bloc Reduce incentive for MTS, esp. in MA and new

issues (WTO-plus, NN RTAs) Specialization of areas and «forum-shopping»

(only AG Subsidy & DS for WTO?) Administrative burdens and negotiating capital

constraints (overlapping membership to several RTAs) (RoO)

Fragmentation of regional rules in new areas & jurisprudence

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(1) How Do RTAs Affect WTO? “Stumbling block” Thesis

Deep integration limits policy space for proactive development policies

Policy space and SDT permitted under MTS overridden (e.g. less than full reciprocity)

Negotiating leverage at MTS (bilateral FTAs) N-S RTAs may weaken S-S RTAs Exclusion of small countries / « template » RTA « Hub & spoke » RTAs

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(2) How Does WTO Affect RTAs?

(i) WTO rules on RTAs define the conditions to be met by RTAs

(ii) MFN market access conditions determine the level of preferences under RTAs

(iii) WTO disciplines on regulatory issues constitute minimum standards for all

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(i) RTAs and WTO Rules

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(ii) RTAs and WTO Rules Comment

WTO rules notoriously ineffective Not an answer to discipline proliferation of

RTAs? But not mean rules are useless Rules of the game => affect terms of RTAs Not matter for many RTAs Special relevance for low income vulnerable

DCs seeking flexible terms of RTAs (EPAs)

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WTO Rules on RTAs

ProvisionsProvisions CoverageCoverage

GATT Article XXIVGATT Article XXIV N-N, N-S RTAs in goodsN-N, N-S RTAs in goods

Enabling ClauseEnabling Clause S-S RTAs in goodsS-S RTAs in goods

GATS Article V GATS Article V All RTAs in servicesAll RTAs in services

All provisions allow for derogation from MFN obligations in providing preferential treatment to RTA partners under certain conditions

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Scope Customs Customs unionsunions, , free-trade areasfree-trade areas or or interim arrangementsinterim arrangements for CU or for CU or FTAsFTAs

Purpose

(XXIV:4) (XXIV:4)

To To facilitate tradefacilitate trade between the between the parties and parties and not to raise barriers to not to raise barriers to their trade with other Memberstheir trade with other Members. .

Compatibility criteria

RTAs must satisfy, RTAs must satisfy, inter aliainter alia, paras , paras 5 and 85 and 8

GATT Article XXIV

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GATT Article XXIV:5-8(i) Duties and other restrictive regulations of commerce

(ORRCs) must be eliminated with respect to substantially all the trade among parties (para 8(a)(i)&(b))

(ii) Duties and other regulations of commerce (ORCs) must not be higher or more restrictive than prior to the RTA formation (para 5(a)(b))

(iii) « Reasonable length of time » for the formation of CU/FTA should exceed 10 years only in exceptional cases (para5(c))

(iv) Notification to the CTG, examination & reporting by CRTA on WTO consistency («make  recommendation» as required)

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Scope Regional or global arrangements entered Regional or global arrangements entered into into among developing countriesamong developing countries for the for the mutual mutual reduction or elimination reduction or elimination of tariffs of tariffs & & non-tariff measures non-tariff measures

Principles (a)Be designed to facilitate trade between the (a)Be designed to facilitate trade between the parties parties and not to raise barriers to or create and not to raise barriers to or create undue difficulties for their trade with other undue difficulties for their trade with other MembersMembers; and ; and

(b)not impede the liberalization of trade (b)not impede the liberalization of trade between the parties at the multilateral level.between the parties at the multilateral level.

Enabling Clause

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Enabling Clause (2)

The Enabling Clause does not assume formal link with GATT Article XXIV conditions

The Enabling Clause is less stringent than GATT XXIV as it permits reciprocal preferences on a limited range of products, & not « substantially all the trade»

The clause permits reduce tariffs only, or non-tariff measures as well, & not « elimination» like GATT Article XXIV

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Scope Economic integration agreements (EIAs) Economic integration agreements (EIAs) inin trade in trade in services services

V:4 To facilitate trade between the parties and not to To facilitate trade between the parties and not to raise the overall level of barriers to trade in services raise the overall level of barriers to trade in services vis-à-visvis-à-vis third parties. third parties.

V:1(a) ""substantial sectoral coverage" (n" (no o of sectors, of sectors, volume of trade affected and modes of supply), with volume of trade affected and modes of supply), with no a priori exclusion of any mode of supplyno a priori exclusion of any mode of supply

V:1(b) ""the absence or elimination of substantially all discrimination,, in the sense of [GATS] in the sense of [GATS] Article XVII" (national treatment)Article XVII" (national treatment) thorugh thorugh elimination of existing discriminatory measures elimination of existing discriminatory measures and/or prohibition of new measuresand/or prohibition of new measures

GATS Article V

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V:4 & 5 Not Not raise the overall level of barriers to trade in raise the overall level of barriers to trade in services within the respective sectors compared to services within the respective sectors compared to the level applicablethe level applicable prior to the EIA prior to the EIA

V:3 (a) Flexibilities shall be provided for DCs regarding the conditions of V:1 in accordance with the level of development

V:3 (b) Under S-S EIAs, Under S-S EIAs, more favorable treatment may may be granted to juridical persons owned or be granted to juridical persons owned or controlled by natural persons of an EIA member controlled by natural persons of an EIA member with respect to substantive business operationswith respect to substantive business operations

GATS Article V (2)

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Issues in WTO Rules Negotiations

How much is «substantially all the trade»? 90%? How to measure?

How long is «reasonable period of time»? 12 years? What are the «exceptional cases»? How long is reasonable in such cases?

How should WTO monitor, examine and decide on WTO compatibility of an RTA? Transparency Mechanism adopted in 2006

DMD 29DMD 29: Negotiations aimed at “clarifying : Negotiations aimed at “clarifying and improving disciplines and procedures” and improving disciplines and procedures” on RTAs while taking into account on RTAs while taking into account “developmental aspects”“developmental aspects”

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Debate on SAT Measurement

Trade (import) value => Measure existing trade rather than future trade which are subject to prohibitive tariffs & with no imports. Can exclude many products with small or no trade value (EU)

Tariff lines => Can exclude products with high trade value How to aggregate (EU) or disaggregate among RTA

parties & among the one party if block-to-block RTA How to treat non-zero tariffs => tariff reduction promotes

intra-RTA trade but no incentive if not counted for SAT NTBs like TRQ? What threshold?

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0

10

20

30

40

50

60

70

A - 5% B -10%

C -50%

D -80%

E-100%

F -100%

G - H J K

Trade volume 95%Tariff line 33%

Trade volume 30%Tariff line 90%

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“Substantially All the Trade”

AUSAUS 95% of HS 6-digit line w/o duties & TRQ at the end of 10 year period

No “hNo “highly traded products” = >0.2% volume or top 50 ” = >0.2% volume or top 50 imports within RTAimports within RTA

No “sNo “significant exports” = >2% of a country’s total ” = >2% of a country’s total exports to the worldexports to the world

EUEU Combined average of trade + tariff line coverage Combined average of trade + tariff line coverage

(Z= (X+Y)/2) w/ threshold to be determined later(Z= (X+Y)/2) w/ threshold to be determined later

ACPACP Favorable methodology

Lower threshold levels for DCs (as SDT)

(Non-zero tariffs, TRQ, cumulative or individual)

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Transitional Period

AUSAUS 70% of tariff lines at the entry into force70% of tariff lines at the entry into force

95% of tariff lines at the end of 10 year period 95% of tariff lines at the end of 10 year period

Longer than 10 years only for “interim agreement”Longer than 10 years only for “interim agreement”

EUEU Longer than 10 year periodLonger than 10 year period

Clarify “exceptional cases”Clarify “exceptional cases”

ACPACP SAT applies only at the end of the transition period

Relax the scope of “exceptional cases” for DCs

No limitation on maximum period in exceptional cases but, if needed, should be consistent with development situations (>18 yrs)

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SDT/Flexibilities for DCs

AUSAUS Open for some flexibilities for DCsOpen for some flexibilities for DCs

EUEU Clarify the Clarify the flexibilities already provided for within the for within the existing framework:existing framework:

Extent to which WTO rules already take into account Extent to which WTO rules already take into account discrepancy in development levels between RTA partiesdiscrepancy in development levels between RTA parties

Flexibilities available during the transitional period Flexibilities available during the transitional period (length, level of final trade coverage, degree of (length, level of final trade coverage, degree of asymmetry)asymmetry)

ACPACP Formally & explicitly incorporate SDT in the application of Art XXIV conditions

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ACP Proposal on GATT Art XXIV

WTO-compatibility (then prevailing) & flexibilities for ACP under CPA Art 37:7

GATT Art XXIV requires “reciprocity” in liberalizing “SAT” under RTAs

While SDT is available in MTN through “less-than-full reciprocity”, the extent of such SDT under RTAs is limited by reciprocity requirement of GATT Art XXIV

GATT Art XXIV does not include SDT for N-S RTAs while GATS V does provide SDT

No a priori reason why SDT cannot be included. Incorporate SDT in the application of Art XXIV conditions so as to allow for: Lesser product coverage, securer and longer transition periods, due consideration of developmental dimension in the examination process

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Possible Challenge?

A third country (MFN exporter) complains: EU tariff treatment discriminates against its exports, thus

violates GATT Art I (MFN) Such preferential tariff is not justified under GATT Art

XXIV because EPA in question is not an FTA in the sense of GATT Art XXIV due to product coverage less than “substantially all” or exceedingly long transition period

Such EPAs indeed amounts to unilateral preferences similar to Lomé Convention, thus the Parties should have sought a WTO waiver

…although GATT Art XXIV case very limited

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(ii) RTAs and Market Access Negotiations in Goods & Services

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Typical Issues in WTO & RTA Negotiations (vis-a-vis RTA

partners)WTOWTO RTAsRTAs

Export Export

IssuesIssues

Preference erosion

Exp revenue loss

Improved market Improved market access & market access & market entryentry

Import Import IssuesIssues

Policy spacePolicy space

AdjustmentAdjustment

Gov revenue lossGov revenue loss

Policy space

Adjustment

Gov revenue loss

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Market access in Goods & Preference Erosion

MFN market access conditions (tariffs) determined the level of preference available to RTA partners

Preferential benefits are a function of MFN (& other preferences that may exist)

WTO negotiations on agriculture & NAMA could lead to lowering of MFN rates causing preference erosion

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Market Access Negotiations in Services

No preference erosionas such but potentially affect the level of “preference” (to the extent that commitments are GATS-plus)

E.g. US FTAs Binding of autonomous liberalization Negative list GATS-plus commitments sought in some key

sectors (telecom/insurance, banking)

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Services Negotiations & RTAs (2)

Mode 4 & labour mobility Global gains of 160 billion from 3% quota in

OECD with 70% accruing from low skill labour

RTAs can provide suitable platform but achievement limited Full labour mobility tend to be between similar level of

development = N-N or S-S RTAs Mode 4 commitments limited to high-skills (inter-

corporate transferees)

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(iii) RTAs & Multilateral Disciplines on Trade-

Related Issues

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RTAs and Negotiations on Trade-Related Issues

(i) TRIPS does not allow for preference – RTA commitments on IPR to be applied on an MFN basis

(ii) Where no WTO rules exist (Investment, CP), RTAs are free to agree on any rule (either on an MFN or preferential basis)

(iii) Even where no WTO rules exist, some issues are applied on an MFN basis by nature (T&E, T&L) RTA negotiations may lead to standard-setting negotiations that may be applied on an MFN basis

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Conclusions The close linkage between WTO & RTAs => Coherent

approach needed to both processes RTAs as an avenue for faster and deeper liberalization.

Liberalization more effective vis-a-vis partners as RTAs eliminate duties on SAT

RTAs are about preference, thus MFN matters DC flexibilities important under N-S RTAs (WTO rules) RTAs can affect policy space => Development policy options Develop supply capacity and competitiveness to gain from

both WTO and RTA negotiations Deeper development cooperation & financial assistance

important as complementary elements

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Thank You

ContactsTaisuke Ito

E-mail: taisuke.ito@unctad.orgTel: +41 22 907 4893Fax: +41 22 907 0044