Trade Union Policies and Strategies on Free Trade Agreements

1. Trade Union Policies and Strategies onFree Trade Agreements - Reject? or Govern? -

2. Issues to be Discussed • Why did WTO Cancun meeting failed? • Trends towards Regional/Bi-lateral Free Trade Agreements • APEC – Lessons for Trade Unions? • Issues for Trade Union Policies • Multilateralism or Bilateralism? • Free trade or Managed trade? • How to achieve socially-oriented, fair free trade? • What is the best institutional settings?

3. Why did WTO Cancunmeeting fail?

4. Main Issues at Cancun • Agriculture • Domestic subsidies • Export subsidies • Market access • Special and differential treatment for LDCs and developing countries • Singapore Issues (investment, competition, transparency in government procurement and trade facilitation) • Openness and transparency of the WTO negotiations

5. Trends towards Regional and Bilateral Free Trade Agreements

6. What is Goal of Free Trade? • Increase global trade through liberalisation (tariff reduction) • Opportunity to increase employment and raise welfare • Full and meaningful participation of countries in global trade Is it true?

7. Stages of Economic Integration • Free Trade Area (FTA) - starting point - rules of origin • Customs Union - common external tariffs • Common Market - movement of capital and labor • Economic Union - coordination of fiscal and monetary policy • Complete Economic Union - super-natural institution

8. Types of Economic Cooperation Agreements • Multilateral (WTO, OECD) • Regional (APEC, AFTA, NAFTA, MERCOSUR) • Bilateral (Singapore-Japan New Age Partnership Agreement)

9. Examples of Regional Economic Agreement (1) Asia Pacific Economic Cooperation (APEC) • Membership • Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the U.S. (1989); China, Hong Kong, Taiwan (1991); Mexico, Papua New Guinea, Chile (1994); Peru, Russia, Vietnam (1998) • Bogor Declaration (1994) • Free trade and investment area by 2010 for developed members and by 2020 for developing members • Concerted Unilateralism • Voluntary individual and national action plans rather than a rigid and uniform plan • Open Regionalism - Concessions to be extended to non-members

10. Examples of Regional Economic Agreement (2) ASEAN Free Trade Area (AFTA) • Membership - Now increased to ASEAN 10 (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Lao PDR, Myanmar, Cambodia) • Aim to reduce tariff to 0-5% by 2002/2003. • As of January 2002, original ASEAN-6 countries have included 98.4% of products into AFTA. Out of this, 96.2% are between 0-5%. • New members have included 62% of products, of which 56% are at 0-5% • The secret behind the success lies in realistic approach. - Inclusion list, temporary exclusion list, sensitive list, and general exception list

11. Example of Bilateral Economic Agreement Japan-Singapore New Age Partnership • Japan was not a member of any bilateral FTAs until recently - Strong believer of multilateralism - Very sensitive agricultural sector • Signed in January 2002 • Wide range of coverage • trade, investment, financial services, IT, etc • EXCEPT agriculture • Beginning of proliferation of bilateral FTAs in the works, eg between Singapore and US, HK and Mexico; Japan-ROK, etc

12. Regional and Bi-lateral Economic Agreements – Why? • Disillusionment with work in the multilateral fora • Unsatisfactory result through multilateral cooperation • Bigger market to attract FDI • Optimization of resources • Stronger voice

13. Benefits of Regional/Bilateral Economic Agreements • Geographical proximity (same culture/language); less cost of negotiations • Lesser member countries, easier to negotiate • More practical & realistic targets • Allow developing countries & LDCs (esp. non WTO members) opportunity to start liberalizing e.g. Vietnam, Cambodia. Preparation to compete effectively globally • Possible to achieve regional cooperation in other areas beyond trade - NAFTA (e.g. labour) - ASEAN (e.g. political & security cooperation; services (GATS plus) - MERCOSUR (political cooperation; customs union)

14. Disadvantage of Regional/ Bilateral Economic Agreements • Preferential • Trade diversion • Some too ambitious targets, difficult to implement • Trade diversion instead of trade creation (protectionist) • Wastage of resources (duplication/ overlapping)

15. Article XXIV of GATT 1947 • Sanctions FTAs only if: - complete liberalisation (100% substantially all the trade) - no increase in outside barrier • Ambiguity on: - how soon - “substantially all the trade” - shall not on the whole be more restrictive

16. Para 29 of Doha Ministerial Declaration 2001 • Agree to negotiate aimed at clarifying and improving disciplines and procedures under existing WTO provisions. • Negotiations to take into account developmental aspects of RTAs.

17. Are these economic agreementsin line with WTO principles • Note that WTO has never endorsed formally any regional/bilateral economic agreements. • Only acknowledged their existence under Article XXIV of GATT 1947 & 1994. • Is Article XXIV still adequate and applicable to FTAs in current context? current context? • Is WTO’s position on FTAs now obsolete??

18. Possible Options to Consider • Revisit Article XXIV again • Strictly enforce Article XXIV for transparency and discipline purposes. In future, all possible FTAs (bilateral or regional) to be notified to WTO. Note that most new FTAs involve developed countries e.g. FTAA • Allow FTAs to continue and proliferate as it is complementary to multilateralism. Beneficial to developed and developing countries. • Allocate more capacity building to developing countries (esp. LDCs)

19. Overview of the Trends • The drive towards the conclusion of RTAs continues unabated. • 33 RTAs have been notified to the WTO since November 2001. If the current trend continues we estimate that 300 RTAs will be in force in 2007. • RTAs can clearly help countries integrate into the MTS, but are a fundamental departure from the guiding principle of non-discrimination of the WTO. • Are RTAs a building block or stumbling block? • Need to look at the changing landscape of RTAs

20. Main Trends Identified • Countries traditionally favoring MFN liberalization are increasingly being drawn into RTAs (e.g. Japan). • Those which have been engaged in RTAs for some time are looking further afield for cross-regional partners. • Mega-blocks such as the FTAA or Euro-Mediterranean FTA are under negotiation.

21. RTAs notified to the GATT/WTO (1948-2003) in force and non-notified RTAs

22. RTAs in force, as of October 2003, by type of agreement

23. RTAs’ Configuration

24. Cross Regional RTAs are a growing phenomenon

25. RTAs in Effect in the APEC region, 2003 • Israel • Russia • Korea NAFTA • Japan • Canada • China • USA ASEAN (AFTA) Cambodia Vietnam Myanmar Laos Malaysia Philippines Indonesia Brunei • Mexico SAARC India Pakistan Bangladesh Sri Lanka Nepal Bhutan Maldives • Thailand Singapore • Peru • Chile • Hong Kong • Papua New Guinea • Australia • New Zealand CER

26. Regional and Cross-Regional Developments • The greatest concentration of RTAs is in Europe, where over 100 RTAs are in force. • The main focus of RTA activity has shifted away from Europe in the last two years towards Asia Pacific. • APEC members, in particular, have been among the most active participants in RTAs.

27. Motivations: why do countries engage in RTAs? • Economic Rationale • search for larger markets • deeper integration • defensive necessity • lock out competition • lock in investment • More secure access to • developed markets than • GSP programs • Political Reasons • increase bargaining power • prevent backsliding on • political/economic reforms • ensure or reward political support

28. Effects of RTAs on the multilateral system are manifold • Negative • strains negotiating capacity • dampens enthusiasm for • multilateral negotiations • creates vested interests • labyrinthine rules of origin • trade and investment • diversion • weakest countries left out • Positive • economies of scale • laboratories for change • provide competition • attract FDI • allow countries to hone • negotiating skills

29. RTAs in the WTO context • Long-standing controversy about the interpretation of provisions relating to RTAs • Impasse in the current examination of agreements. • Negotiations launched at Doha have resulted in fruitful discussions on transparency, but no « early harvest » was achieved in time for Cancun. • Informal discussions on the more controversial systemic issues began in June.

30. Issues for Trade Unions

31. What policies should trade unions support? • Multilateral trades or bi-lateral trades? • Free trades or managed trades? • How to achieve socially-oriented, fair free trades?

32. Case 1 • ASEAN and China has signed a Free Trade Agreement • What are the implications of this agreement? • Workers in ASEAN • Workers in China • Workers in Japan and Korea • Workers in SAARC countries • In terms of • Economic and social development of the countries • Employment, working conditions and worker rights • Decide your union’s position on this.

33. Trade Union Agenda 1 • Employment generation (reduction) • Fair competition • Adequacy of economic and social safety nets (for sectors affected by free trade) • Education, training and retraining • Assurance of corporate governance, transparency and accountability • Fairer profit-sharing, gain-sharing and productivity-oriented remuneration schemes • Respect for core labour standards • Revisions of national labour legislation in conformity with international standards

34. Trade Union Agenda 2 • Socially oriented macroeconomic, trade and investment policies (poverty eradication, etc.) • Promotion of tripartism - trade union participation through “smart partnership” • Information sharing and promotion of ICT • Workers’ health and safety, and the environment • Promotion of gender equality • Protection of the rights of migrant workers • Sufficient attention to informal economy • Transfer of technology • Contributions to local economic/social wellbeing

35. Trade Union Agenda 3 • Promotion of technical skills within trade unions on trade issues • Setting up of a department/unit on trade issues • Training and education • Alliance with academics and NGOs • Promotion of bi-lateral, regional and international trade union alliances • Joint research/study groups on trade issues • Information sharing and coordinated lobbying/campaign • Establishment of trade union policies and strategies on trades and investments

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