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Comparison of CARIFORUM EPA and Other Trade Negotiations: Regionalism in the Americas Maryse Robert, Chief, Office of Trade Department of Economic Development, Trade and Tourism. Organization of American States. Organization of American States. Barbados, April 22-23, 2010.

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Comparison of CARIFORUM EPA and Other Trade Negotiations: Regionalism in the AmericasMaryse Robert, Chief, Office of TradeDepartment of Economic Development, Trade and Tourism

Organization of American States

Organization of American States

Barbados, April 22-23, 2010


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Questions to be addressed

  • What kind of RTAs have been negotiated in the Western Hemisphere, as comparedwith other regions in the world?

  • What underlying objectives do countries in the WH have for entering into regional trade arrangements?

  • What economic effects have RTAs had in the WH?

    4. Have RTAs in the WH diverted attention away from the WTO multilateral system?

  • How will the increasingly numerous RTAs fit into broader regional initiatives for trade integration?

  • What are the experiences and challenges related to implementation and to taking advantage of those agreements?


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Bilateral and Regional TradeAgreements

Spaghetti bowl

of trade

agreements


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Type of RTAs in the Western Hemisphere

  • Pre-NAFTA type Agreements –“Old Vision”

  • NAFTA-type Agreements –“New Vision”

    FTAs in the WH since 1994 largely modeled on NAFTA

    3. Post-NAFTA template for RTAs - now being exported throughout the world


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Pre-NAFTA type Agreements –“Old Vision”

  • Simple structure

  • Scope: focus mainly on trade in goods

  • No dispute settlement


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NAFTA-type Agreements –“New Vision”

  • Comprehensive approach to trade liberalization: goods, services, investment

  • Far-reaching objectives for behind-the-border integration

  • Deep disciplines in new areas : Investment, Procurement, IPR, Competition Policy

  • Sophisticated Dispute Settlement mechanisms


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Innovation/Stimulus of NAFTA - 1994

  • First major North-South FTA – posed major challenge to LAC countries

  • Eliminated rationale for old-type integration among countries of similar levels of development

  • New cost-benefit logic emerged for developing countries to link up with very large and competitive markets

  • One of defining aspects of “new regionalism”

    - typically involving small countries linking with large ones, while the large developed countries conduct their trade relations based on the WTO system


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FTAs since 1994 modeled on NAFTA

Negotiation process for FTAs led by:

  • Mexico and Chile from 1994 to 2002

  • Post-2002 and US Trade Promotion Authority (now expired): process led by U.S. on the basis of refined and revised template with strengthened disciplines, especially for transparency –“NAFTA Plus”


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FTAs Signed by Countries of the Americas since 1994

  • Since 1994, 55 FTAs have been signed by countries of the region, and of those 34 were signed after 2002.

  • To expand their trade opportunities, countries of the Americas have also reached out to countries beyond their borders with 22 FTAs signed since 2003 with non-hemispheric partners, including the European Union, China, India, Japan and Korea.


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Unusual Facets of Recent RTAs in the Western Hemisphere

  • Post-NAFTA FTAs go for deeper levels of economic integration than do the Custom Unions in the WH (this was more true in the 1990s than it is now)

  • RTAs in the WH have experimented with pushing the envelope in new and deeper rules on trade-related issues. Examples include:

    • Elimination of antidumping disciplines; substitution of Safeguard disciplines – Canada-Chile FTA

    • Inclusion of chapters on Services; Investment; Government Procurement; Competition Policy; – most NAFTA-type FTAs; most recently Transparency


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Unusual Facets of Recent RTAs in the Western Hemisphere

  • Inclusion of Labor and Environmental issues

    - NAFTA: Side-agreements; no possible DS

    - Canada - Chile: Side-agreements but with possibility of monetary fines in case of violations

    - Canada - Costa Rica : Side-agreements but only with provisions for cooperative actions

    - Chile - US : Chapters incorporated into the agreement itself, with possibility for dispute settlement

    - CAFTA – DR and other agreements signed by the US: Same


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What Underlying Objectives Do Countries in the Western Hemisphere Have for Entering into Regional Trade Arrangements: Main Objectives for RTAs in the WH

  • To consolidate market-oriented policy reforms

  • To enhance competitive position on world markets and attract investment

    QUESTION:

    Can these objectives be achieved in same way at multilateral level?

    Perhaps, but movement is slower

    Countries are doing both


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Objectives for Participating in RTAs in North-South RTAs in WH

  • On part of U.S./Canada

    - trade as foreign policy

    - trade agreements used to solidify political, security or strategic objectives

  • On part of developing LAC countries

    - Increased access to large markets

    - Investment attraction; positive signaling

    - Strengthening domestic policy reform

    - RTAs used as development tools


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Objectives for Participating in RTAs Differ in South-South RTAs in WH

  • Used as vehicles to strengthen political processes or to weaken historic tensions/hostilities (Example: Andean Community)

  • Used to increase bargaining power vis-à-vis third countries on the multilateral arena

    (Example: MERCOSUR)


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Level of Ambition of RTAs in the WH Depends on the Objectives of the Negotiating Partners

  • Deeper politics (Mercosur)

    vs.

  • Deeper rules (NAFTA-type FTAs)

    No ‘one’ single approach/formula, but a common template has emerged for the FTAs since 1993 and an updated version a decade later, after 2002


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What Economic Effects Have RTAs Had Under This “New Regionalism” in Latin America and the Caribbean?: First, Faster and Deeper Liberalization for Goods

FTAs have succeeded in greater market access:

  • Tariff phase-out programs in RTAs based on quick, automatic and nearly universal schedules

  • Base rate for liberalization program coincides with MFN applied rates for nearly all RTAs

  • Most RTAs carry out liberalization over 10 years but there are exceptions particularly for agriculture. In CAFTA-DR: For El Salvador, the transition periods are 15 years for beef, pork and yellow maize, 18 years for rice and chicken thighs, and 20 years for dairy product

  • On the whole, faster and nearly universal liberalization, as contrasted with multilateral level under WTO


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RTAs Have Had Positive Rule-Making for Several Behind-the-Border Issues

FTAs concluded in era of globalization far-reaching:

  • Deep integration for areas such as services, investment, competition policy, procurement, IPR

  • Disciplines that go beyond WTO Agreements

  • Mutual recognition encouraged for trade in goods and professional services

  • Attempts at regulatory harmonization for services


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RTAs Have Served To “Lock in” Reforms

  • Considerable evidence of RTAs used as commitment mechanisms (Exp: NAFTA for Mexico, CAFTA-DR for Central America & DR, etc.)

  • Enforcement of commitments through robust dispute settlement mechanism in RTAs (although the system has not been used much)


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RTAs Have Reduced Domestic Price Distortions

  • Domestic reforms undertaken as result of RTAs have brought in more competition and reduced domestic price distortions

    - Exp: Experience of the Dominican Republic in acting to reduce tariffs because of FTA with Central America


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RTAs Have Inspired Behavioral Changes

  • Transparency disciplines in recent RTAs have reduced the scope for rent-seeking in the private and public sector

  • Behavioral changes over time in functioning of political economy processes and in government/ private sector interaction


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Have RTAs in the Americas Diverted Attention Away from WTO and the Multilateral System / DOHA Round ?

  • Evidence that RTAs have not diverted the attention of LAC countries from multilateral trade negotiations but have rather enhanced their participation after the Uruguay Round (since 1995) and now in the Doha Development Round


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Increased Participation after the Uruguay Round

  • Twenty LAC countries participated actively in the Agreement on Basic Telecommunications (1997)

  • Seventeen LAC countries submitted improved schedules for the Financial Services Agreement (1997)

  • Active LAC participation in agricultural and services negotiations since 2000

    -- LAC countries made 12 out of 45 proposals in the agricultural negotiations (2000 – end 2002)

    -- LAC countries made 23 out of 68 total offers to the services negotiations (May 2002 – June 2005)


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RTAs Have Contributed to the Process of Multilateral Trade Negotiations

  • Learning effects from RTAs negotiations carried over

  • Development of consistent and comprehensive hemispheric data bases on trade

  • Supply of trade-related technical assistance for government officials by international and hemispheric organizations

  • Building of political consensus and private sector support for the liberalization process

  • Generation of additional pressure towards timely implementation of WTO commitments


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RTAs vs. Multilateral Trade Negotiations:A False Dilemma?

  • Evidence shows that the dilemma of regionalism vs. multilateralism may be a false one for LAC

  • Latin America did not adopt new regionalism instead of or as an alternative to multilateralism but has rather pursued both simultaneously, benefiting from greater trade liberalization than in relying just on one track


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How Will RTAs Fit Into Broader Regional Initiatives for Trade Integration?

  • UNASUR

  • ARCO

  • Pathways for Prosperity in the Americas

  • Others


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • In a strict sense, implementation refers to the set of interventions adopted by a govt to allow for the full entry into practice of a trade agreement

  • Therefore, most implementation measures are normally adopted before the entry into force of an FTA except when

    • The FTA provides for transition periods

    • The implementation of a particular provision needs to be extended over a period of time


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • Implementation relates to the administration and enforcement of the agreement

  • It also relates to, but differs from:

    • Measures aimed at promoting the use of the agreement

    • Measures designed to mitigate or resist any potential negative effect of the agreement

    • Complementary measures which improve the conditions in the environment in which the agreement will apply


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • Interest in the implementation phase has been motivated in the last few years by the different ways in which FTAs become part of domestic legal systems

    • Automatic and direct application vs the need for implementing legislation

      • Who decides, and when, whether an international agreement has in fact amended a domestic regulation/law? If so, how?


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • In Latin America, although with significant variation, an int’l treaty generally becomes part of domestic law automatically, once it has been signed and entered into force –which normally requires prior legislative approval. The international agreement generally has direct effect in domestic law and does not need specific implementing legislation.

  • In the US, preferential trade agreements require passage of a specific implementing law in order to become part of the legal system


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • Implementation (Pacta sunt servanda: According to Article 26 of the Vienna Convention on the Law of Treaties, every treaty in force is binding upon the parties to it and must be performed by by them in good faith)

  • Lack of implementation:

    • Political reasons

    • Differences in interpretation

    • Problems intrinsic to a particular obligation

    • Weakness in the management of public policy


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • The interventions necessary to allow the full entry into practice of a trade agreement can be quite diverse. In general terms, these interventions relate to one or several of the following three major areas:

    • Institutions

    • Regulatory reforms

    • Operational/Administrative changes


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What Are the Challenges Related to the Implementation of Trade Agreements in the Americas?

  • Facing the implementation challenge:

    • Latin American countries have faced the implementation challenge in two different ways:

      • By adopting the minimum measures necessary to avoid future conflicts with co-signatories

      • By using implementation as a platform for promoting competitiveness and improving the business climate


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Beyond Negotiation and Implementation:Food for Thought

  • Taking advantage of trade opportunities remains an unfinished business.

  • As the UNDP Human Development Report 2005 stated, “Even the best trade rules will not overcome the structural inequalities within countries that prevent the poor from capturing a fair share of the prosperity generated by trade.”

  • Beyond negotiation and implementation, in Latin America the key question facing governments is: How to assist their economic agents, particularly micro, small and medium-sized enterprises (MSMEs), women and vulnerable groupsto benefit from expanded markets for their goods and services?


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