Issues in RTA negotiations 2 August 2010 MIDC Khon Kaen , Thailand

1. Issues in RTA negotiations2 August 2010MIDCKhonKaen, Thailand RajanSudeshRatna Economic Affairs Officer Trade Policy Section (TID) UNESCAP ratna@un.org rsratna@gmail.com

2. Presentation Overview • WTO Rules • Regional Trade Agreements: concepts • Negotiating process • PTAs • FTAs • CECAs Rajan Ratna 2.8.2012

3. WTO RULES ON RTAs • Permitted under Article XXIV of GATT 1994. • Exception to MFN treatment within the Rules subject to fulfillment of conditions: • items on which there is substantial trade to be covered • the phase out of duties should be within a reasonable period of time • purpose - to facilitate trade among the RTA parties/territories and not to raise barriers to the trade of non-RTA Parties with such territories. Rajan Ratna 2.8.2012

4. M.F.N. EXCEPTIONS • Exception to MFN is also available under the “Enabling Clause Decision” of 1979 wherein the WTO members may accord differential and more favourable treatment to developing countries, without according such treatment to other Contracting Parties. Rajan Ratna 2.8.2012

5. Terminology • PTA – Grant of partial preference on reciprocal basis ( Preferential Trade Area) or one-way concessions (P.T. Arrangements). No coverage of substantial trade, no time-frame to eliminate tariffs. Concessions enlarged through different Rounds of negotiations. • FTA – Eliminate all tariffs, QRs on SAT and within fixed time-frame. Varying levels of tariffs and other barriers are maintained against non-members. • Customs Union or CER – Setting up a common level of trade barriers vis-à-vis non-members/outsiders. • Common Market – Deeper integration where free movements of factors of production: labour and capital are allowed, beyond free exchange of goods and services. • Economic Union – Goes beyond Common Market. Involves harmonizing national economic policies, including typically taxes and a common currency. Rajan Ratna 2.8.2012

6. STAGES OF ECONOMIC DEVELOPMENT ECONOMIC UNION COMMON EXTERNAL TARIFF (CET) FTA PTA ECONOMIC COOPERATION Rajan Ratna 2.8.2012

7. Issues for negotiations • Proper information about the import export regime/regulations (TPRM). • Article XXIV or Enabling Clause • Reciprocity or less than full reciprocity • Substantially all trade • Value and/or tariff lines • Time frame of TLP • Same or different Rajan Ratna 2.8.2012

8. Pre – negotiation step • Cost benefit analysis : Study • patterns of trade • modeling • identify gains and losses • vulnerable sectors • Evaluation of maximum gain: • PTA or FTA or CECA? • Wide consultations: stakeholders Rajan Ratna 2.8.2012

9. Pre – negotiation step (2) • Internal assessment: • PTA or FTA • Enabling Clause or Article XXIV of GATT • CECA: XXIV of GATT and V of GATS • Rules of origin – thresholds • Commitments for cooperation Rajan Ratna 2.8.2012

10. Negotiations • Market Access issues– • Gains or losses • Tariff structure • Other RTAs done by your trading partner • Implications • Identification of products of export interest • Identification of sensitive items Rajan Ratna 2.8.2012

11. Negotiations (2) • Rules of Origin • General Rules vrs. Product Specific Rules • Agencies for issue of CoO • Verification procedures • Cost of compliance • Cumulation provisions Rajan Ratna 2.8.2012

12. Other Issues • Anti dumping measures • Safeguard measures • Global ( WTO SGM) • Bilateral SGM • Drawback Rules • SPS/TBT issues • Dispute Settlement Mechanism • Review Rajan Ratna 2.8.2012

13. PTA Steps • Text and RoO • Positive List • Request and offer • Additions of items • Reciprocity: MoP & trade coverage • Rounds: deepening and widening of concessions on items Rajan Ratna 2.8.2012

14. FTA Steps • Text and RoO • Negative list • Exchange list • Negotiate reduction of NL • Fast tracking of TLP on items of export interest • Services: Positive list – Request and offer Rajan Ratna 2.8.2012

15. Stakeholders consultations: the need • India’s first FTA was with Sri Lanka. • A very important aspect which was missed, not by intent but because of the fact that ISFTA was India’s first full fledged FTA and the negotiators could not visualise the future scenario: impact of FTA on Indian industry. • Some misconceptions during consultations: • SL does not produce so no threat for India. • Duty differentials were not accounted for – mostly led to trade diversion and very little trade creation effects have now been observed. • No industry in India – hence item not sensitive. • No proper study was done to examine economically the sensitivity. • Overall, ISFTA was a good learning experience for the Indian negotiators as well as Industry. • Industry became more pro-active to feedback in India’s policy making. Rajan Ratna 2.8.2012

16. What India does presently? • First stage: In-house analysis – trade & tariff • Second stage: Studies on purely economic parameters. • Third stage: Findings – stakeholders consultations. • Fourth stage: Finalise study • Fifth stage: Share study in inter-governmental consultations. • Final stage: Final consultations with all stakeholders and firm up its negotiating position. • Time to time information is also posted on the website of Department of Commerce: Singapore, BIMSTEC, ASEAN etc. Rajan Ratna 2.8.2012

17. India’s negotiations: Some illustrations Rajan Ratna 2.8.2012

18. Conclusions • The importance of stakeholder consultations in the design of trade agreements – very important and essential. • There are though several problems associated with: • Conflicting interests • Domestic policies • Inefficiencies • Large industry vrs. SME Rajan Ratna 2.8.2012

19. THANK YOU Rajan Ratna 2.8.2012