Regional and Bilateral Trade Agreements

1. Regional and Bilateral Trade Agreements Lance Graef www.nathaninc.com

2. Some terms • Regional and bilateral FTAs and preferential trade agreements are exceptions to Article I of GATT/WTO (MFN) • Free trade agreements • Reciprocal • Bound (committed in a schedule) • Disciplined safeguard action • Subject to dispute resolution • Preferential trade arrangements • Unilateral • Not scheduled • Expedited safeguard actions • Not subject to dispute resolution (except as provided for the preference offering country)

3. WTO exceptions for RTAs/PTAs • Goods • Article XXIV • Cover substantially all trade • Not raise barriers to non-members • Implement in 10 years • Enabling Clause • Services • Article V • Doha Round Rules Group

4. RTAs—pluses and minuses • Economic benefits • Trade creation • Larger market (returns to scale) • Attractive to FDI • Lower prices due to tariff elimination • Increased efficiency resulting from greater competition • Economic costs • Trade diversion • Rise in prices if absorbed in tariff cut • Complex difficult to implement rules especially rules of origin • Revenue loss • Structural adjustment within the RTA

5. Pluses and minuses (continued) • Non-economic benefits • Faster liberalization • Greater certainty (locking in reforms) • Related stability for investors • Increased bargaining power • Non-economic costs • Increased demands on limited government resources

6. Rise of non-MFN trade • WTO estimates of trade flows under RTAs and PTAS • 40% of world trade 1988 – 1992 • 42% 1993 -1997 • WTO 10th Anniversary Report • Exceeds 50 percent • 176 FTAs notified since 1995 • 150 currently in force • Estimated 70 more in place

7. Old Generation Import substituting Limited coverage Non-compliance Lacked political commitment Weak secretariats Limited private sector role New Generation Trade creating Comprehensive coverage Dispute settlement High commitment Strengthened institutions Private sector involved New generation FTAs are different

8. Classification matrix for free trade agreements Weaker Weaker Stronger

9. What is to be done • First best solution is successful completion of the Doha Round • Second best to make RTAs trade creating • and not prevent multilateral liberalization • Clarify Article XXIV in the Doha Round

10. Trends in Mozambique’s Trade with SADC—the Agenda

11. Mozambique exports by destination, 1999-2004

12. Most of the increase in total exports has come from aluminum and electricity • Aluminum exports begin in 2000 and have risen to 915 million • Electricity exports have increased 40 million in the same time period • If these are deducted from the total • Have more than doubled • Recovered strongly from 2002 decline • Exports to SADC have more than doubled but increased only slightly as a percentage of adjusted export from 37 to 39 percent • Exports to developing countries have increased significantly • Exports to the EU are up strongly

13. Mozambique’s exports to SADC (non-electricity), 1999-2004

14. Products of export interest in SADC • South Africa – fish, coconut oil, pimentos, pigeon peas, bananas, guavas/mangoes, grapefruit, oilcake, lumber • Malawi – coal, beans, maize, tobacco, cooking oil • Zimbabwe – coal, fish, wheat flour

15. Disappointments • Declines in some traditional exports • Tires, apparel, wood products • Expected non-traditional exports have not appeared • Footwear • Recorded agricultural trade with Malawi • Sugar to SADC

16. Recommendations for the SADC Agenda • Accelerate tariff reductions • Implementation by Malawi, Zimbabwe • Current decision to eliminate duties under 5% is best efforts and doesn’t address backloaded products of export interest to Mozambique in Non-SACU offers • Revisit sensitive list (drawn up 4 years ago) • Liberalize rules of origin • Single transformation to replace MMTZ quotas • SPS Protocol • Services • Transport • Tourism • Accession offers Angola, Madagascar • Common External Tariff

17. Relationship of SADC to other negotiations (overlapping agreements) • EPA negotiations (EU would like an agreement with a Customs Union) • BLNS part of SACU • de facto partners in RSA/EC agreement • Negotiating FTA with US • Tanzania part of EAC • Four SADC members negotiating EPA with ESA (Malawi, Mauritius, Madagascar, Zambia) • RSA not participating • SADC 14 committed to Customs Union (2010 not 2008) • Bilateral negotiations by Mozambique • Malawi, Zambia, Zimbabwe • Should there be a SADC “enabling clause”

18. Economic Partnership Agreement

19. ACP and GSP Plus • Export Products • Fisheries • Sugar • Rules of Origin • Apparel • Safeguards • Services • Capacity Building/Development

20. Relationship to other negotiations and events • ESA EPA negotiations include SADC partners • SADC Customs Union • GSP/EBA Reform in EU • Still an option to withdraw

21. Mozambique’s assignment • Negotiating strategy for non-agricultural and fisheries market access

22. Export Trade

23. Exports, 1999-2004

24. Preferential Arrangements—GSP, EBA, AGOA

25. EU GSP January 2006 • GSP Plus • General scheme covers 7200 products (300 new in agriculture and fisheries) • Duty free access for the poorly diversified • 5 largest products must account for 75% of total exports and • Less than 1% of total EU GSP imports provided that beneficiary ratifies and implements 27 international conventions (human rights, labor standards, etc.) • Graduation • Share exceeds 15% of total GSP, 12.5% for apparel • Rules of Origin • EBA

26. EBA • EBA and GSP rules of origin the same • EBA exceptions to duty free/quota free • Tariff on bananas for LDCs will be free in January • Tariff on sugar will disappear July 2009 • Quota for LDC will expand from 74 thousand tons in (MY 2001/2002) to 197 thousand tons (MY 2008/2009)

27. AGOA • Mozambique participation low and declining • Apparel declining • Offset by tobacco appearing ??

28. Exports, Destinations, and WTO Negotiations

29. Agricultural exports

30. Destinations for key exports

31. Selected agricultural schedules

32. WTO negotiations on agriculture • Three Pillars • Market Access • High levels of tariffied products • Minimum market access (TRQs) • Domestic Support • Not addressed in RTAs • Export Subsidies • Development Dimension • Cotton • Flexibilities for developing countries • Special and differential treatment for LDCs • Reserve portion of expansion of TRQs for LDCs, especially new supplier LDCs

33. Exports of non-agricultural goods

34. Destinations for non-agricultural exports

35. Selected bound NAMA tariff levels

36. Non-agricultural market access issues • Level of ambition and flexibilities • LDCS not expected to make commitments • Is this good • Developing country flexibilities • Lower rate of reduction • Longer phase-in • Exemptions • Sectoral negotiations • Fisheries • Wood • Bound duty and quota free access for LDCs • Erosion of preferences

37. Other WTO interests • Services • Tourism • Telecommunications • Other reforms ???

38. Why trade facilitation? • Increase in competitive position • Equivalent of reducing tariff on inputs between 26.5 points • Increase in transparency equals increase in predictability • Uniform application of procedures/regulations • Advance ruling • Improved investment environment • Facilitation measures already widely used • Especially in Asia

39. Trade facilitation mandate • Clarify and improve GATT to expedite the movement, release and clearance of goods • Article V Transit • Article VIII Fees and Formalities • Article X Transparency • Enhance technical assistance/capacity building • During Negotiations • Post-Negotiations • Establish provisions for effective cooperation between customs and other appropriate authorities • Facilitation issues • Compliance issues

40. Trade facilitation mandate (continued) • Special and Differential Treatment • Developing countries and LDCs separate • LDC’s consistent with administrative/institutional capabilities • Take into account implementation capacities • Including investment in infrastructure • Negotiations required to address concerns related to cost implications of proposed measures

41. All concepts are not new • Transparency (concepts in the Agreement on Rules of Origin) • Notification and Publication • Advance Rulings • Appeals

42. Trade facilitation • Other important proposals/concepts • Fees and charges • Reduction in procedures/formalities • Expedited release in goods • Pre-arrival clearances • Risk management • Post-clearance audits • Regional agreements • Transit