Trade Sustainability Impact
Assessment (TSIAs) in support of
negotiations of DCFTAs between the
EU and the Kingdom of Morocco and
the Republic of Tunisia
Civil Society Meeting - EU
Brussels, 17 October 2013
By:
Koen Berden, Nora Plaisier, Jurgen Vermeulen, Katelyn Price
1. Introduction
2. Results of the CGE modelling
3. Additional quantitative and qualitative analysis
4. Stakeholder consultations
5. Policy recommendations
Agenda
1. Introduction
TSIA methodology consists of 4 main phases:
Phase 0: Inception
Phase 1: Overall analysis of the sustainability impacts
• In-depth analysis of selected sectors and horizontal issues
• Causal Chain Analysis (CCA)
• Literature review, Partial Equilibrium modelling, consultations, interviews
Phase 3: Policy recommendations and flanking measures present phase
• Causal Chain Analysis
• Consultation and dissemination (throughout all phases)
• Final report
Consultation and dissemination (throughout all phases)
Phase 2: Sectoral analysis
• Scenario analysis and CGE modelling
• Additional quantitative and qualitative analyses: social / HR / environmental
• Screening and scoping analysis
1. Introduction
• Liberalisation of trade:
Tariff liberalisation
Services non-tariff liberalisation
Reduction of other non-tariff measures (NTMs)
• NTM reduction through regulatory approximation, mainly in following fields:
Sanitary and Phytosanitary measures (SPS)
Technical Barriers to Trade (TBT)
Intellectual Property Rights (IPRs)
Competition
Trade Facilitation (customs)
Investment Protection
Public Procurement
What does a Deep and Comprehensive Free Trade Agreement (DCFTA) entail?
1. Introduction
• Computable General Equilibrium (CGE) modeling
• CGE takes into account all economic linkages
• CGE compares the situation with and without DCFTA
• The results from the CGE model are obtained in multiple levels of detail:
› Macro – economic results
› Sector - specific results
› Short-run
› Long-run
› Effects on 3rd countries
How do we estimate effects of DCFTA?
1. Introduction
• A scenario is developed that tries to imitate the outcomes of the negotiations:
How do we estimate the impacts of the DCFTA for Morocco?
No further tariff
liberalisation
(after October 2012
agreement)
Asymmetric liberalisation and three levels of ambition (High,
Medium, Low)
- 3% reduction in trade costs for exports into EU
- 13% reduction in trade costs for exports into Morocco
Goods
NTMs Tariffs
Services
liberalisation
Trade liberalisation
1. Introduction
• A scenario is developed that tries to imitate the outcomes of the negotiations:
How do we estimate the impacts of the DCFTA for Morocco?
Agricultural tariff
liberalisation (95%
towards EU; 80% towards
Tunisia
Asymmetric liberalisation and three levels of ambition (High,
Medium, Low)
- 3% reduction in trade costs for exports into EU
- 8% reduction in trade costs for exports into Tunisia
Goods
NTMs Tariffs
Services
liberalisation
Trade liberalisation
Variable EU Morocco EU Morocco
Short Run Long Run
National Income, Million € 834 1,145 1,403 1,300
GDP, % change 0.0 1.3 0.0 1.6
Consumer prices, % change 0.0 0.4 0.0 0.4
Wages, less skilled % change 0.0 1.4 0.0 1.5
Wages, more skilled % change 0.0 1.6 0.0 1.9
Total Imports, % change 0.0 8.0 0.0 8.4
Total Exports, % change 0.0 15.3 0.0 15.3
2. Results of CGE Modelling
• The macroeconomic effects for the EU are negligible
Macroeconomic effects in the short run and long run: Morocco
Variable EU Morocco EU Morocco
Short Run Long Run
National Income, Million € 834 1,145 1,403 1,300
GDP, % change 0.0 1.3 0.0 1.6
Consumer prices, % change 0.0 0.4 0.0 0.4
Wages, less skilled % change 0.0 1.4 0.0 1.5
Wages, more skilled % change 0.0 1.6 0.0 1.9
Total Imports, % change 0.0 8.0 0.0 8.4
Total Exports, % change 0.0 15.3 0.0 15.3
2. Results of CGE Modelling
• National income gain for Morocco €1,3 billion in the long run, equal to a 1.6%
change in GDP
Macroeconomic effects in the short run and long run: Morocco
Variable EU Morocco EU Morocco
Short Run Long Run
National Income, Million € 834 1,145 1,403 1,300
GDP, % change 0.0 1.3 0.0 1.6
Consumer prices, % change 0.0 0.4 0.0 0.4
Wages, less skilled % change 0.0 1.4 0.0 1.5
Wages, more skilled % change 0.0 1.6 0.0 1.9
Total Imports, % change 0.0 8.0 0.0 8.4
Total Exports, % change 0.0 15.3 0.0 15.3
2. Results of CGE Modelling
• Trade flows for Morocco increase significantly
Macroeconomic effects in the short run and long run: Morocco
Variable EU Morocco EU Morocco
Short Run Long Run
National Income, Million € 834 1,145 1,403 1,300
GDP, % change 0.0 1.3 0.0 1.6
Consumer prices, % change 0.0 0.4 0.0 0.4
Wages, less skilled % change 0.0 1.4 0.0 1.5
Wages, more skilled % change 0.0 1.6 0.0 1.9
Total Imports, % change 0.0 8.0 0.0 8.4
Total Exports, % change 0.0 15.3 0.0 15.3
2. Results of CGE Modelling
• Purchasing power in Morocco will increase: consumer prices increase, but wages
increase more
Macroeconomic effects in the short run and long run: Morocco
2. Results of CGE Modelling
• The largest effects are due to reductions in NTMs in goods
Overall impacts at macro level: Morocco
1,402.9
832
1,403
872 969
38
54
33
43
-36 -54
241
288
-200
0
200
400
600
800
1,000
1,200
1,400
1,600
EU short run EU long run Morocco short run Morocco long run
National Income, million €
Spillover
NTBs reductionin services
NTBs reductionin goods
Variable EU Tunisia EU Tunisia
Short Run Long Run
National Income, Million € 640 1,834 1,344 2,498
GDP, % change 0.0 4.1 0.0 7.4
Consumer prices, % change 0.0 2.6 0.0 2.3
Wages, less skilled % change 0.0 7.0 0.1 9.9
Wages, more skilled % change 0.0 7.6 0.1 10.5
Total Imports, % change 0.3 13.9 0.5 17.7
Total Exports, % change 0.3 17.7 0.5 20.4
2. Results of CGE modelling
• The macroeconomic effects for the EU are negligible
Macroeconomic effects in the short run and long run: Tunisia
Variable EU Tunisia EU Tunisia
Short Run Long Run
National Income, Million € 640 1,834 1,344 2,498
GDP, % change 0.1 4.1 0.1 7.4
Consumer prices, % change 0.0 2.6 0.0 2.3
Wages, less skilled % change 0.0 7.0 0.1 9.9
Wages, more skilled % change 0.0 7.6 0.1 10.5
Total Imports, % change 0.3 13.9 0.5 17.7
Total Exports, % change 0.3 17.7 0.5 20.4
2. Results of CGE modelling
• National income gain for Tunisia €2,5 billion in the long run, equal to a 7.4%
change in GDP
Macroeconomic effects in the short run and long run: Tunisia
Variable EU Tunisia EU Tunisia
Short Run Long Run
National Income, Million € 640 1,834 1,344 2,498
GDP, % change 0.1 4.1 0.1 7.4
Consumer prices, % change 0.0 2.6 0.0 2.3
Wages, less skilled % change 0.0 7.0 0.1 9.9
Wages, more skilled % change 0.0 7.6 0.1 10.5
Total Imports, % change 0.3 13.9 0.5 17.7
Total Exports, % change 0.3 17.7 0.5 20.4
2. Results of CGE modelling
• Trade flows for Tunisia increase significantly
Macroeconomic effects in the short run and long run: Tunisia
Variable EU Tunisia EU Tunisia
Short Run Long Run
National Income, Million € 640 1,834 1,344 2,498
GDP, % change 0.1 4.1 0.1 7.4
Consumer prices, % change 0.0 2.6 0.0 2.3
Wages, less skilled % change 0.0 7.0 0.1 9.9
Wages, more skilled % change 0.0 7.6 0.1 10.5
Total Imports, % change 0.3 13.9 0.5 17.7
Total Exports, % change 0.3 17.7 0.5 20.4
2. Results of CGE modelling
• Purchasing power in Tunisia will increase: consumer prices increase, but wages
increase more
Macroeconomic effects in the short run and long run: Tunisia
1,402.9
473
935 1,074
1,208
16
17
24
28
-118
401
-133
568
269
480
380
694
-250
250
750
1,250
1,750
2,250
2,750
EU short run EU long run Tunisia short run Tunisia long run
National Income, million €
Tariffs
Spillover
NTBs reduction inservices
NTBs reduction ingoods
2. Results of CGE Modelling
• The largest effects are due to reductions in NTMs in goods
Overall impacts at macro level: Tunisia
2. Results of CGE modelling
• Expanding and Declining sectors due to the DCFTA
Expected impacts on value added: Morocco
other machinery
vegetables and fruit
vegetable oils
motor vehicles
other processed foods
wearing apparel
public and other services
grains and crops
electrical machinery
textiles
lumber, paper
leather goods
-500
0
500
1,000
1,500
2,000
2,500
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11
Exp
ort
s t
o t
he E
U (
baselin
e)
% changes in value added, LR
Winning sectors Losing sectors
other machinery
electrical machinery
trade
other transport equipment
textiles
petrochemicals
non metallic mineral products
grains and crops
leather goods
-500
0
500
1,000
1,500
2,000
2,500
3,000
-20 -10 0 10 20 30 40 50
% changes in value added
Export to EU baseline Winning sectors Losing sectors
vegetable oils;
223%
• Vegetables and Fruits: 3rd largest sector in value added (8.1%); Long run: +4,7% (8)
2. Results of CGE modelling
• Expanding and Declining sectors due to the DCFTA
Expected impacts on value added: Tunisia
+ employment share increase in sectors where Morocco has a competitive advantage;
+ closer cooperation between Moroccan and EU companies;
+ the pressure from businesses for education system reforms.
+ certain sectors will need to comply with EU production regulations;
+ EU pressure to improve labour standards;
+/- Moroccan businesses might put pressure to relax rigidity of labour mkt.
- Potential pressure on labour rights if not protected
+ increase in living
standards might lead to increased demand for more social protection
+ higher economic
growth, higher average living standards gradually increase the engagement of the social partners in the design of employment and
social policies.
+ increase in living
standards and changes in attitude
towards equality issues;
- shift in employment
opportunities among sectors may disproportionally affect weakest groups of workforce.
Job
creation
Rights at
work
Social
protection
Social
dialogue
Gender
equality
DCFTA impact on Decent Work Agenda
3. Additional quantitative and qualitative analysis
Social effects: qualitative analysis for Morocco
3. Additional quantitative and qualitative analysis
+ employment share increase in sectors where
Morocco has a competitive advantage;
+ closer cooperation between Moroccan and EU
companies;
+ the pressure from businesses for education system
reforms.
Social effects: qualitative analysis for Morocco
Job
creation
3. Additional quantitative and qualitative analysis
+ certain sectors will need to comply with EU production
regulations;
+ EU pressure to improve labour standards;
+/- local business may pressure the government to
create more flexibility in labour legislation.
− potential pressure on labour rights if not protected
Social effects: qualitative analysis for Morocco
Rights at
work
3. Additional quantitative and qualitative analysis
+ increase in living standards might lead to increased
demand for more social protection.
Social effects: qualitative analysis for Morocco
Social
protection
3. Additional quantitative and qualitative analysis
+ higher economic growth, higher average living
standards → gradually increase the engagement of
the social partners in the design of employment and
social policies.
Social effects: qualitative analysis for Morocco
Social
dialogue
3. Additional quantitative and qualitative analysis
+ increase in living standards and changes in attitude
towards equality issues;
− shift in employment opportunities among sectors may
disproportionally affect weakest groups of workforce.
Social effects: qualitative analysis for Morocco
Gender
equality
Indicator Short run Long run
Poverty rate Declines by about 1.5 %-points as wage
effect outweighs price effect. Extreme
poverty also falls. Relative poverty
increases slightly.
Stronger wage increase drives further
decline in poverty and extreme poverty.
Poverty depth Measures how far the poor fall below the
poverty line. This aspect of poverty
remains stable.
Same as short run impact.
Dispersion Fewer people at risk of (extreme) poverty.
Small increase of people at risk of
relative poverty.
Similar in direction to short run impact.
Higher impact, mostly due to wage effect.
Gini Income inequality hardly changes. Slight
tendency to increase, both due to price
and wage effect.
Same as short run impact.
Richest versus
poorest
Some increase of inequality between the
extremes of the income distribution at the
household level. Reflects the impact on
average disposable incomes and
differences in spending patterns.
Same as short run impact.
3. Additional quantitative and qualitative analysis
• In general, small net impact on main indicators below. Certain groups more
vulnerable for price increases.
Social analysis (quantitative): Poverty and income inequality for Tunisia
+ employment share increase in the vegetable oil sector, other machinery sector, the vegetables and fruits sector as well as the trade sector;
- employment shares decrease in grains and crops, textiles, and air transport sectors;
+ the pressure from businesses for education system reforms.
+ certain sectors will need to comply with EU production regulations;
+ EU pressure to improve labour standards;
+/- local business may pressure the government to create more flexibility in labour legislation.
- Potential pressure on labour rights if not protected
+ increase in living
standards might lead to increased demand for more social protection.
+ higher economic
growth, higher average living standards gradually increase the engagement of the social partners in the design of employment and
social policies.
+ increase in living
standards and changes in attitude
towards equality issues;
- shift in employment
opportunities among sectors may disproportionally affect weakest groups of workforce.
Job
creation
Rights at
work
Social
protection
Social
dialogue
Gender
equality
DCFTA impact on Decent Work Agenda
3. Additional quantitative and qualitative analysis
Social effects: qualitative analysis for Tunisia
3. Additional quantitative and qualitative analysis
• DCFTA is expected to mainly affect economic and social rights and not
cultural, civil or political rights
• Overall, effects on HR are expected to be small but positive:
– Expected increase in income is likely to improve HR situation
– Regulatory approximation may in some cases also improve HR (e.g. food
safety, working conditions)
– Expected decline in poverty (based on data only available for Tunisia) reduces
some of the root causes of child labour
Although no a priori negative effects expected, good to pay attention to:
- Vulnerable groups
- Sectors that face significantly increased competitive pressure
Human rights effects for Morocco and Tunisia
3. Additional quantitative and qualitative analysis
• Change in emissions of classical pollutants in Morocco due to DCFTA, %
Air pollution Morocco
3. Additional quantitative and qualitative analysis
• Change in external costs due to DCFTA
Air pollution Morocco
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
S-R L-R
€ m
illi
on
NOx SOx PM2.5 PMcoarse Total
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
NOx SOx PM2.5 PMcoarse Externality NOx SOx PM2.5 PMcoarse Externality
Composition effect Scale effect Total effect
Short run Long run
3. Additional quantitative and qualitative analysis
• Change in emissions of classical pollutants in Tunisia due to DCFTA, %
Air pollution Tunisia
-9.0
-0.6
-20.1
15.3 8.4
25.1
-€ 40
-€ 30
-€ 20
-€ 10
€ 0
€ 10
€ 20
€ 30
€ 40
€ 50
S-R L-R€ m
illi
on
s
PMcoarse
PM2.5
SOx
NOx
Total
3. Additional quantitative and qualitative analysis
• Change in external costs due to DCFTA
Air pollution Tunisia
+ Chemical and
petrochemical industries responsible for 40% waste
+ Reduction in output in these sectors
+ decrease in output of the chemicals, and petrochemicals, the textile and leather industries;
+/- decrease in output of water transport services;
- due to an increase in output of the agricultural sector.
- due to an increase
in output of the agricultural industry;
- due to an increase
in fisheries output;
+/- the (illegal)
trade in wildlife.
+ the estimated
reduction in external costs of carbon by €2,000 (short-run) and €12,000 (long-run).
+ due to internal reorganisation of economic activities;
+ possible pressure for green products from the EU side;
+ due to potential increase in international exchange and investment.
Waste
DCFTA impact on environmental indicators
Water Ecosystem
&
biodiversity
Climate
change
‘Greening’
the
Economy
3. Additional quantitative and qualitative analysis
Environmental effects: qualitative analysis for Morocco
3. Additional quantitative and qualitative analysis
+ Chemical and petrochemical industries responsible
for 40% waste
+ Reduction in output in these sectors
Environmental effects: qualitative analysis for Morocco
Waste
3. Additional quantitative and qualitative analysis
+ decrease in output of the chemicals, and
petrochemicals, the textile and leather industries;
+/- decrease in output of water transport services;
− due to an increase in output of the agricultural
sector.
Environmental effects: qualitative analysis for Morocco
Water
3. Additional quantitative and qualitative analysis
− due to an increase in output of the agricultural
industry;
− due to an increase in fisheries output;
+/- the (illegal) trade in wildlife.
Environmental effects: qualitative analysis for Morocco
Ecosystem
&
biodiversity
3. Additional quantitative and qualitative analysis
+ the estimated reduction in external costs of carbon by
€2,000 (short-run) and €12,000 (long-run).
Environmental effects: qualitative analysis for Morocco
Climate
change
3. Additional quantitative and qualitative analysis
+ due to internal reorganisation of economic activities;
+ possible pressure for green products from the EU
side;
+ due to potential increase in international exchange
and investment.
Environmental effects: qualitative analysis for Morocco
‘Greening’
the
Economy
- more waste pollution from households;
+ reduction in industry sector output;
+ promoting private sector development, enhance activities of SMEs in the waste sector.
- Sea pollution from industrial and household waste;
- due to an increase in output of the agricultural sector(vegetables and fruit).
- due to an increase
in the use of land and air pollution;
- due to an increase
in output of the agricultural industry and forestry products.
- the estimated
increase in external costs of carbon by €9.4 million in the short run and €25 million in the long run.
+ due to internal reorganisation of economic activities;
+ possible pressure for green products from the EU side;
+ due to potential increase in international exchange and investment.
Waste
DCFTA impact on environmental indicators
Water Ecosystem
&
biodiversity
Climate
change
‘Greening’
the
Economy
3. Additional quantitative and qualitative analysis
Environmental effects: qualitative analysis for Tunisia
4. Consultations and stakeholders
Electronic consultation
Public meetings EU
Workshops
Attendance of other conferences
Personal interviews
Consultation activities undertaken so far
• Website
• Newsletters (2 sent out)
• 9 April 2013
• 17 October 2013 (today)
• Rabat: 27 June 2013
• Tunis: 19 June 2013
• Presentation at EESC on Trade
SIA EU - Morocco
• Continuously, for example with
Ministries, private sector,
NGOs. Includes SME survey
5. In-depth sectoral analysis
Morocco
1. Fruits and vegetables;
2. Textiles, clothing and leather;
3. Offshoring in business support services;
4. Energy (with a focus on renewable energy).
Tunisia
1. Fruits and vegetables;
2. Textiles, clothing and leather;
3. Retail trade;
4. Water scarcity and quality.
The following sectors were analysed
6. Policy Recommendations
• Although the DCFTA is expected to enhance economic growth in Morocco, it is
clear that some sectors will gain while other will lose.
Recommendations for the economic pillar: Morocco
Policy measure Potential to address
Within DCFTA Outside DCFTA
Facilitation of technical assistance and capacity building in regulatory approximation process (e.g. SPS, TBT, trade facilitation, etc.) based on a thorough needs assessment.
Provision of technical assistance and capacity building in sectoral and business upgrading, especially SMEs to increase their competitiveness
Stimulate on-going improvements in business and investment climate.
Enhance public-private dialogue through well-structured mechanisms.
Support regional and local economic development
Enhance governance and fight against the informal economy
6. Policy Recommendations
• Part 1: Recommendations 1 - 5
Recommendations for the social pillar: Morocco
Policy measure
Potential to address
Within DCFTA Outside DCFTA
Allow for phasing in of regulatory approximation at sector level, especially for those sectors where the social impact will be high.
Support flexibility of labour market to facilitate the reallocation between sectors while ensuring that worker’s rights are respected in law and practice
Further develop social protection system, with attention for coverage, financial management and price levels.
Support entrepreneurship and training programmes to allow easier update and upgrade of human capital, with a clear link to labour market requirements
Provide assistance in upgrading education and training programmes and improving institutional and regulatory environment in the social policy sphere to address the skill gaps.
6. Policy Recommendations
• Part 2: Recommendations 6 - 10
Recommendations for the social pillar: Morocco
Policy measure
Potential to address
Within DCFTA Outside DCFTA
Provide assistance to improve the educational links with the labour market to address the mismatch between supply and demand
Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. by effective implementation and enforcement of relevant ILO and by approximating domestic legislation to EU acquis in the area of labour.
Effective implementation of HR treaties, with a focus on vulnerable groups (e.g. children, women, minorities, disabled, etc.)
Enhance policies to reduce the scale of youth unemployment
Provide assistance to improve the educational links with the labour market to address the mismatch between supply and demand
6. Policy Recommendations
Recommendations for the environmental pillar: Morocco
Policy measure Potential to address
Within DCFTA Outside DCFTA
Create incentives for environmentally friendly production
Maintain or further improve incentives to improve efficient use of water in agricultural and industrial production
Improve waste collection and waste management systems
Ensure effective implementation and enforcement of CITES
Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Morocco relations)
Provision of (technical) assistance in environmental policy
6. Policy Recommendations
Recommendations for the economic pillar: Tunisia
Policy measure
Potential to address
Within DCFTA Outside DCFTA
Allow for phasing in of tariff reduction or regulatory approximation at sector level, especially for those sectors where the economic impact will be high
Facilitation of technical assistance and capacity building in the regulatory approximation process, based on a needs assessment
Develop a strategy to increase the value added of exports
Increase awareness of the DCFTA and its implications
Provide internationalisation support to SMEs
6. Policy Recommendations
• Part 1: Recommendations 1 - 5
Recommendations for the social pillar: Tunisia
Policy measure Potential to address
Within DCFTA Outside DCFTA
Allow for phasing in of tariff reduction or regulatory approximation at sector level, especially for those sectors where the social impact will be high
Support flexibility of the labour market- easing reallocation between sectors while ensuring that workers’ rights are respected in law and practice
Support education and training programmes to allow easier update and upgrade of human capital, with a clear link to labour market requirements, and promote life-long learning
Further develop social protection system, with attention for coverage, financial management and price levels.
Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. by effective implementation of relevant ILO conventions, and by approximating domestic legislation to the EU acquis in the area of labour
6. Policy Recommendations
• Part 2: Recommendations 6 - 10
Recommendations for the social pillar: Tunisia
Policy measure
Potential to address
Within DCFTA Outside DCFTA
Effective implementation of HR treaties, with a focus on vulnerable groups (e.g. children, women, minorities, disabled, etc.)
Consider creating monitoring mechanisms of the social (including human rights) impact of the DCFTA (and more broadly EU-Tunisia relations in these areas).
Promotion of social dialogue and civil society involvement
Provide technical assistance in improving education as well as the institutional and regulatory environment in the social policy sphere
6. Policy Recommendations
Recommendations for the environmental pillar: Tunisia
Policy measure
Potential to address
Within DCFTA Outside DCFTA
Create incentives for environmentally friendly production
Maintain / further improve incentives to improve efficient use of water in agricultural and industrial production
Improve waste collection and waste management systems
Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Tunisia relations)
Thank you
Morocco
www.trade-sia.com/morocco
Tunisia
www.trade-sia.com/tunisia