issues in rta negotiations 2 august 2010 midc khon kaen, thailand rajan sudesh ratna economic...

Issues in RTA Issues in RTA negotiationsnegotiations

2 August 20102 August 2010

MIDCMIDCKhon Kaen, ThailandKhon Kaen, Thailand

Rajan Sudesh RatnaRajan Sudesh Ratna

Economic Affairs OfficerEconomic Affairs Officer

Trade Policy Section (TID)Trade Policy Section (TID)

UNESCAPUNESCAP

[email protected]@un.org

[email protected]@gmail.com

Presentation OverviewPresentation Overview

WTO RulesWTO Rules Regional Trade Agreements: conceptsRegional Trade Agreements: concepts Negotiating processNegotiating process

PTAsPTAs FTAsFTAs CECAsCECAs

2Rajan Ratna 2.8.2012

WTO RULES ON RTAsWTO RULES ON RTAs Permitted under Article XXIV of GATT Permitted under Article XXIV of GATT

1994.1994. Exception to MFN treatment within the Exception to MFN treatment within the

Rules subject to fulfillment of Rules subject to fulfillment of conditions:conditions: items on which there is items on which there is substantial substantial

tradetrade to be covered to be covered the phase out of duties should be the phase out of duties should be

within a reasonable period of timewithin a reasonable period of time purpose - to facilitate trade among purpose - to facilitate trade among

the RTA parties/territories and the RTA parties/territories and not not to raise barriers to the trade of to raise barriers to the trade of non-non-RTA Parties with such territories.RTA Parties with such territories.


M.F.N. EXCEPTIONSM.F.N. EXCEPTIONS

Exception to MFN is also Exception to MFN is also available under the available under the “Enabling “Enabling Clause Decision”Clause Decision” of 1979 of 1979 wherein the WTO members may wherein the WTO members may accord differential and more accord differential and more favourable treatment to favourable treatment to developing countries, without developing countries, without according such treatment to according such treatment to other Contracting Parties.other Contracting Parties.


TerminologyTerminology PTAPTA – Grant of partial preference on reciprocal – Grant of partial preference on reciprocal

basis ( Preferential Trade Area) or one-way basis ( Preferential Trade Area) or one-way concessions (P.T. Arrangements). No coverage of concessions (P.T. Arrangements). No coverage of substantial trade, no time-frame to eliminate substantial trade, no time-frame to eliminate tariffs. Concessions enlarged through different tariffs. Concessions enlarged through different Rounds of negotiations.Rounds of negotiations.

FTA FTA – Eliminate all tariffs, QRs on SAT and within – Eliminate all tariffs, QRs on SAT and within fixed time-frame. Varying levels of tariffs and fixed time-frame. Varying levels of tariffs and other barriers are maintained against non-other barriers are maintained against non-members.members.

Customs Union or CERCustoms Union or CER – Setting up a common level – Setting up a common level of trade barriers vis-à-vis non-members/outsiders.of trade barriers vis-à-vis non-members/outsiders.

Common MarketCommon Market – Deeper integration where free – Deeper integration where free movements of factors of production: labour and movements of factors of production: labour and capital are allowed, beyond free exchange of capital are allowed, beyond free exchange of goods and services.goods and services.

Economic UnionEconomic Union – Goes beyond Common Market. – Goes beyond Common Market. Involves harmonizing national economic policies, Involves harmonizing national economic policies, including typically taxes and a common currency.including typically taxes and a common currency.


PTAPTA

ECONOMIC ECONOMIC COOPERATIONCOOPERATION

ECONOMIC ECONOMIC UNIONUNION

COMMON COMMON EXTERNAL EXTERNAL

TARIFF (CET)TARIFF (CET)

FTAFTA

STAGES OF ECONOMIC DEVELOPMENTSTAGES OF ECONOMIC DEVELOPMENT


Issues for negotiationsIssues for negotiations Proper information about the Proper information about the

import export regime/regulations import export regime/regulations (TPRM).(TPRM).

Article XXIV or Enabling ClauseArticle XXIV or Enabling Clause Reciprocity or less than full Reciprocity or less than full

reciprocityreciprocity Substantially all tradeSubstantially all trade

Value and/or tariff linesValue and/or tariff lines Time frame of TLPTime frame of TLP

Same or differentSame or different


Pre – negotiation stepPre – negotiation step Cost benefit analysis : Study Cost benefit analysis : Study

patterns of trade patterns of trade modelingmodeling identify gains and lossesidentify gains and losses vulnerable sectorsvulnerable sectors

Evaluation of maximum gain:Evaluation of maximum gain: PTA or FTA or CECA?PTA or FTA or CECA?

Wide consultations: stakeholdersWide consultations: stakeholders


Pre – negotiation step (2)Pre – negotiation step (2)

Internal assessment:Internal assessment: PTA or FTAPTA or FTA Enabling Clause or Article XXIV of GATTEnabling Clause or Article XXIV of GATT CECA: XXIV of GATT and V of GATSCECA: XXIV of GATT and V of GATS Rules of origin – thresholdsRules of origin – thresholds Commitments for cooperationCommitments for cooperation


NegotiationsNegotiations

Market Access issues– Market Access issues– Gains or lossesGains or losses Tariff structureTariff structure Other RTAs done by your trading Other RTAs done by your trading

partner partner ImplicationsImplications Identification of products of export Identification of products of export

interestinterest Identification of sensitive items Identification of sensitive items


Negotiations (2)Negotiations (2)

Rules of OriginRules of Origin General Rules vrs. Product Specific General Rules vrs. Product Specific

RulesRules Agencies for issue of CoOAgencies for issue of CoO Verification proceduresVerification procedures Cost of complianceCost of compliance Cumulation provisionsCumulation provisions


Other IssuesOther Issues

Anti dumping measuresAnti dumping measures Safeguard measures Safeguard measures

Global ( WTO SGM)Global ( WTO SGM) Bilateral SGMBilateral SGM

Drawback RulesDrawback Rules SPS/TBT issuesSPS/TBT issues Dispute Settlement MechanismDispute Settlement Mechanism ReviewReview


PTA StepsPTA Steps

Text and RoOText and RoO Positive ListPositive List Request and offerRequest and offer Additions of itemsAdditions of items Reciprocity: MoP & trade coverageReciprocity: MoP & trade coverage Rounds: deepening and widening of Rounds: deepening and widening of

concessions on itemsconcessions on items


FTA StepsFTA Steps

Text and RoOText and RoO Negative listNegative list Exchange listExchange list Negotiate reduction of NLNegotiate reduction of NL Fast tracking of TLP on items of Fast tracking of TLP on items of

export interestexport interest Services: Positive list – Request and Services: Positive list – Request and

offeroffer


Stakeholders consultations: the needStakeholders consultations: the need India’s first FTA was with Sri Lanka.India’s first FTA was with Sri Lanka. A very important aspect which was missed, not by A very important aspect which was missed, not by

intent but because of the fact that ISFTA was India’s intent but because of the fact that ISFTA was India’s first full fledged FTA and the negotiators could not first full fledged FTA and the negotiators could not visualise the future scenario: impact of FTA on Indian visualise the future scenario: impact of FTA on Indian industry. industry.

Some misconceptions during consultations:Some misconceptions during consultations: SL does not produce so no threat for India.SL does not produce so no threat for India. Duty differentials were not accounted for – mostly led to Duty differentials were not accounted for – mostly led to

trade diversion and very little trade creation effects have trade diversion and very little trade creation effects have now been observed.now been observed.

No industry in India – hence item not sensitive.No industry in India – hence item not sensitive. No proper study was done to examine economically No proper study was done to examine economically

the sensitivity.the sensitivity. Overall, ISFTA was a good learning experience for the Overall, ISFTA was a good learning experience for the

Indian negotiators as well as Industry. Indian negotiators as well as Industry. Industry became more pro-active to feedback in Industry became more pro-active to feedback in

India’s policy making.India’s policy making.


What India does presently?What India does presently?

First stage: In-house analysis – trade & tariffFirst stage: In-house analysis – trade & tariff Second stage: Studies on purely economic Second stage: Studies on purely economic

parameters.parameters. Third stage: Findings – stakeholders Third stage: Findings – stakeholders

consultations.consultations. Fourth stage: Finalise studyFourth stage: Finalise study Fifth stage: Share study in inter-Fifth stage: Share study in inter-

governmental consultations.governmental consultations. Final stage: Final consultations with all Final stage: Final consultations with all

stakeholders and firm up its negotiating stakeholders and firm up its negotiating position.position.

Time to time information is also posted on Time to time information is also posted on the website of Department of Commerce: the website of Department of Commerce: Singapore, BIMSTEC, ASEAN etc.Singapore, BIMSTEC, ASEAN etc.


India’s negotiations: Some illustrationsIndia’s negotiations: Some illustrations

Country/Group

Start Finish Total Time

No. of consultations held)

(Inter Govt. &

industry)

Sri Lanka August 1998

November 1998

4 months

4-5

SAFTA 1999 2004 5 years > 20

Singapore 2003 2005 2 years >40

ASEAN 2004 2009 5 years > 70

South Korea 2006 2009 3 years >30

Thailand 2004 Not concluded

>6 years >50

BIMSTEC 2004 Not concluded

>6 years >50

EC 2007 Not concluded

>3 years >30

Japan 2007 2010 > 3 years

>3017

Rajan Ratna 2.8.2012

ConclusionsConclusions The importance of stakeholder The importance of stakeholder

consultations in the design of consultations in the design of trade agreements – very trade agreements – very important and essential. important and essential.

There are though several There are though several problems associated with:problems associated with: Conflicting interestsConflicting interests Domestic policiesDomestic policies InefficienciesInefficiencies Large industry vrs. SMELarge industry vrs. SME


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THANK YOUTHANK YOU

Rajan Ratna 2.8.2012

issues in rta negotiations 2 august 2010 midc khon kaen, thailand rajan sudesh ratna economic...

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