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DEEP MEASURES IN REGIONAL TRADE AGREEMENTS:
HOW MULTILATERAL-FRIENDLY?
AN OVERVIEW OF OECD FINDINGS
OECD Global Forum on Trade
“Reconciling Multilateralism and Regionalism in a Post-Bali World”
Paris, 11-12 February 2014
Iza Lejárraga, Trade and Agriculture Directorate
OECD Trade and Agriculture Directorate 2
Overview of Presentation
TRENDS IN REGIONALISM
BACKGROUND TO OECD WORK ON RTAs
CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES
HIGHLIGHTS FROM OECD FINDINGS
CONCLUSION
Source: Compiled from WTO Database on RTAs
Note: Only includes RTAs notified to the WTO that are in force.
3
Regionalism has proliferated and deepened
4
First Wave (1985-2000) Second Wave (2001-present)
1. GOODS
Only 5 RTAs include services
1. SERVICES
Over 105 RTAs include services
2. NEGATIVE INTEGRATION
Removal of barriers
Trade diversion vs. trade creation
2. POSITIVE INTEGRATION
Provision of public goods
Positive externalities and dynamic gains
3. GEO-POLITICAL
Regional
Driven by political interests
3. COMMERCIAL
Cross-regional
Aligned with Global Value Chains
4. MAINLY OECD
28% of RTAs North-South
South-South RTAs shallow
4. EMERGING ECONOMIES
59% of RTAs North-South
South-South RTAs becoming deeper
5. PROLIFERATION
New agreements with key partners
Duplication and overlaps
5. CONSOLIDATION
Expansion of existing agreements
Harmonization and deepening
The focus of regionalism has been shifting
OECD Trade and Agriculture Directorate 5
Overview of Presentation
TRENDS IN REGIONALISM
BACKGROUND TO OECD WORK ON RTAs
CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES
HIGHLIGHTS FROM OECD FINDINGS
CONCLUSION
Background of Trade Committee work on RTAs:
Multilateralising Regionalism
OECD Trade and Agriculture Directorate 6
• Questions: Can some deep commitments and disciplines in RTAs be multilsaterilised; if yes, how? What are some good practices in RTA design and content? (TAD/TC(2009)1; TAD/TC/WP(2009)18)
• Coverage: A dozen policy areas, focusing on deep measures (i.e., not traditional border measures). Main focus on RTAs signed by OECD countries; some studies cover South-South RTAs.
• Methodologies: All studies look at legal obligations; in a limited set of policy areas, additional analyses have investigated implementation, quantitative impact and political economy.
• Caveats: Questions addressed from a technical feasibility perspective, and not from a political feasibility point of view. Important questions of political will outside the scope of studies.
Policy options for multilateralising deep RTA
commitments: Two approaches
OECD Trade and Agriculture Directorate 7
“Bottom up”: RTAs-driven
--Clauses (e.g., third-party MFN)
--Extension of existing agreements
--Coordination and convergence
--Mega-regionals
“Top down”: WTO-driven
--Committees
--Disciplines
--Negotiations
--Dispute Settlement
Review and
amendment of
RTA
Clauses on the
choice of
dispute fora
Provision to
implementation of
WTO obligations
Dynamic
incorporation of
WTO Agreements
Customs union
on sectoral
basis
Liberal ROO -
denial of
benefits
Unconditional
(third-party)
MFN clause
Suspension or
replacement
of agreements
Text Text Text
Lego Blocks Process – 12 Stages
Extension to
non-Members
Provision of
Observer
Status
Open accession
clauses (non-
region bound)
Obligation to
cooperate in WTO
negotiations
Good practices in RTAs to promote ‘building-block’ effects
OECD Trade and Agriculture Directorate
OECD Trade and Agriculture Directorate 9
Overview of Presentation
TRENDS IN REGIONALISM
BACKGROUND TO OECD WORK ON RTAs
CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES
HIGHLIGHTS FROM OECD FINDINGS
CONCLUSION
Factors influencing multilateralisability
Multilaterali-sation
Dispersion
Coherence & homogeneity
Extent of discrimination
Predictability (compliance)
Economic impact
(optimal area)
OECD Trade and Agriculture Directorate 10
Checklist of multilateral-friendly attributes
Economic Impact: What are the economic dividends and the constraints ?
5a) Trade effect from globalising WTO-plus 5b) Political economy constraints
Predictability: How enforceable and transparent are WTO-plus measures?
4a) Mandatory through dispute settlement 4b) Transparency of deep measures
Extent of Discrimination: How discriminatory is the treatment granted under WTO-plus practices?
3a) Non-excludable (de facto MFN) 3b) Eligibility an extension of benefits
Coherence and Homogeneity: How consisistent are WTO-plus measures across RTAs and with WTO?
2a) Coherence with WTO agreements 2b) Similarity across RTAs
Dispersion: How widespread are WTO-plus measures in RTAs?
1a) Critical mass of RTAs 1b) Broad representation of WTO Members
OECD Trade and Agriculture Directorate 11
Profile of deep measures by policy area
OECD Trade and Agriculture Directorate 12
Ag
ricu
ltu
re
SP
S
TB
Ts
Exp
ort
Restr
ict.
Tra
de
Fa
cil
itati
on
Serv
ices
La
bo
ur
Mo
bil
ity
E-c
om
merc
e
Inv
estm
en
t
Co
mp
eti
tio
n
Inte
llectu
al
Pro
p.
Rig
hts
Go
vern
men
t
Pro
cu
rem
en
t
Tra
ns
pare
nc
y
An
ti-c
orr
up
tio
n
En
vir
on
men
t
Critical Mass, incl.
developing countries
Coherence with WTO
agreements
International standards -- --
High degree of
homogeneity --
Non-discriminatory
(non-excludable)
Liberal ROO or lack of
ROO --
Third-party MFN or
extension benefits -- -- -- NA NA NA NA NA NA
Mandatory (not best-
endeavour)
Enforceable via dispute
settlement
Co-operation on
implementation -- -- -- -- -- -- --
Economic impact
-- -- -- -- -- --- -- -- -- -- --
Political economy
-- -- -- -- -- -- -- -- -- -- -- --
Note: High, good and limited potential for multilateralisation. “NA” denotes not applicable, and “ –“ not assessed in OECD work
Note: High, good and limited potential for multilateralisation. “NA” denotes not applicable, and “ –“ not assessed in OECD work.
The findings reflected on this chart are preliminary and are being refined in a forthcoming OECD paper.
OECD Trade and Agriculture Directorate 13
Overview of Presentation
TRENDS IN REGIONALISM
BACKGROUND TO OECD WORK ON RTAs
CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES
HIGHLIGHTS FROM OECD FINDINGS
CONCLUSION
Critical mass of RTAs deepen commitments: over 80% of
RTAs WTO-plus in services, investment and transparency
OECD Trade and Agriculture Directorate 14
0 10 20 30 40 50 60 70 80 90
Environment
E-commerce
Govt. Procurement
Export restrictions
Movement of perople
SPS
TBT
IPR
Competition
Transparency
Investment
Services
Percentage of RTAs signed since 2001
Source: Compiled from texts of agreements.
RTAs that Deepen Obligations, by Policy Area
Deep provisions spreading to North-South and South-South
RTAs; marginal representation of low–income countries
OECD Trade and Agriculture Directorate 15
Source: Compiled from WTO RTAs Databseoed
from texts of
Composition of 21st Century RTAs
First wave of
RTA (1985-
2000), only 28 %
of deep RTAs
were North-
South
Propagation of
deep measures
from North-
South to South-
South RTAs
Only 3% of
South partners
with deep RTAs
are low-income
countries
There is a high degree of similarity in WTO-plus measures,
both within and across trading partners
OECD Trade and Agriculture Directorate 16
• In services, 60% of WTO-plus commitments of OECD countries are similar; 49% similarity in overall sample.
• In investment, most commitments and lists of non-conforming measures are found to be highly similar.
• In transparency, 45% of RTAs signed since 2001 contain a horizontal transparency chapter with common obligations.
• In e-commerce, countries have reached similar, albeit not identical conclusions to unresolved issues in WTO.
• In government procurement, there is high similarity in WTO-plus measures regarding central government, and less so in measures related to local (sub-national) governments.
Most WTO-plus measures are mandatory; WTO-
beyond have best-endeavour or carve-outs
17
0
10
20
30
40
50
60
70
80
90
100
Pe
rce
nta
ge
of
RT
As
Enforceable via dispute settlement mechanism Mandatory but carved out of dispute settlement Best endeavour
Source: Compiled from WTO Database on RTAs
Enforceability of WTO-plus and WTO-beyond Commitments, by Policy Area
Weak discrimination in many WTO-plus areas
Level of discrimination
Agriculture High. Preference margins average 5% (some products 15%).
Export restrictions Low. De facto MFN effect.
TBTs/SPS Moderate. MRAs with no ROO are less trade distorting-than tariffs.
Transparency Low. De facto MFN effect.
Services Moderate. Liberal ROO attenuate spaghetti bowl effects. There are
exceptions, such as recognition of professional qualifications.
Investment Low. MFN clauses relatively prevalent.
Govt procurement Moderate. GPA forbids discrimination non-party subsidiaries.
Competition Low. Few explicit discriminatory provisions.
IPR Low. De facto MFN effect.
Environment Low. De facto MFN effect.
OECD Trade and Agriculture Directorate 18
Deep RTAs are promoting greater transparency,
trust and policy coordination
OECD Trade and Agriculture Directorate 19
• Deep measures require greater transparency and trust --Deep measures cannot be liberalised in the same way that traditional border barriers can: greater focus on enhancing regulatory transparency .
• Evolving scope: more than the exchange of information --Obligations on transparency in RTAs have broadened beyond WTO scope, incorporating elements of policy coordination and cooperation (procedures for designing and reviewing regulations, participation of public-including foreign-parties, coherence across domestic regulatory portfolios).
• Trade-boosting effects: quantitative evidence --A marginal improvement in transparency (each additional WTO-plus obligation) is associated with an increase in trade of over 1 per cent: 1.2% for goods, 1.4% in agriculture. --A marginal reduction in preferential tariffs (1%) is associated with an overall 2% increase in trade in agriculture (1.34% in North-South trade).
OECD Trade and Agriculture Directorate 20
Overview of Presentation
TRENDS IN REGIONALISM
BACKGROUND TO OECD WORK ON RTAs
CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES
HIGHLIGHTS FROM OECD FINDINGS
CONCLUSION
“Multilateralising regionalism”: RTAs can be stepping
stones for global trade reform
Critical mass, North-South & South-South
Coherence & homogeneity across RTAs
Mandatory & enforceable obligations
MFN-driven (relatively weakly discriminatory)
Generating higher levels of transparency
GLOBAL
Many improved commitments and
disciplines in deep RTAs have
multilateral-friendly features…
…but the desirability and feasibility of
their multilateralisation depends on
economic and political considerations.
See OECD work on RTAs:
www.oecd.org/trade/rta
Thank you for your attention