EVALUATION OF THE IMPLEMENTATION OF THE FREE ...trade.ec.europa.eu/doclib/docs/2016/october/tradoc...Evaluation of the implementation of the free trade agreement between the EU and

EVALUATION OF THE IMPLEMENTATION OF THE FREE TRADE AGREEMENT BETWEEN THE EU AND ITS MEMBER STATES AND THE REPUBLIC OF KOREA

Civil Society Dialogue – Brussels, October 18, 2016 For the European Commission, Directorate-General for Trade By Civic Consulting, in cooperation with the Ifo Institute

Evaluation of the implementation of the free trade agreement between the EU and its member states and the Republic of Korea

Structure of the presentation

Team

Objectives and scope of the evaluation

Methodological steps

Analyses to be conducted

Consultation of stakeholders

Timeline

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Team Civic Consulting: Economic and public policy

consultancy with expertise in evaluation, impact assessment and EU and global economic & legal studies, including trade related. Civic Consulting leads a variety of EC framework contracts for evaluation/impact assessment (DG SANTE, DG CONNECT, DG JUST, CHAFEA)

Ifo Institute: Leading European economic research institute, with a strong focus on trade. Recent work has focused on TTIP, global trade and economic wage inequality and other trade related analyses

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Objectives and scope of the evaluation The evaluation will examine:

– Effectiveness and efficiency of the FTA in view of achieving its objectives

– Relevance of the FTA regarding trade issues faced by the EU/Korea

– Coherence of the FTA with the EU-Korea Framework Agreement and with the objectives of EU trade policy

– Impact of the implementation of the FTA on sustainable development (economic/social/environmental) and human rights

The evaluation will cover the impact of the FTA in the EU and, to a certain extent, in Korea, with the main focus being on the EU and its Member States

Total of 10 Tasks, specified in detail in ToR

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Evaluation questions

1. To what extent have the objectives as laid down in Article 1.1(2) of the EU-Korea FTA been achieved?

2. Has the EU-Korea FTA had unintended side effects, and if so, which ones?

3. To what extent has the EU-Korea FTA been efficient with respect to achieving its objectives?

4. To what extent has the EU-Korea FTA been coherent with the EU-Korea Framework Agreement and with current EU trade policy?

5. To what extent are the provisions of the EU-Korea FTA relevant for addressing current trade issues faced by the EU and Korea?

Elaboration of conclusions and recommendations on this basis

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Overview of methodology

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Steps taken so far /1

Literature review: identifying and reviewing prior studies on trade; developing a tagging system

Exploratory interviews with key stakeholders (e.g. BusinessEurope, European Trade Union Confederation, EU Delegation to Seoul) aimed at developing a broader understanding of the implementation of the FTA

Description of the FTA, including context, institutional structure &interaction with other instruments/policies

Creating the evaluation website www.eukorea-eval.com

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Evaluation website

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Steps taken so far /2

Refining the intervention logic of the FTA

Finalising the scientific advisory group: experts on trade law, Korean context, human rights, economic analysis

Preparing methodological tools: document database; questionnaires for public consultation/ survey on SMEs/survey on consumers & case study interviews

Designing the consultation strategy

Selecting case studies

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Conducting the case studies /1

Both sectoral and cross-cutting/thematic case studies will involve desk research, analysis of previous studies, stakeholder documents and the results of the econometric analysis (for the sectoral case studies)

In the framework of the case studies, we will also conduct interviews with experts and stakeholders

Selection of experts/stakeholders case-study specific

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Conducting the case studies /2

The following eight case studies will be conducted:

– Automotive sector (passenger cars)

– Consumer electronic goods

– Agricultural sector

– Environmental goods and services

– Postal sector

– Implementation of institutional mechanisms of TSD chapter

– Use of tariff preferences under the FTA

– Rules of origin

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Modelling simulations: overview

The approach for the modelling simulations consists of three steps:

1. Description and initial inspection of data at a very disaggregate level (6-8 digit) and using (where appropriate) econometric tools to obtain simple correlations to obtain first insights into the data

2. Rigorous econometric analysis of trade flow data at 6-digit level to obtain causal estimates of the relevant parameters required for full CGE analysis of the FTA

3. Simulation analysis with CGE model to obtain information on how the status quo compares to a counterfactual situation (without the FTA)

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Econometric analysis

Econometric analysis (gravity model) will allow for:

– Obtaining pair-specific estimates of the effects of the EU-Korea FTA (e.g. Italy-Korea, Czech Republic-Korea)

– Identifying directional/asymmetric effects for each pair

– Evaluating trade creation and trade diversion effects

– Consistency with general equilibrium model used to study welfare effects

– Separation at the sectoral level

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Gravity model

Xij,t = exp[∏i,t + Zj,t + μij + η1BTPij,t + η2NESi,t × INTLij + η3NIPj,t × INTLij] + Eij,t

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Variable Description

Xij,t Nominal trade flows (international and intra-national trade)

∏i,t Time-varying source-country dummies

Zj,t Time-varying destination-country indicator variables

μij Country-pair fixed effects

BTPij,t Vector of time-varying bilateral determinants of trade flows

NESi,t × INTLij Effects of any non-discriminatory export support policies

NIPj,t × INTLij Effects of any non-discriminatory import protection policies


Data

Among others, data sources include:

– COMEXT and COMTRADE (trade in goods)

– WDI database (general economic development)

– OECD (trade in services)

– GTAP (FDI)

– TRAINS (customs-related provisions)

– Enterprise Europe Network (SMEs)

– ILO KILM (employment)

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CGE modelling /1

The Ifo Trade Model is a CGE model which falls into the class of New Quantitative Trade Theory models

Analysis compares observed 2015 status quo situation with a simulated counterfactual situation in which the EU-Korea FTA is assumed to be non-existent

Advantages: no direct measures of observed reductions in non-tariff trade barriers are needed; simulation exercise cleanly tied to gravity estimation; ideal for ex post evaluation

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CGE modelling /2

The modelling will assess:

– Conventional equilibrium outcomes (Structure of bilateral trade flows at the GTAP 9.1. level of aggregation, aggregate trade, levels of value added, wages, measures of real per capita GDP and of welfare, etc.)

– Impacts on jobs and other social impacts

– Consequences for public finance (via tariff elimination, changes in trade volumes, expansion of economic activity)

– Environmental impacts

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Other analyses /1

Analysis of the implementation of the FTA

– Identification of regulatory changes adopted by the EU/Korea via research on relevant provisions and extent to which decisions have been taken during implementation process/changes in trade policy regulations have been made

– Econometric results, consultation results will also feed into the analysis

Analysis of social impacts

– Identification of impact on consumer welfare, prices, product safety, etc. via use of Ifo trade model and analysis of consultation/survey results, desk research

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Other analyses /2

Analysis of environmental impacts

– Identification of impact on environmental outcomes (emissions of CO2 and other pollutants; biodiversity) via use of the Ifo trade model

Analysis of human rights impacts

– Identification of impact on human rights via analysis of selected quantitative/qualitative indicators (based on screening and feedback from stakeholder consultation), document review, econometric analysis and case study results

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Consultation strategy

The consultation strategy involves the following steps:

– Defining the objectives of the consultation

– Identifying relevant stakeholders in the public sector, private sector and civil society in the EU and Korea; grouping them according to their level of relevance for the FTA

– Developing consultation questionnaires

– Informing stakeholders on the consultation (consul-tation website, DG Trade website & newsletter, etc.)

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Stakeholder mapping

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Category Stakeholder type Level of relevance Rationale

Public sector Ministries Very high relevance Directly involved in the implementation of the FTA

Other government bodies (e.g. the European Economic and Social Committee)

High relevance Representatives/platforms for stakeholders (e.g. occupational interest groups) that may be directly or indirectly affected by the FTA

Private sector Business associations High relevance Representatives of businesses that are directly affected by the FTA

SMEsa Very high relevance Operations (exports and imports) directly affected by the FTA

Large companies/ multinationalsa

Very high relevance Operations (exports and imports) directly affected by the FTA

Civil society NGOs (environmental/consumer/human rights orgs.)

High relevance Advocates of the environment/consumers/ individuals who may be indirectly affected by the FTA

Labour unions Very high relevance Representatives of employees whose jobs may be directly affected by the FTA

Think tanks/research institutes

Moderate relevance

Potentially involved in research regarding FTA, but no direct impact

a The categories of SMEs and large companies/multinationals also include investors in the EU and Korea.


Consultation tools /1

The stakeholder consultations will involve:

– 12 week online public consultation on the ‘Your Voice in Europe’ platform

– Survey on SMEs focusing on the advantages and disadvantages of the FTA for this group (SME Panel Questionnaire)

– Survey on consumers targeted at EU and Member State consumer organisations and NGOs that work in the field of trade and sustainable development (Qualtrics)

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Consultation tools /2

The stakeholder consultations will also involve:

– In-depth interviews with experts and stakeholder representatives from the EU and Korea

– One-day stakeholder workshop (April 2017) to present interim findings and obtain input for the final stage of the evaluation

– Updates via the website

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Structure of the consultation QR General questions on impact, benefits, etc. of FTA

Questions on trade activities (for businesses/business associations only)

Questions on effectiveness of customs procedures; remaining trade barriers

Questions on effectiveness of other provisions (investment, IPR, procurement, competition, etc.)

Questions on regulatory changes related to the FTA

Questions on impact on consumers

Questions on impact on sustainable development and human rights

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Timeline

Stakeholder consultation: October to December 2016

Interim technical report: February 2017

Stakeholder workshop: April 2017

Draft final report: May 2017

Final report: July 2017

Contact: [email protected]

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EVALUATION OF THE IMPLEMENTATION OF THE FREE ...trade.ec.europa.eu/doclib/docs/2016/october/tradoc...Evaluation of the implementation of the free trade agreement between the EU and