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UNCTAD/CD-TFT 1

Negotiating an RTA

Some Key Challenges & Opportunities for Developing Countries

16 April 2010

Taisuke ITO, UNCTAD

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UNCTAD/CD-TFT 2

Outline

1. North-South RTA negotiations- DCs market opening at home- Market access in the partners- Deep integration issues

2. South-South integration & cooperation- State of play, its role & potential

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UNCTAD/CD-TFT 3

1. Policy Issues in RTAs (1) RTAs here to stay – How to make them useful for

development while minimizing the costs? Trade creation & diversion = TC>TD leads to net

welfare gains TC = source of efficiency gains but short-term adjustment

challenge (like any trade liberalization) TD = efficiency loss, challenge for RTA members and

affected non-members

Need to assess trade diversion relative to the non-static benefits of increased trade

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UNCTAD/CD-TFT 4

Policy Issues in RTAs (2) Dynamic Effects

Economies of scale, pro-competitive effects, FDI, ToT, positive externalities from institutional changes

Deep integration Increase the likelihood of dynamic gains But upward regulatory harmonization entails

implementation costs (unlike tariffs) and can be sub-optimal for “non-best practice” DCs (WTO-plus)

And deeper commitments on broader coverage of behind-the-border regulatory issues may limit domestic “policy space”

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UNCTAD/CD-TFT 5

2. North-South RTAs: Why Significant?

1. Reciprocal, as against non-reciprocal Adjustment costs important as DCs tend to have

higher tariffs, import dependence, dependence on tariffs on government revenue

2. Limited scope for improved market access Low MFN rates & unilateral preferences in

DDCs 3. Deep integration under “new generation”

RTAs Broader coverage of behind-the-border measures

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UNCTAD/CD-TFT 6

-300'000

-200'000

-100'000

0

100'000

200'000

300'000

Change in imports Change In Revenue Consumer Surplus

Effects of trade liberalization – Example

Nigeria’s 100% liberalization vis-à-vis the US (SMART simulation)

Source: TRAINS/WITS

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UNCTAD/CD-TFT 7

(1) Market Opening in Developing Countries

Import surge, de-industrialization /food security & revenue loss concerns

Lesser & slower liberalization as SDT in RTAs to mitigate adjustment costs, but

The degree of such flexibility constrained by GATT Art XXIV requirement (“Substantially all the trade”), ie, 90% over 10 years. EPAs evolved around 80% over 15 years (EU)

How to design product coverage & schedules under the WTO legal constraint? How does it matter?

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UNCTAD/CD-TFT 8

How to determine “Sensitive” Products?

Objectives To protect domestic industry from import competition To minimize tariff revenue loss SAT constraints = Min. 80-90% volume & t-line coverage

By which benchmarks? Products with high dutiable imports Products protected with high tariffs with high imports Products facing large theoretical tariff revenue loss (MFN

rates/100 *import value) Minimizing import surge (overall & by product) Minimizing tariff revenue loss Maximizing consumer surplus (welfare) - memo

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UNCTAD/CD-TFT 9

(a)Products with the highest dutiable import value

HS Product Name MFN Imports ($ '000) Share Cumulative Total Total Trade 7.51 3589772 100.0100190 Other, wheat 5 823699 22.9 22.9870310 Vehicles specially designed for travelling on snow12.5 104972 2.9 2.9890120 Tankers 5 87200 2.4 5.4252329 Other portland cement 15 82206 2.3 7.6100110 Durum wheat 5 74713 2.1 9.7871000 Tanks and other armoured fighting vehicles, motori20 74200 2.1 11.8390210 Polypropylene 10 68076 1.9 13.7730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 15.3870130 Track-laying tractors 5 49602 1.4 16.7890800 Vessels and other floating structures for breaking5 43741 1.2 17.9390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 18.9843143 Parts for boring or sinking machinery of subheadin5 32543 0.9 19.8

80% limit 1 180% limit 2 1190% limit 1 190% limit 2 4

Source: TRAINS/WITS

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(b) Products with the highest tariffs & imports

HS Product Name MFN Imports ($ '000) Share Cumulative Total Total Trade 7.51 3589772 100.0170199 Other, cane or beet sugar 50 8650 0.2 0.2730511 Longitudinally submerged arc welded50 4572 0.1 0.4690890 Other, glazed ceramic flags 50 3144 0.1 0.5732399 Other, table kitchen 50 2691 0.1 0.5690790 Other, unglazed ceramic flag 50 2262 0.1 0.6730300 Tubes, pipes and hollow profiles, of cast iron.50 1670 0.0 0.6240220 Cigarettes containing tobacco 50 1230 0.0 0.7730512 Other, tubes & pipes 50 1142 0.0 0.7401110 New pneumatic tyres 50 986 0.0 0.7721420 Other bars & rods of iron 50 942 0.0 0.8

80% limit 80290% limit 396

Source: TRAINS/WITS

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(c) Products with the highest theoretical tariff revenues

HS Product Name MFN Imports ($ '000) Share Cumulative Tariff Rev Share Total Total Trade 7.51 3589772 100.0 129472 100.0100190 Other, wheat 5 823699 22.9 22.9 41185 31.8871000 Tanks and other armoured fighting vehicles, motori20 74200 2.1 2.1 14840 11.5870310 Vehicles specially designed for travelling on snow12.5 104972 2.9 5.0 13122 10.1252329 Other, portland cement 15 82206 2.3 7.3 12331 9.5390210 Polypropylene 10 68076 1.9 9.2 6808 5.3730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 10.8 5925 4.6391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 11.6 5645 4.4730890 Other, structures of irons or steel 20 26606 0.7 12.4 5321 4.1850213 Of an output exceeding 375 kVA 18.75 24146 0.7 13.0 4527 3.5890120 Tankers 5 87200 2.4 15.5 4360 3.4170199 Other, cane or beat sugar 50 8650 0.2 15.7 4325 3.3870323 Of a cylinder capacity exceeding 1,500 cc but not 25 15793 0.4 16.1 3948 3.0100110 Durum wheat 5 74713 2.1 18.2 3736 2.9390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 19.2 3400 2.6

80% limit 1 1 31.880% limit 2 13 36.490% limit 1 1 31.890% limit 2 4 68.2

Source: TRAINS/WITS

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(d) Import Surge Minimization (SMART)

HS Product NameMFN Weighted AverageImports Value ($ '000)Share Cumulative Imp Change Share Total Total Trade 7.51 3589772 100.0 238793 100.0100190 Other wheat 5 823699 22.9 22.9 15690 6.6730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 1.7 10773 4.5390210 Polypropylene 10 68076 1.9 3.5 10768 4.5391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 4.3 9174 3.8390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 5.3 5377 2.3401693 Gaskets, washers and other seals20 4707 0.1 5.4 4566 1.9390110 Polyethylene having a specific gravity of less tha10 28750 0.8 6.2 4548 1.9730890 Other 20 26606 0.7 7.0 4257 1.8730429 (1996-) Other 10 22858 0.6 7.6 4156 1.7850213 Of an output exceeding 375 kVA18.75 24146 0.7 8.3 3851 1.6401120 Of a kind used on buses or lorries10 6568 0.2 8.4 3583 1.5170199 Other 50 8650 0.2 8.7 3287 1.4730511 Longitudinally submerged arc welded50 4572 0.1 8.8 3048 1.3271011 (2002-) Light oils and preparations10 24113 0.7 9.5 2652 1.1283620 Disodium carbonate 5 14791 0.4 19.9 1162 0.5

80% limit 1 1 6.680% limit 2 39 47.690% limit 1 1 6.690% limit 2 13 29.3

Source: TRAINS/WITS

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(e) Tariff Revenue Loss Minimization (SMART)

Source: TRAINS/WITS

HS Product NameMFN Weighted AverageImports ($ '000) Share Cumulative T Rev Change Share Total Total Trade 7.51 3589772 100.0 -219958 100.0100190 Other wheat 5 823699 22.9 22.9 -42226 19.2390210 Polypropylene 10 68076 1.9 1.9 -7530 3.4730410 (-2006) Line pipe of a kind used for oil or gas pi10 59249 1.7 3.5 -6539 3.0730890 Other 20 26606 0.7 4.3 -6315 2.9170199 Other 50 8650 0.2 4.5 -6145 2.8391731 Flexible tubes, pipes and hoses, having a minimum 20 28227 0.8 5.3 -5683 2.6850213 Of an output exceeding 375 kVA18.75 24146 0.7 6.0 -5383 2.4390120 Polyethylene having a specific gravity of 0.94 or 10 33995 0.9 6.9 -3810 1.7100110 Durum wheat 5 74713 2.1 9.0 -3772 1.7850211 Of an output not exceeding 75 kVA25 11091 0.3 9.3 -3548 1.6730511 Longitudinally submerged arc welded50 4572 0.1 9.5 -3305 1.5150200 Fats of bovine animals, sheep or goats, other than5 15196 0.4 19.8 -796 0.4

80% limit 1 1 19.280% limit 2 45 47.690% limit 1 1 19.290% limit 2 10 23.7

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Summary

Source: TRAINS/WITS

Scenario Max excludable lines (20% & 10%, HS6) 1192 596Static 20% value lmit 10% value limit

1a Import value (t>0) 1 11b Import value (t>0) 11 42 High tariffs + Initial import values 802 396

3a Expected tariff revenue loss minimization 1 13b Expected tariff revenue loss minimization 13 4

Dynamic4a Overall import surge minimization 1 14b Overall import surge minimization 39 135 Line-by-line import surge minimization 699 453

6a Tariff revenue loss minimization 1 16b Tariff revenue loss minimization 45 107 Consumer surplus maximization 1525 1399

Import-surge minimization line-by-line basis captured products with very low level of initial imports Consumer surplus maximization - by design, captured lowest imported items, hence the large

numbers chosen. Caveat – only illustrative for estimates based on simulation

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Implications Not straightforward exercise – depends on individual trade &

tariff structures Static & dynamic perspectives complementary, to be combined

with other considerations – domestic production, direct competition, employment, social sensitivities etc

Import concentration in a few lines affect the choice High tariff protection approach, the favored one? SAT requirement limits the selection In case of regional groupings, harmonizing with other

countries further complicates the task – lack of overlap (EPAs) Staging & speed of liberalization yet another issue WTO interface – Rules negotiations on SAT

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UNCTAD/CD-TFT 16

Note: EPA Liberalization Schedules (Value)

Source: ECDPM

Value 2008 2010 2012 2013 2017 2018 2022 2023 2033 TotalFiji 24.0% 37.0% 78.0% 81.5% 81.5%PNG 88.1% 88.1%EAC 64.0% 80.0% 82.0% 82.0%Comoros 21.5% 80.6% 80.6%Madagascar 37.0% 80.7% 80.7%Mauritius 24.5% 53.6% 95.6% 95.6%Seychelles 62.0% 77.0% 97.5% 97.5%Zimbabwe 45.0% 80.0% 80.0%Botswana, Lesotho, Namibia, Swaziland

86.0% 86% + 47 lines

Mozambique 78.5% 80.5%Cameroon 50.0% 80.0% 80.0%Cote d'Ivoire 69.8% 80.8% 80.8%Ghana 62.2% 80.5% 80.5%CARIFORUM 52.8% 56.0% 61.1% 82.7% 86.9% 86.9%

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UNCTAD/CD-TFT 17

Note: EPA Liberalization Schedules (Tariff Lines)

Source: ECDPM

T lines 2008 2010 2013 2015 2017 2018 2022 2023 2033 TotalFiji 9.0% 22.0% 78.0% 81.5% 80.0%PNG 82.1% 82.1%EAC 64.0% 80.0% 82.0% 82.0%Mauritius 26.0% 73.0% 96.6% 96.6%Botswana, Lesotho, Namibia, Swaziland

86.0% 44 lines 3 lines 86% + 47 lines

Mozambique 78.5% 100 linesCote d'Ivoire 84.0% 88.7% 88.7%Ghana 72.8% 80.0% 80.0%CARIFORUM 52.8% 56.0% 61.1% 85.1% 90.7% 90.7%

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(2) Market Access in RTA Partners

New MA opportunities limited due to already low tariffs in DDCs (SSA, LDCs). Not so much so for non-LDCs?

Excluded sectors often sensitive and politically difficult either in RTAs or MTN Statutory prohibition on “import sensitive AG product”

(US TPA) / Hierarchy of preferences (EU) How have existing RTAs dealt with such “sensitive”

products? Any lessons? 3 US RTAs - Bahrain, Jordan, Morocco (Oman) 6 EU RTAs - Algeria, Egypt, Jordan, Morocco, Tunisia,

Turkey

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UNCTAD/CD-TFT 19

US Tariff Treatment 2008 by Regime

(Total 10047)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GSP Jordan Bahrain Morocco

Not coveredNon-Ad valoremNon-DF wtih preferenceDuty freeMFN DF

Source: TRAINS/WITS

84% for LDCs, 91% for AGOA (2007)

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UNCTAD/CD-TFT 20

US RTA Product Coverage of MFN & GSP Dutiable Lines, 2008 (Total

3264)

1443; 44%

1295; 40%

272; 8%

254; 8%

DF in 3 RTAsDF in 2 RTAsDF in 1 RTADF in no RTAs

Source: TRAINS/WITS

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UNCTAD/CD-TFT 21

US - Frequency of “Sensitive” Products by HS Chapter (DF under

no or 1 RTAs, total 526)

0

10

20

30

40

50

60

70

80

90

100

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97

4. Dairy 17-24. Prepared foodstuff (sugar, cereals, tobocco)

61-62. Apparel

Source: TRAINS/WITS

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UNCTAD/CD-TFT 22

US MFN Tariffs 2007 (Simple Av, incl. AVEs)

0

20

40

60

80

100

120

140

0101

10

0705

21

1514

19

2520

20

2844

30

2927

00

3504

00

4001

10

4704

21

5208

59

5601

29

6116

91

6811

83

7215

90

7504

00

8410

12

8448

49

8506

40

8703

22

9102

11

Source: TRAINS/WITS

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UNCTAD/CD-TFT 23

How do they affect actual exports?

US MFN & Effective Rates, 2007 (Weighted av.)

4.2

12.6

3.54.6

3.2

5.4

0.0

4.4

0.9 0.7

3.2 3.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Bahrain Jordan Morocco Oman United ArabEmirates

Tunisia

MFN AHS

Source: TRAINS/WITS

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The “sensitive” products affect DC exports

Share of US Duty-Free Imports, 200799.7

39.3

75.5

42.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Bahrain Jordan Morocco Tunisia

Source: TRAINS/WITS

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UNCTAD/CD-TFT 25

US Tariff Treatment of Jordan’s Major Exports, 2007

HS Product MFN EffectiveImports (000) Share Cumulative

Total Total Trade 12.6 4.4 1341693 100.0611020 Of cotton 10.8 10.8 256104 19.1 19.1620462 Of cotton 8.2 0.0 173407 12.9 32.0611030 Of manmade fibres15.3 8.0 117576 8.8 40.8711319 Of other precious metal, whether or not plated or5.8 0.0 100764 7.5 48.3610610 Of cotton 19.7 6.0 69361 5.2 53.5620463 Of synthetic fibres11.8 1.2 59754 4.5 57.9610462 Of cotton 12.6 7.5 54377 4.1 62.0610520 Of manmade fibres22.8 5.0 47482 3.5 65.5610510 Of cotton 19.7 6.0 46429 3.5 69.0610910 Of cotton 16.5 0.0 38170 2.8 71.8

Source: TRAINS/WITS

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UNCTAD/CD-TFT 26

US Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,

% of dutiable imports)

5.5

8.3

4.3

2.2

5.5

12.8

5.86.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Bahrain Jordan Morocco Tunisia

Actual preference value Potential preference value

Source: TRAINS/WITS

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UNCTAD/CD-TFT 27

Summary Tariff line coverage is high for all 3 RTAs. Morocco FTAs, &

other to a lesser extent, still in implementation All provide significantly greater coverage than GSP The coverage is lower in the import value terms Excluded or back-loaded are dairy, processed foodstuffs &

apparels, where tariffs are still high The exclusion of apparels have significant implications,

particularly for Jordan But it is also the sector where preference margins are high, &

concentration of exports in the sector resulted in high “value” of preferences for Jordan even if it has very low DF trade coverage

Fuller coverage could have increased preference value, particularly in Jordan

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EU Tariff Treatment by Regime, 2008

(Total 14238)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GSPLDCs

Egypt

Algeria

Jordan

Turkey

Tunisia

Morocc

o

Not coveredNon-Ad valoremNon-DF wtih preferenceDuty freeMFN DF

Source: TRAINS/WITS

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UNCTAD/CD-TFT 29

Note: EU DF Product Coverage by Regime (Total 14310) DF Lines by EU Tariff Regimes (incl MFN) (2007)

26.5

55.6

88.499.4

89.7

0102030405060708090

100

MFN duty free Total DF forGSP

Total DF forGSP+

Total duty freefor LDCs

Total duty freefor ACP

Source: TRAINS/WITS

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UNCTAD/CD-TFT 30

EU RTA Product Coverage of MFN & GSP Dutiable Lines, 2008 (Total

6241)

3261; 53%

691; 11%

93; 1%

152; 2%

738; 12%

1119; 18%

187; 3%

6 RTA DF5RTA DF4RTA DF3RTA DF2RTA DF1RTA DF0 RTA DF

Source: TRAINS/WITS

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UNCTAD/CD-TFT 31

EU - Frequency of “Sensitive” Products by HS Chapter, 2008 (DF in no or 1

RTAs, total 1308)

0

50

100

150

200

250

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97

2. Meet 4.Dairy

8. Edible frut nut20. Prep. vegetables, fruits

22. Beverages, spirits

Source: TRAINS/WITS

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UNCTAD/CD-TFT 32

EU MFN Tariffs 2007 (Simple Av, incl. AVEs)

Source: TRAINS/WITS

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

0101

10

0506

90

1207

20

2103

20

2804

50

2905

51

2934

20

3603

00

3921

13

4410

19

5105

31

5407

72

5901

90

6204

52

6903

10

7212

30

7403

21

8211

93

8428

90

8466

93

8517

18

8708

91

9101

19

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UNCTAD/CD-TFT 33

How do they affect DC exports? Not so much?

EU MFN & Effective Rates, 2007 (Weighted av.)

0.6

3.84.3

8.5

6.87.2

2.2

8.9

0.00.6

1.2 1.3 1.7

0.2

1.0

6.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan

MFN Effective

Source: TRAINS/WITS

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UNCTAD/CD-TFT 34

Share of EU Duty-Free Imports, 2007

99.893.2 94.8 91.8 94.8 97.5

80.9

17.8

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan

Source: TRAINS/WITS

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EU Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,

$000)

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

5000000

Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan

Actual Preference Total Potential Preference Total

Source: TRAINS/WITS

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UNCTAD/CD-TFT 36

EU Actual & Potential “Value” of Preferences, 2007 (Tariffs saved,

% of dutiable imports)

2.8

5.65.1

8.1

6.7

8.1

2.1 2.22.9

6.7 7.0

9.68.9

8.3

3.9

9.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Algeria Egypt Jordan Morocco Tunisia Turkey UAE Pakistan

Actual Preference (% dutiable) Potential Preference (% dutiable)

Source: TRAINS/WITS

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UNCTAD/CD-TFT 37

Source: TRAINS/WITS

Tunisia ($202mil)

80.8

11.62.7 4.9

150910 Virgin150990 Other olive oil151000 Other oilsOthers

Jordan ($3.5 mil)

70.7

17.1

6.45.8 150910 Virgin

070700 Cucumbers andgherkins, fresh orchilled.070200 Tomatoes, freshor chilled.

Others

Egypt ($58 mil)

15.8

13.0

11.4

10.16.55.9

37.4

080501 Oranges

080610 Fresh grpes

100640 Broken rice

070190 Other potatos

070820 Beans

100630 Semimilled orwholly milled riceOther

Morocco ($141 mil)

60.4

7.3

7.3

5.0

3.6

2.2

14.3

070200 Tomatoes

080520 Mandarins

081110 Strawberries

080510 Oranges

070990 Othervegetables200850 Apricots

Others

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UNCTAD/CD-TFT 38

Summary Tariff line coverage in EU RTAs is lower than US RTAs, as

low as 80% for Egypt, less than 90% for Algeria, Morocco, Tunisia (may be yet to be implemented)

Significantly better than GSP but lower than LDCs “Sensitive” products concentrate on Agriculture By contrast, the coverage is higher on import volume terms,

unlike US RTAs, all above 90% (olive oils, vegetables, fruits) Significant preference margins, thus preference value,

especially for Turkey. Caveat – EU has competing RTAs, so preference margin & value can be an overestimate

Some potential remain for improved preference for Egypt, Morocco, Tunisia & Jordan, not so much for Turkey

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UNCTAD/CD-TFT 39

Implications The design of product coverage and staging

matter for DC export opportunities Innovative approach & lessons Tariff reduction, longer period, longer than 10

years for fuller liberalization? Preferential TRQ, expansion and tariff

elimination for key products MFN reduction – Preference erosion but may

gain where products not covered or utilized

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UNCTAD/CD-TFT 40

Not all Preferences are utilizedTentative estimates of the utilization rates of

Quad unilateral preferential schemes by LDCs, 2007

Source: GSP database

0

10

20

30

40

50

60

70

80

90

100

Canada EU US Japan

41

UNCTAD/CD-TFT 41

Determine the eligibility for preferential treatment => can Determine the eligibility for preferential treatment => can be trade policy instrumentbe trade policy instrument Insulate an industry from the RTA consequences, to attract Insulate an industry from the RTA consequences, to attract

investment in strategic sectors like TRIMsinvestment in strategic sectors like TRIMs Raise production cost by protecting intermediate good Raise production cost by protecting intermediate good

producers (resultant distortion = 4.3% tariffs)producers (resultant distortion = 4.3% tariffs) Also compliance cost (1.8% under NAFTA)Also compliance cost (1.8% under NAFTA)

Restrictive rules hampers the use of preferences Restrictive rules hampers the use of preferences Often more restrictive in N-S than in S-S RTAsOften more restrictive in N-S than in S-S RTAs

Rules of Origin (1)

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UNCTAD/CD-TFT 42

Rules of Origin (2) Wholly obtained Substantial transformation, as measured by

Change in tariff classification Regional value-added Specific processing requirement

Some restrictive rules High local content requirement (60%) T&C – “yarn-forward”/double transformation Processed foodstuff – raw materials to be wholly obtained Fish taken outside territorial waters – “vessels” –

registration, flag, ownership, crew

43

UNCTAD/CD-TFT 43

Rules of Origin (3) Facilitated use of non-originating input to qualify for

RTA RoO in key products Time-bound exemption /“RoO-free quota” Phase-in implementation Lower thresholds in VA rules for DCs Use of non-originating row materials for processing Optional rules for processed AG Single transformation for apparels Broader & fuller cumulation (Paneuro) Higher tolerance rules

But RoO also reciprocal – balancing act needed

44

UNCTAD/CD-TFT 44

Other NTBs SPS/TBT Standards

Products may be covered but can be totally restricted (QR) Harmonization/equivalence/MRAs => difficult in N-S context? Cooperation in conformity assessment & certification?

SG/AD/CVM As per WTO requirement? Some eliminated AD for RTA partners SG – bilateral SG with elements of asymmetry + exclusion from global

SG?

AG subsidies Basically WTO issue, but need to be factored in Not to target export subsidies to RTA partners exports, zero-for-zero

(EPAs) & prohibition of new subsidies

45

UNCTAD/CD-TFT 45

(3) Deep Integration Issues Services

Binding existing regime, investment focus (M3), financial, telecom Limited M4 & labour mobility (high-skill labour, intra-corporate

transferees etc) Intellectual property rights

TRIPS-plus, to be applied on an MFN basis Investment

Liberation, investor protection vs Investment promotion & cooperation

Competition policy CP law (state aid, adoption of CPL) vs cooperation

Government procurement MA interests vs asymmetric supply capacity.

46

UNCTAD/CD-TFT 46

3. South-South RTAs Reinvigoration of SS RTAs - broader economic

cooperation S-S trade dynamic, now nearly 50% of DC trade Mostly intra-regional – distance matter. Role of

regional arrangements Limited complementarily, small markets, limited

liberalization traditionally noted More positive views as many engaged in SS RTAs What are the “realities”?

47

UNCTAD/CD-TFT 47

Intra-RTA trade generally lower in SS RTAs

Intra-RTA Trade Share (2008)

Source: UNCTAD GlobStat

0.40.8

2.24.54.7

6.38.39.0

11.311.7

13.425.4

49.567.2

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

ECCASCEMAC

UMAGCC

COMESASAARC

ECOECOWAS

SADCAPTA

WAEMUASEANNAFTA

EU

48

UNCTAD/CD-TFT 48

But grew faster in many SS RTAs

Av Annual Change in Intra- & Extra-RTA Exports: 2000-08

Source: UNCTAD GlobStat

Av annual growth 2000-2008

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

ECOAPTA

SAARC

COMESA

ECOWASUMA

GCC

CEMACSADC

WAEMU

ASEAN EU

NAFTA

Intra-Group

RoW

49

UNCTAD/CD-TFT 49

ATPA

0

2000

4000

6000

8000

10000

12000

199019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

ASEAN

0100200300400500600700800900

1000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.0

5.0

10.0

15.0

20.0

25.0

30.0

SAARC

0200400600800

10001200140016001800

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.01.02.03.04.05.06.07.08.0

ECO

0500

10001500200025003000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.02.04.0

6.08.010.0

Intra G share Intra-group Rest of the region Extra-region

Source: UNCTAD GlobStat

50

UNCTAD/CD-TFT 50

COMESA

0100200300400500600700800900

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.0

1.02.0

3.04.0

5.06.0

7.0

UEMOA

0

100

200

300

400

500

600

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.02.04.06.08.010.012.014.016.0

GCC

0200400600800

10001200

1990

1991

1992

1993

199419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

0.02.04.06.08.010.0

Intra G share Intra-group Rest of the region Extra-region

UMA

0

100

200

300

400

500

600

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0.00.51.01.52.02.53.03.54.0

Source: UNCTAD GlobStat

51

UNCTAD/CD-TFT 51

UMA

0%

20%

40%

60%

80%

100%

Developedeconomies

Africa UMA

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

UEMOA

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

Africa UEMOA

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

ECO

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

DevelopingAsia

ECO

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

GCC

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

DevelopingAsia

GCC

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

S-S RTA have the potential to foster diversification of DC exports into more value-added & technology intensive products

Source: UNCTAD GlobStat

52

UNCTAD/CD-TFT 52

APTA

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

DevelopingAsia

APTA

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

SAARC

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

DevelopingAsia

SAARC

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

CIS

0%

20%

40%

60%

80%

100%

Developedeconomies

Developingeconomies

CIS

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

ASEAN

0%10%20%30%40%50%60%70%80%90%

100%

Developedeconomies

DevelopingAsia

ASEAN

High technology M

Medium technology M

Low technology M

Natural resource-basedMPrimary products

Source: UNCTAD GlobStat

53

UNCTAD/CD-TFT 53

Scope for intra-regional S-S Cooperation

by sectorIntra-regional tariffs by sector

Intra-regioanl tariffs by Sectors, 2008

0.01.02.03.0

4.05.0

6.07.0

8.09.0

10.0

High-incomenon-OECD

LMI Middle E &N Africa

LMI South Asia SSA

AgricultureIndustrialPetroleumTextile & Clothing

Source: TRAINS/WITS

54

UNCTAD/CD-TFT 54

Scope for intra-regional S-S Cooperation

by degree of processingIntra-regional tariffs by Degree of Processing

Av Tariffs applied to Intra-Regional Trade by Degree of Processing, 2008

0.0

1.02.0

3.0

4.05.0

6.07.08.0

9.0

High-incomenon-OECD

LMI Middle E&N Africa

LMI South Asia SSA

Raw materialsIntermediate goodsConsumer goodsCapital goods

55

UNCTAD/CD-TFT 55

Summary Greater SS cooperation as opportunities for

overcoming scale constraints & create greater markets Platform for diversifying DCs into new markets &

products, higher value addition, access to technology Although still modest, SS integration as a tool for

exploiting the potential And, regional cooperative mechanism other than trade,

like in infrastructures, transport networks, through regional resource pool, particularly useful

Competitive supply capacity essential

56

UNCTAD/CD-TFT 56

Conclusion Designing adequate terms of N-S RTAs represent

challenge Trade & revenue impact tend to be greater for DCs,

hence greater adjustment costs => Need for careful design of scope & pacing

Innovative approaches and lessons in realizing export interest to be explored

Deep integration can be conducive to greater dynamic gains but also constrain policy space - careful assessment important

S-S integration & cooperation can provide useful avenue

57

UNCTAD/CD-TFT 57

Thank You

ContactsTaisuke Ito

E-mail: taisuke.ito@unctad.orgTel: +41 22 917 4893Fax: +41 22 917 0044