Presentation CSD meeting on TSIAs of DCFTAs with Egypt and ...trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152790.pdf · Social analysis –quantitative analysis Egypt Indicator

Trade Sustainability Impact

Assessments (TSIAs) in support of

negotiations of DCFTAs between the

EU and Egypt and Jordan

Public Meeting

Ecorys Nederland B.V.

Paul Wymenga, Nora Plaisier,

Corine Besseling, Erik Merkus

Brussels, 18 September 2014

1. Introduction

2. Results of the CGE modelling

3. Additional quantitative and qualitative analyses

◦ Social (incl. human rights)

◦ Environmental

4. In-depth sectoral analyses

5. Stakeholder consultations

6. Policy recommendations

7. Questions and contact information

Agenda of the Public Meeting

1. Introduction

0. Inception phase◦ Model specifications

◦ Preliminary screening on key sustainability issues

1. Overall analysis of the sustainability impacts◦ Scenario analysis and CGE modelling

◦ Additional quantitative and qualitative analyses

– Social, environmental, human rights

◦ Screening and scoping analysis

2. Sectorial Trade SIA analysis (present stage)◦ In-depth analysis of selected sectors and horizontal issues

◦ Causal Chain Analysis

◦ Literature review and interviews

3. Policy recommendations and flanking measures (present stage)◦ Causal Chain Analysis

◦ Final Report

Trade SIA approach (phases and methodologies)

Consultation

and

dissemination

(throughout

all phases)

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 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 a DCFTA?

Methodology Phase 1 – overall analysis

Assumptions

Trade liberalization

TariffsGoods

NTMsServices

NTMsSpillovers

2. Results of the CGE Modelling


Macro-economic effects of the DCFTA in the short run and long run:

Overall impacts at macro level for Egypt

Short run Long run

Variable/Country EU28 Egypt EU28 Egypt

National Income, million € 595.5 2343.1 511.8 3374.3

GDP, % change 0.0 1.2 0.0 1.8

Consumer prices, % change 0.0 -1.4 0.0 2.7

Wages, less skilled, % change 0.0 1.9 0.0 -2.0

Wages, medium skilled, % change 0.0 4.8 0.0 3.2

Wages, high skilled, % change 0.0 0.1 0.0 0.1

Terms of trade, % change 0.0 0.2 0.0 -1.0

Total imports, % change 0.1 7.7 0.1 24.7

Total exports, % change 0.1 8.3 0.1 26.7


The largest effects are due to reductions in Goods NTMs.

Overall impacts at macro level for Egypt

-2000 -1000 0 1000 2000 3000 4000

EU 28 short run

EU 28 long run

Egypt, short run

Egypt, long run

National Income effect, Million €

Tariffs

NTMs for Goods

NTMs for Services

Spillovers


Macro-economic effects in the short run and long run:

Overall impacts at macro level for Jordan

Short run Long Run

Variable/Country EU28 Jordan EU28 Jordan

National Income, million € 93.1 283.2 178.7 442.3

GDP, % change 0.0 1.3 0.0 2.1

Consumer prices, % change 0.0 -0.7 0.0 -0.5

Wages, less skilled, % change 0.0 1.7 0.0 2.4

Wages, medium skilled, % change 0.0 2.5 0.0 2.9

Wages, more skilled, % change 0.0 2.4 0.0 2.8

Terms of trade, % change 0.0 0.4 0.0 0.2

Total imports, % change 0.0 3.7 0.0 4.8

Total exports, % change 0.0 4.4 0.0 5.3


The largest (long run) effects are due to reductions in Goods

NTMs.

Overall impacts at macro level for Jordan

-100 0 100 200 300 400 500

EU 28, Short-run

EU 28, long-run

Jordan, Short-run

Jordan, long-run

National Income effect, Million €

Tariffs

NTMs for Goods

Spillovers


Impact on sectoral value added and employment

- Competititive sectors

- Growth in output & employment

- Non competitive sectors- Decline in output, employment


The five most expanding sectors:

Expected impacts on value added in Egypt

Short run Long run Share in

total VA

Other machinery and equipment 0.8 376.2 0.7%

Air transport 24.6 41.9 0.5%

Utilities 0.6 6.2 1.2%

Recreational, personal services 4.7 4.7 2.2%

Other manufactures 0.0 1.9 0.1%


The five most contracting sectors:

Expected impacts on value added in Egypt


total VA

Beverages and tobacco -7.8 -30.4 2.4%

Other processed foods -7.9 -11.7 2.7%

Textiles -0.4 -11.2 3.7%

Fabricated metal products -1.1 -10.7 1.4%

Vegetable oils and fats 2.2 -9.9 0.0%


The five most expanding sectors:

Expected impacts on value added in Jordan


total VA

Other manufactures 2.19 50.67 0.1%

Chemicals, rubber, plastics 0.79 4.35 10.5%

Motor vehicles, transport eq 1.04 2.90 0.2%

Electrical machinery 0.62 2.33 0.6%

Metals 0.75 1.68 1.7%


The five most contracting sectors:

Expected impacts on value added in Jordan


total VA

Beverages and tobacco -17.87 -33.47 0.8%

Leather -0.99 -5.72 0.2%

Grains and crops -1.27 -5.68 0.5%

Non-metallic mineral products -2.17 -5.03 0.9%

Other processed foods -1.30 -4.04 2.2%

3. Additional qualitative and quantitative analyses

◦ Social (incl. human rights)

◦ Environmental


DCFTA impacts on poverty and inequality:

Social analysis – quantitative analysis Egypt

Indicator Short run impact Long run impact

Poverty rate Decreases from 25.7 to 24%.

Also relative poverty slightly

decreases with 0.1 %-points

Increases to 27%, mostly driven by

expenditure effect. Also relative

poverty increases with 0.2 %-points.

Poverty

depth

Decreases with 0.3 %-points. Increases with 0.6 %-points, so the

poor will become poorer.

Dispersion Negligible (decile dispersion ratio

goes down with 0.1 %-points).

Negligible (decile dispersion ratio

same as baseline).

Gini Slight increase from 31.0 to 31.7 Slight decrease to 30.9

Richest vs.

poorest

No strong effect on inequality. No strong effect on inequality, as

disposable income for both rich and

poor decreases.


Social analysis – qualitative analysis Egypt

.

Job creation Rights at

work

Social

dialogue

DCFTA impact on Decent Work Agenda

Social

protection

Gender

equality


Social analysis Egypt (qualitative)

SR: employment . LR: medium and high skilled , low skilled workers , additional effects of FDI

Formal employment probably increases.

Workers from agriculture and food should move to industry, transport and services.

Skill adaptation of the moving workers has to be facilitated.

Job creation



Certain sectors will need to comply with EU production regulations that affect working conditions.

Pressure from EU based business partners to improve labour standards.

In contracting sectors, there may be some pressure on labourstandards.

Rights at work



Higher living standards lead to more demand for social security.

Effect depends on the change in informal sector.

Social protection



Could be a small positive impact because of higher demand for social dialogue.

Social dialogue is influenced by many factors not related to the DCFTA.

Social dialogue



Indirect impacts, because of increase in living standards and change in attitude towards equality.

Shifts in employment opportunities affect weakest groups of the workforce (women).

Gender equality


DCFTA impacts on poverty and inequality:

Social analysis – quantitative analysis Jordan

Indicator Short run impact Long run impact

Poverty rate Decreases from 11.9% to 11.0%.

Also relative poverty decreases

with 0.6 %-points.

Decreases to 11.2%. Also relative

poverty decreases with 0.5 %-

points.

Poverty

depth

Goes down with 1 %-point. Goes down with 0.8 %-point

compared to baseline. So poor

become less poor.

Dispersion Decile dispersion rate decreases

from 12.7 to 12.3.

Decile dispersion rate decreases

from 12.7 to 12.4.

Gini No change No change

Richest vs.

poorest

Difference in income groups

caused by DCFTA is in favour of

lowest income groups.

Same as short run effect.


Social analysis – qualitative analysis Jordan

.

Job creation Rights at

work

Social

dialogue

DCFTA impact on Decent Work Agenda

Social

protection

Gender

equality


Social analysis Jordan (qualitative)

Employment goes up (both in SR and LR).

Impact on informal economy difficult to predict.

Inter-sector movement of workers (3% total): from agriculture and food to other sectors (e.g. industry, transport and services).

Skill adaptation of the moving workers has to be facilitated.

Job creation



Certain sectors will need to comply with EU regulations that affect working conditions.

Pressure from EU based business partners to improve labour standards.

Rights at work



Higher living standards lead to more demand for social security.

Effect depends on the change in informal sector and the facilitation thereof.

Social protection



Could be a small positive impact because of higher demand for social dialogue.

Social dialogue is influenced by many factors not related to the DCFTA.

Social dialogue



Indirect impacts, because of increase in living standards and change in attitude towards equality.

Shifts in employment opportunities affect weakest groups of the workforce (women).

Gender equality


• The DCFTA will mainly affect economic and social rights, and not

cultural, civil or political rights.

• The net effect is difficult to predict.

• HR of vulnerable groups could be at risk, because of the increase

in poverty and reduction in disposable income.

• Rights that could be negatively affected:

– Right to adequate standard of living;

– Right to health;

– Right to education.

• In some sectors, pressure on labour standards is expected to

increase.

• Negative effects can be mitigated by flanking measures.

Human rights analysis Egypt


• The DCFTA will mainly affect economic and social rights, and not

cultural, civil or political rights.

• The net effect is expected to be positive, as the DCFTA will

reduce poverty and increase disposable incomes for a large

majority of the population.

• In some sectors, pressure on labour standards is expected to

increase.

• Potential negative effects can be mitigated by flanking measures.

Human rights analysis Jordan


Change in emissions of classical pollutants due to DCFTA

Environmental analysis Egypt (quantitative)

0%

1%

2%

3%

4%

5%

6%

7%

Scale

Composition

Total

Short run Long run


Change in water use due to DCFTA (in mln m3)

Environmental analysis Egypt (quantitative)

-3.000

-2.500

-2.000

-1.500

-1.000

-500

0

500

1.000

1.500

Scale

Composition

Total

Short run Long run


Environmental analysis Egypt (qualitative)

Water WasteClimate

change

DCFTA impact on environmental indicators

Ecosystems

&

biodiversity

Greening

the

economy



Positive effect on water scarcity due to decline in agriculture.

Therefore also less water pollution from pesticides and fertilizers.

Increase in water transport affects marine environment.

Water



Municipal solid waste increases due to increase in GDP.

In the long run, less hazardous waste.

Waste

Environmental impacts from the DCFTA


Intensity of land use is expected to decrease.

Net effect ambiguous because of increased in air pollution, a short-run increase in water scarcity and vulnerability to desertification, and short-run increase in water pollution.

Recreational services will increase.

Ecosystems &

biodiversity



Short run: increase of CO2 emissions by 0.58 percent (995 thousand tonnes, EUR 19 million).

In the long-run, CO2 emissions will increase by 1.02 percent (2065 thousand tonnes, EUR 41 million).

Climate change



Internal reorganisation of economic activities.

More demand for green products.

Greening the

economy


Change in emissions of classical pollutants due to DCFTA

Environmental analysis Jordan (quantitative)

-1,5%

-1,0%

-0,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5% Scale

Composition

Total

Short run Long run


Change in water use due to DCFTA (in mln m3)

Environmental analysis Jordan (quantitative)

-40

-30

-20

-10

0

10

20

30

Scale

Composition

Total

Short run Long run


Environmental analysis Jordan (qualitative)

Water WasteClimate

change

DCFTA impact on environmental indicators

Ecosystems

&

biodiversity

Greening

the

economy



Positive effect on water scarcity due to decline in agriculture (shift in economic structure)

Effect on water pollution is unclear

Positive: decline agriculture

But also growth in industry, municipal waste

Water



Municipal solid waste increases due to increase in GDP

Increased production of hazardous waste

Final effect depended on regulations and waste management

Waste



Intensity of land use is expected to increase in the long run.

Decreased pressure on forests (decrease in wood and paper production)

Ecosystems &

biodiversity



In the long-run, CO2 emissions will increase

- 1.4 percent

- 275 thousand tonnes

- EUR 5.5 million (rough estimate)

Climate change



Mixed effects due to shifts in economic activity from agriculture to industry

- Increased air pollution

- Decreased water use

Possible inner industry improvements incl. meeting EU regulations and consumer demandsfor “greener” industrial and agricultural

Effects of possible flanking measures and EU-Jordanian cooperation

Greening the

economy

4. In-depth sector analyses


Four specific sectors or cross-cutting issues per country were

selected in the Screening & Scoping exercise for more in-depth

analysis.

Selection criteria:

1. Economic importance;

2. The expected economic impact of the DCFTA on sectors /

issues;

3. The social and environmental impacts of the DCFTA on

sectors / issues;

4. Stakeholder issues of special importance;

5. The reality of the negotiations and the issues that are of

specific importance to the actual negotiations.

Method for selection of sectors or horizontal issues


The following sectors were selected and analysed for Egypt:

• Vegetables, fruit and nuts;

• Textiles;

• Other machinery and equipment;

• Business and ICT.

The following sectors and horizontal issues were selected and

analysed for Jordan:

• Pharmaceuticals;

• Financial services;

• Telecommunications;

• Water and energy.



Electronic consultation

Public meetings EU

Local workshops

Online SME survey

Personal interviews

• Websites

• Facebook and Twitter

• Newsletters (2 sent out)

• 18 March 2014

• 18 September 2014 (today)

• Cairo (22 May 2014)

• Amman (11 June 2014)

• Disseminated by DG ENTR

• Closed on 1 August 2014

• Continuously, for example with

Ministries, private sector,

NGOs.



Recommendations for the economic pillar

Policy measure Potential to address

Within DCFTA Outside DCFTA

Allow for phasing in of regulatory approximation and remaining tariff reductions 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.

√ √

Provide internationalisation support to SMEs. √

Support to enhance productivity of business. √

Stimulate improvements in the business climate. √ √


Recommendations for the social pillar



Support education and training programmes to allow easier updating and upgrading of human capital, with a clear link to labour market requirements, and promote life-long learning and skills transformation.

√

Support flexibility of the labour market - easing reallocation between sectors while ensuring that workers’ rights are respected in law and practice.

√

Further develop social protection system, with attention for reaching those most in need and those most likely to be negatively affected by the DCFTA.

√

Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. through effective implementation of relevant ILO conventions, and by approximating domestic legislation to the 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.).

√ √

Consider creating monitoring mechanisms of the social (including human rights) impact of the DCFTA (and more broadly EU-Egypt relations in these areas).

√ √

Promotion of civil society involvement. √ √


Recommendations for the environmental pillar



Maintain / further improve incentives to improve efficient use of energy and water.

√

Create incentives for environmentally friendly production, including with respect to air pollution.

√ √

Improve waste collection and waste management systems. √

Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Egypt relations).

√


Recommendations for the economic pillar



Allow for phasing in of remaining tariff reductions 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.

√ √

Raise awareness among SMEs in particular on the DCFTA and the opportunities it may provide; provide internationalisation support to SMEs.

√ √

Stimulate improvements in the business climate. √ √


Recommendations for the social pillar

Policy measure Potential to addressWithin DCFTA Outside DCFTA

Support education and training programmes to allow easier updating and upgrading of human capital, with a clear link to labour market requirements, and promote life-long learning.

√

Support flexibility of the labour market - easing reallocation between sectors while ensuring that workers’ rights are respected in law and practice.

√

Further promote formalisation of employment in all sectors and develop social protection system, with attention for reaching those most in need and those most likely to be negatively affected by the DCFTA.

√

Prevent risks of pressures to lower the labour standards due to rising international competition, e.g. through effective implementation of relevant ILO conventions, and by approximating domestic legislation to the 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.).

√ √

Create monitoring mechanisms of the social (including human rights) impact of the DCFTA (and more broadly EU-Jordan relations in these areas).

√ √

Promotion of civil society involvement. √ √


Recommendations for the environmental pillar



Maintain / further improve incentives to improve efficient use of energy and water.

√

Create incentives for environmentally friendly production, including with respect to air pollution.

√ √

Improve waste collection and waste management systems. √

Consider creating mechanisms for monitoring of environmental (and social) impact of the DCFTA (and more broadly EU-Jordan relations).

√

7. Questions and contact information

Contact us through:

W: www.trade-sia.com/egypt

www.trade-sia.com/jordan

E: [email protected]

[email protected]

T: +31 10 453 87 81 (Egypt)

+31 10 453 87 48 (Jordan)

Documents

Presentation CSD meeting on TSIAs of DCFTAs with Egypt and ...trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152790.pdf · Social analysis –quantitative analysis Egypt Indicator