Assessing and Addressing the Effects of Trade on Employment Multilateral Trading System and Trade...

Assessing and Addressing the Effects of Trade on Employment

Multilateral Trading System and Trade Negotiations

Indonesia 12 - 16 July 2010

Ralf PetersChief Technical Advisor

ILO Trade and Employment Programmepeters@ilo.org

International Labour Organization

2

H L5 3

0 3 L1 0

1 5 H

The Liberalisation Game

3

H L5 3

0 3 L1 0

1 5 H

The Liberalisation GameTrade Negotiations because of Prisoners Dilemma

Applied Tariffs Changes

0

5

10

15

20

25

30

35

40

45

Pre-Uruguay Latest Available Year

Tar

iffs

Brazil

China

Egypt

Indonesia

Kenya

Malaysia

Philippines

Venezuela

Trade Agreements

“Three Levels”

Regional Trade

Agreements

(Free Trade

Agreements)Preferences• EU, NAFTA• ASEAN• GSP, AGOA

Multilateral

Trading

System• All countries

(all WTO members)

• WTO agreements• (Plurilateral

agreements)

Bilateral Trade

Agreements• Indonesia – Japan• EU – Mercusor• Accession to WTO

Belarus - WTO

Outline

• The Multilateral Trading System• The Doha Round• Regional Trade Agreements

WTO and GATT

Umbrella AGREEMENT ESTABLISHING WTO

Goods Services Intellectual property

Basic principles GATT GATS TRIPS

Additional details Other goods agreements and annexes

Services annexes

Market access commitments

Countries’ schedules of commitments

Countries’ schedules of commitments(and MFN exemptions)

Dispute settlement DISPUTE SETTLEMENT

Transparency TRADE POLICY REVIEWS

Source: WTO

Main Objectives of the WTO

• Trade without discrimination• Freer trade: gradually, through negotiation• Predictability: through binding and transparent commitments• Promoting fair competition• Encouraging development and economic reform

9

GATT Basic Principles: Trade without Discrimination

• MFN-clause (Most-Favoured-Nation): Art. ICountries cannot (normally) discriminate between their trading partners. E.g. give the same tariff to all trading partners (between foreign suppliers)

• National treatment: Art. IIIOnce goods have cleared customs, imported goods must be treated equally to domestically-produced goods (between domestic and foreign supplier)

10

Other Key GATT Articles• II: Schedule of Concessions (Bound rates: maximum ceiling level)• XVIII bis: Tariff negotiations (GATT to sponsor negotiations time to

time)

• XI: Elimination of quantitative restrictions (Export restrictions allowed for food security)

• XIX: Safeguard (emergency action on imports if quantity increased AND causes or threatens to cause serious injury)

• XX: General exceptions (protect human, animal or plant life or health)

• XIV: Free-trade Agreements (only under conditions) • XVIII: Modification of schedules (negotiate change but pay

compensation)

Similar Provisions for Services Trade

• Most Favoured Nation Treatment: Article II (1) of the GATS:

“…each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.”

11

12

Country Schedules(specific commitments by service sector and

mode of supply)

Sector or subsector

Limitations on market access

Limitations on national treatment

Additional commitments

A 1) 2) 3) 4)

1) 2) 3) 4)

B 1) 2) 3) 4)

1) 2) 3) 4)

…

… … … …

Country X - Schedule of Specific Commitments

Modes of supply: 1) Cross-border supply2) Consumption abroad3) Commercial presence4) Presence of natural persons

Outline

• The Multilateral Trading System• The Doha Round• Regional Trade Agreements

subscribing members and subjects covered by the international trade rounds

year place/name subject covered countries

1947 Geneva tariffs 231949 Annecy tariffs 131951 Torquay tariffs 381956 Geneva tariffs 26

1960-1961Geneva (Dillon Round)

tariffs, 26

1964-1967Geneva (Kennedy Round)

tariffs, anti dumping measures 62

1973-1979Geneva (Tokyo-Round)

tariffs, non tariff measures, framework agreements, „codes“Bovine Meat AgreementInternational Dairy Agreement

102

1986-1994Geneva (Uruguay Round)

tariffs, non tariff measures, rules services, intellectual property, dispute settlement textiles, agriculture, creation of the WTO, etc

123

15

Market Access: Current Tariffs

Bound Applied

Developed countries 38 34

Developed countries 4 3Developing countries 20 13

25Agriculture

Non-Agriculture

Developing countries 61

Source: UNCTAD TRAINS and UNCTAD calculations based on WTO CTS

Specific Problems:• Tariff escalation• Tariff peaks

European Union: bound and applied tariff rates, agriculture

Note: New AVEs (Paris), Five products with tariffs above 500% not plotted.

0

50

100

150

200

250

300

350

400

450

1 159 317 475 633 791 949 1107 1265 1423 1581 1739 1897 2055

Olive oil, refinedSugar, raw

Tea

Developing countries: bound and applied tariff rates, agriculture

Kenya bound and applied tariffs

0

20

40

60

80

100

120

0 200 400 600 800

bound

applied

Number of tariff lines

Tari

ffs

in p

er c

ent

Bound at ceiling level

Lower applied rates

18

Developing countries: bound and applied tariff rates, agriculture

Number of tariff lines

Tari

ffs

in p

er c

ent

Cote d'Ivoir

0

10

20

30

40

50

60

70

1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667

bound

applied

SUPPORT TO PRODUCERS% of the total farm receipt

0

20

40

60

80

OECD EU Japan Switzerland

1986-88 1998-2000

Source: OCDE, Politiques agricoles des pays de l’OCDE, 2001

D e ve lo pe d cou ntrie s D e ve lo pin g cou ntrie s

AMS

• Final bound AMS of OECD countries for the year 2000 = US$158 billion

97 %OCDE

2.8

12.611.9

2.9

8.1

13.6

0

2

4

6

8

10

12

14

16

Developed Developing LDC

%Bound*Applied**

Initial Tariffs

Source: WITS/TRAINS *Final Uruguay Round,

**Last available year, mostly 2001

Trade Weighted Averages

Developing countries have higher tariffs

22

Bilateral average applied tariffs

Trade weighted applied tariffs, Source: UN COMTRADE and UNCTAD TRAINS

Developed Developing Least developed

Source % % %

Developed 2.1 9.2 11.1

Developing 3.9 7.2 14.4

Least developed

3.1 7.2 8.3

Total 2.9 8.1 13.6

Initial tariff peaks

8.2

9.9

0.4

3.5

0.4 0.7

0

2

4

6

8

10

12

Bound Applied

%DevelopedDevelopingLDC

Source: WITS/TRAINS

Peaks:Tariffs above three

times national average

Percentage of Items with Peaks in all Tariff Universe

Developed countries have loweraverage tariffs but more peaks

=> Harmonizing approach

24

1996

2000

0

1

2

3

4

5

6

7

8

9

10

Raw silk - PrefRaw silk - MFNSilk Yarn - PrefSilk yarn - MFNWoven silk - PrefWoven silk - MFNFinished Silk - PrefFinished Silk - MFN

Raw silk Silk yarnWoven

silk

Finished silk

Silk tariff escalation (weighted average tariffs)

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Doha Round Overview 1999 Seattle Failed launching of a new round

2001 Doha MD Doha round launched

2002 -- Missed deadlines (SDT, implementation)

2003 Cancun Mid-term agreement failed

2004 July Package Framework agreement

2005 Hong Kong MD Modest progress

2006 -- Suspension in June

2007 -- Resumption (February)AG & NAMA Draft Modalities (July)

2008…

-- Revised DMs (Feb, May, July, …)July Mini-Ministerial : almost an agreement?

Doha: Negotiating Mandate

• Single undertaking– Impl. Issues and SDT review– Agriculture– Services Market access (reduction of trade barriers)– NAMA– Rules (AD, SCM & RTAs)– TRIPS– Trade and Environment

• Singapore issues– Trade Facilitation (part of single undertaking)

• Non single undertaking– DSU Review

26

AD = Anti DumpingSCM = Subsidies Countervailing MeasuresRTA = Regional Trade agreementsTRIPS = Trade Related Interlectual PropertyDSU = Dispute Settlement Understanding

Outline of the Agreement on Agriculture

“Three Pillars”

Domestic Support• AMS reduction• Green Box• de minimis

Market Access• Tariffication• Tariff reduction• Minimum access• Special Safeguard

Export Subsidies

• Reduction• Prohibition of

new subsidies

• Special and Differential (S&D) Treatment for DCs and LDCs• Related Agreements, e.g. Marrakesh Decision• Establishment of a Committee on Agriculture • Continuation of the reform process

Outline of the Negotiations on Market Access for Non-Agricultural Products

Tariff Binding

• Coverage• Level

Formula• Formula• Preferences

Sectorial Approach

• Sectors • Participation

Flexibilities for DCs and SDT for LDCs

NTBs

Specific groups• Recently acceded members• SVE

Issues

Special and differential treatment

0

01 ttB

ttBt

a

a

0

01 8

8

t

tt

atttt 27.08.0 001

wa

waw

a tA

tAt

0

01

01 tct

0

20

1 tPt

tPBtt

a

a

LU

LULL

BB

BBBtBt

00

110011

Formulae

Conclusion Trade Negotiations

• Doha Round Negotiations are ongoing• Very sensitive in most countries

• What is a « good » level of commitments?• How much policy space do developing

countries need?

• What is the impact on employers and workers?

Change in producer surplus Cancun and Harbinson

-25,000-20,000-15,000-10,000

-5,0000

5,00010,00015,00020,000

$m

Develo

ped

Develo

ping

LDC

Wor

ldSSA

CancunHarbinson

31

Source: ATPSM, only agriculture

Change in consumer surplus Cancun and Harbinson

-20,000

-10,000

0

10,000

20,000

30,000

40,000

$m

Develo

ped

Develo

ping

LDC

Wor

ldSSA

CancunHarbinson

32

Source: ATPSM, only agriculture

Change in welfare: Cancun and Harbinson

-2,0000

2,0004,0006,0008,000

10,00012,00014,000

$m

Develo

ped

Develo

ping

LDC

Wor

ldSSA

CancunHarbinson

33

Source: ATPSM, only agriculture

RISKS: Sectoral Unemployment

34

Machinery and

Equipment

Non Ferrous Metals

Other Manufacturing

Motor Vehicles Electronics

China -2.8 -4.1 -0.2 -10.4 6.7India -2.2 -25.9 -2.1 -5.6 -1Rest of South Asia -8.7 -13.4 -7.3 -36.8 -14.9South East Asia 0.2 -6.4 -2.3 -6.6 -1.7Brazil -5.2 3.2 -2 -4.3 -1Central America and Caribbean -6.3 -8.2 -6.2 -2.1 -6.8Andean Pact -4.7 6.4 -2.9 -9.6 -10.7Argentina, Chile & Uruguay 3.2 -1.4 -2 9.3 -7.6Middle East and North Africa 0.2 5.8 -1.5 1.9 5.1Sub Saharan Africa -0.6 8 -0.5 0.6 -3.5

Asia

Africa and Middle East

Americas

Percent Changes in Labour Usage Relate to Base, by SectorSwiss Formula, Ambitious Scenario

Source: GTAP, NAMA

Outline

• The Multilateral Trading System• The Doha Round• Regional Trade Agreements

Number of Notified RTAs by Year of Entry into Force: 1948-2009

36

Source: WTO

RTA proliferation means increased share (%) of world trade under RTAs

0

5

10

15

20

25

30

35

40

45

50

2000 2005

37Note: Estimate based on 113 RTAs in force in 2000 with trade data of 1999. Source: WTO, World Trade Report 2003.

43.2%

51.2%

38

BahamasHaiti

USA

Canada

Uruguay

Paraguay

ArgentinaBrazil

Chile

Bolivia Ecuador

Peru

Venezuela

Colombia

Panama

Nicaragua

CostaRica

El Salvador

GuatemalaHonduras

Dominican Republic

Dominica, Suriname,Jamaica, St. Lucia, Belize,St. Kitts & Nevis, Grenada, Barbados,Guyana, St. Vincent & the Grenadines,Antigua & Barbuda, Trinidad & Tobago

Korea

Philippines

New Zealand

Indonesia

Australia

Brunei Darussalam

Chinese Taipei

Malaysia

Japan

People’s Rep. of China

Hong Kong, China

India

Russia

Singapore

ThailandBangladesh

Papua New Guinea

Laos

Fed. States of Micronesia,Marshall Islands, Kiribati, Palau,W. Samoa,Tonga, Vanuatu, E. Timor,Cook Islands, Nauru, Niue, Tuvalu

Bhutan, Maldives,Nepal, Pakistan

Mexico

Viet Nam

Fiji, Solomon Islands,Vanuatu

MyanmarCambodia

Sri Lanka

ASIA AMERICAS

FUTURE PROSPECTS

Source: Estevadeordal

(2004)

Welfare Effects of an RTAPositive

– RTAs creates trade (static trade creation)– RTAs generates dynamic gains from scale economy,

greater competition, FDI inflows & technology transfer

Negative– RTAs diverge trade from more efficient third

countries to less efficient RTA partners

39