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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 [email protected]
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)
25
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