DEEP MEASURES IN REGIONAL TRADE · PDF fileDEEP MEASURES IN REGIONAL TRADE AGREEMENTS: HOW MULTILATERAL-FRIENDLY? AN OVERVIEW OF OECD FINDINGS OECD Global Forum on Trade “Reconciling

DEEP MEASURES IN REGIONAL TRADE AGREEMENTS:

HOW MULTILATERAL-FRIENDLY?

AN OVERVIEW OF OECD FINDINGS

OECD Global Forum on Trade

“Reconciling Multilateralism and Regionalism in a Post-Bali World”

Paris, 11-12 February 2014

Iza Lejárraga, Trade and Agriculture Directorate

OECD Trade and Agriculture Directorate 2

Overview of Presentation

TRENDS IN REGIONALISM

BACKGROUND TO OECD WORK ON RTAs

CHECKLIST OF MULTILATERAL-FRIENDLY ATTRIBUTES

HIGHLIGHTS FROM OECD FINDINGS

CONCLUSION

Source: Compiled from WTO Database on RTAs

Note: Only includes RTAs notified to the WTO that are in force.

3

Regionalism has proliferated and deepened

4

First Wave (1985-2000) Second Wave (2001-present)

1. GOODS

Only 5 RTAs include services

1. SERVICES

Over 105 RTAs include services

2. NEGATIVE INTEGRATION

Removal of barriers

Trade diversion vs. trade creation

2. POSITIVE INTEGRATION

Provision of public goods

Positive externalities and dynamic gains

3. GEO-POLITICAL

Regional

Driven by political interests

3. COMMERCIAL

Cross-regional

Aligned with Global Value Chains

4. MAINLY OECD

28% of RTAs North-South

South-South RTAs shallow

4. EMERGING ECONOMIES

59% of RTAs North-South

South-South RTAs becoming deeper

5. PROLIFERATION

New agreements with key partners

Duplication and overlaps

5. CONSOLIDATION

Expansion of existing agreements

Harmonization and deepening

The focus of regionalism has been shifting







CONCLUSION

Background of Trade Committee work on RTAs:

Multilateralising Regionalism


• Questions: Can some deep commitments and disciplines in RTAs be multilsaterilised; if yes, how? What are some good practices in RTA design and content? (TAD/TC(2009)1; TAD/TC/WP(2009)18)

• Coverage: A dozen policy areas, focusing on deep measures (i.e., not traditional border measures). Main focus on RTAs signed by OECD countries; some studies cover South-South RTAs.

• Methodologies: All studies look at legal obligations; in a limited set of policy areas, additional analyses have investigated implementation, quantitative impact and political economy.

• Caveats: Questions addressed from a technical feasibility perspective, and not from a political feasibility point of view. Important questions of political will outside the scope of studies.

Policy options for multilateralising deep RTA

commitments: Two approaches


“Bottom up”: RTAs-driven

--Clauses (e.g., third-party MFN)

--Extension of existing agreements

--Coordination and convergence

--Mega-regionals

“Top down”: WTO-driven

--Committees

--Disciplines

--Negotiations

--Dispute Settlement

Review and

amendment of

RTA

Clauses on the

choice of

dispute fora

Provision to

implementation of

WTO obligations

Dynamic

incorporation of

WTO Agreements

Customs union

on sectoral

basis

Liberal ROO -

denial of

benefits

Unconditional

(third-party)

MFN clause

Suspension or

replacement

of agreements

Text Text Text

Lego Blocks Process – 12 Stages

Extension to

non-Members

Provision of

Observer

Status

Open accession

clauses (non-

region bound)

Obligation to

cooperate in WTO

negotiations

Good practices in RTAs to promote ‘building-block’ effects

OECD Trade and Agriculture Directorate







CONCLUSION

Factors influencing multilateralisability

Multilaterali-sation

Dispersion

Coherence & homogeneity

Extent of discrimination

Predictability (compliance)

Economic impact

(optimal area)


Checklist of multilateral-friendly attributes

Economic Impact: What are the economic dividends and the constraints ?

5a) Trade effect from globalising WTO-plus 5b) Political economy constraints

Predictability: How enforceable and transparent are WTO-plus measures?

4a) Mandatory through dispute settlement 4b) Transparency of deep measures

Extent of Discrimination: How discriminatory is the treatment granted under WTO-plus practices?

3a) Non-excludable (de facto MFN) 3b) Eligibility an extension of benefits

Coherence and Homogeneity: How consisistent are WTO-plus measures across RTAs and with WTO?

2a) Coherence with WTO agreements 2b) Similarity across RTAs

Dispersion: How widespread are WTO-plus measures in RTAs?

1a) Critical mass of RTAs 1b) Broad representation of WTO Members


Profile of deep measures by policy area


Ag

ricu

ltu

re

SP

S

TB

Ts

Exp

ort

Restr

ict.

Tra

de

Fa

cil

itati

on

Serv

ices

La

bo

ur

Mo

bil

ity

E-c

om

merc

e

Inv

estm

en

t

Co

mp

eti

tio

n

Inte

llectu

al

Pro

p.

Rig

hts

Go

vern

men

t

Pro

cu

rem

en

t

Tra

ns

pare

nc

y

An

ti-c

orr

up

tio

n

En

vir

on

men

t

Critical Mass, incl.

developing countries

Coherence with WTO

agreements

International standards -- --

High degree of

homogeneity --

Non-discriminatory

(non-excludable)

Liberal ROO or lack of

ROO --

Third-party MFN or

extension benefits -- -- -- NA NA NA NA NA NA

Mandatory (not best-

endeavour)

Enforceable via dispute

settlement

Co-operation on

implementation -- -- -- -- -- -- --

Economic impact

-- -- -- -- -- --- -- -- -- -- --

Political economy

-- -- -- -- -- -- -- -- -- -- -- --

Note: High, good and limited potential for multilateralisation. “NA” denotes not applicable, and “ –“ not assessed in OECD work

Note: High, good and limited potential for multilateralisation. “NA” denotes not applicable, and “ –“ not assessed in OECD work.

The findings reflected on this chart are preliminary and are being refined in a forthcoming OECD paper.







CONCLUSION

Critical mass of RTAs deepen commitments: over 80% of

RTAs WTO-plus in services, investment and transparency


0 10 20 30 40 50 60 70 80 90

Environment

E-commerce

Govt. Procurement

Export restrictions

Movement of perople

SPS

TBT

IPR

Competition

Transparency

Investment

Services

Percentage of RTAs signed since 2001

Source: Compiled from texts of agreements.

RTAs that Deepen Obligations, by Policy Area

Deep provisions spreading to North-South and South-South

RTAs; marginal representation of low–income countries


Source: Compiled from WTO RTAs Databseoed

from texts of

Composition of 21st Century RTAs

First wave of

RTA (1985-

2000), only 28 %

of deep RTAs

were North-

South

Propagation of

deep measures

from North-

South to South-

South RTAs

Only 3% of

South partners

with deep RTAs

are low-income

countries

There is a high degree of similarity in WTO-plus measures,

both within and across trading partners


• In services, 60% of WTO-plus commitments of OECD countries are similar; 49% similarity in overall sample.

• In investment, most commitments and lists of non-conforming measures are found to be highly similar.

• In transparency, 45% of RTAs signed since 2001 contain a horizontal transparency chapter with common obligations.

• In e-commerce, countries have reached similar, albeit not identical conclusions to unresolved issues in WTO.

• In government procurement, there is high similarity in WTO-plus measures regarding central government, and less so in measures related to local (sub-national) governments.

Most WTO-plus measures are mandatory; WTO-

beyond have best-endeavour or carve-outs

17

0

10

20

30

40

50

60

70

80

90

100

Pe

rce

nta

ge

of

RT

As

Enforceable via dispute settlement mechanism Mandatory but carved out of dispute settlement Best endeavour

Source: Compiled from WTO Database on RTAs

Enforceability of WTO-plus and WTO-beyond Commitments, by Policy Area

Weak discrimination in many WTO-plus areas

Level of discrimination

Agriculture High. Preference margins average 5% (some products 15%).

Export restrictions Low. De facto MFN effect.

TBTs/SPS Moderate. MRAs with no ROO are less trade distorting-than tariffs.

Transparency Low. De facto MFN effect.

Services Moderate. Liberal ROO attenuate spaghetti bowl effects. There are

exceptions, such as recognition of professional qualifications.

Investment Low. MFN clauses relatively prevalent.

Govt procurement Moderate. GPA forbids discrimination non-party subsidiaries.

Competition Low. Few explicit discriminatory provisions.

IPR Low. De facto MFN effect.

Environment Low. De facto MFN effect.


Deep RTAs are promoting greater transparency,

trust and policy coordination


• Deep measures require greater transparency and trust --Deep measures cannot be liberalised in the same way that traditional border barriers can: greater focus on enhancing regulatory transparency .

• Evolving scope: more than the exchange of information --Obligations on transparency in RTAs have broadened beyond WTO scope, incorporating elements of policy coordination and cooperation (procedures for designing and reviewing regulations, participation of public-including foreign-parties, coherence across domestic regulatory portfolios).

• Trade-boosting effects: quantitative evidence --A marginal improvement in transparency (each additional WTO-plus obligation) is associated with an increase in trade of over 1 per cent: 1.2% for goods, 1.4% in agriculture. --A marginal reduction in preferential tariffs (1%) is associated with an overall 2% increase in trade in agriculture (1.34% in North-South trade).







CONCLUSION

“Multilateralising regionalism”: RTAs can be stepping

stones for global trade reform

Critical mass, North-South & South-South

Coherence & homogeneity across RTAs

Mandatory & enforceable obligations

MFN-driven (relatively weakly discriminatory)

Generating higher levels of transparency

GLOBAL

Many improved commitments and

disciplines in deep RTAs have

multilateral-friendly features…

…but the desirability and feasibility of

their multilateralisation depends on

economic and political considerations.

See OECD work on RTAs:

www.oecd.org/trade/rta

Thank you for your attention

Documents

DEEP MEASURES IN REGIONAL TRADE · PDF fileDEEP MEASURES IN REGIONAL TRADE AGREEMENTS: HOW MULTILATERAL-FRIENDLY? AN OVERVIEW OF OECD FINDINGS OECD Global Forum on Trade “Reconciling