Trade Policy Workshop for MPs in the East Africa Community

27-28 May 2010, Arusha, Tanzania Trade Negotiations and Commercial Diplomacy Branch,

UNCTAD, Geneva

Trade Policy Workshop for MPs in the

East Africa Community Organization of presentation:

1.Structure of the Multilateral Trading System (MTS) from the GATT 1947 to the WTO (1995), incl main principles

2.Functioning of the MTS:

- Provisions of the GATT and WTO agreements that could assist in growth and development

- The WTO’s Dispute Settlement Mechanism

3. Successful trade and development strategies for mitigating the impact of global economic and financial crisis.

UNCTAD The evolving scope of the multilateral trade agendaThe evolving scope of the multilateral trade agenda

Cross-cutting issues :Cross-cutting issues :

Special and differential treatment and Implementation issuesSpecial and differential treatment and Implementation issuesTechnical assistanceTechnical assistance

LDCs and small economiesLDCs and small economies Trade, debt and finance, and transfer of technologyTrade, debt and finance, and transfer of technology

The GATT agendaThe GATT agenda1947-1986:1947-1986:MARKET MARKET ACCESS ACCESS

for trade in goods (non-agric)=rules on

border measuresborder measures

++

The Uruguay Round The Uruguay Round agenda (1994):agenda (1994):

agriculture services TRIPSTRIMS

environment= rules on some

domestic policies within the borderwithin the border

++

The Doha agendaThe Doha agenda(2001):(2001):

Singapore issuesSingapore issues= rules on = rules on moremore

domestic policiesdomestic policieswithin the borderwithin the border

AND…

The multilateral trading The multilateral trading system can be seen as a system can be seen as a

CUBE*:CUBE*:

Level of liberalisation of

Market Access

(border measures)(border measures)

(tariffs, non tariffs barriers, rules of origin, SPS/TBTs, quotas, AD…)

Number of countries part of the multilateral trading system

Depth and number of issues of domestic economic policy (inside the borders)) included in multilateral trading system(services, intellectual property, investments, competition, government procurement, trade facilitation….)

_

+

+

+

_ _

*original idea developed by Craig van Grasstek

The cube changes:The cube changes:

GATT 1947GATT 1947(till the 80s)

from 23 to approx. 80 countries

slow market access liberalisation

Little intrusion in domestic policies

(plurilateral codes, subsidies, purchases…)

Uruguay Round Uruguay Round (1986-94)(1986-94)

fast market access liberalisation

from approx. 90 to

128 countries

Various issues of domestic policy: ServicesTRIPsTRIMssusidies

And keeps changing….

+

_

_ + _

+

_

+ _+

_+

The evolution towards Doha and The evolution towards Doha and post-Doha post-Doha

Liberalisation keeps moving but it is short in touching sensitive issues for developed countries

(AD, tariffs peaks, rules of origin, standards etc.) From 153 countries part of the WTO to….?

Larger impact on domestic policies:

Services, Singapore issues

Industrialised countries consider that their liberalisation regarding market Industrialised countries consider that their liberalisation regarding market access has almost reached its maximum limits. Their interests are thus access has almost reached its maximum limits. Their interests are thus concentrated on advocating further liberalisation (at and within the borders) concentrated on advocating further liberalisation (at and within the borders) in developing countries.in developing countries.

_

+ _+

_+

Evolution of the GATT and the WTOEvolution of the GATT and the WTO

• The General Agreement on Tariffs and Trade (GATT) 1947 came into force in 1948 following the Havana Conference (1947).

• It is a multilateral agreement among countries providing a framework for the conduct of international trade.

GATT 1947GATT 1947

• Common rules governing trade

• Result of the first round of trade negotiations

• Schedules of concessions (result of market access negotiations)

• 23 contracting parties

Three fundamental principlesThree fundamental principles

1. Most Favoured Nation (MFN) Treatment (Article I)

2. National Treatment (Article III)

3. Publication and Administration of Trade Regulations-Transparency (Article X)

Other important provisionsOther important provisions

• Article XI. No quantitative restrictions with some exceptions

• Article XX. Exceptions to all to the GATT provisions

• Article XXIV. Customs Unions and Free trade Areas

• Article XXVIII. Renegotiation of tariff concessions

Trade Negotiation RoundsTrade Negotiation Rounds

Since the Annecy Round (1949), seven Rounds have been concluded; the last being the Uruguay Round( 1986-1994).

Evolution of trade negotiationsEvolution of trade negotiations

• Before Tokyo Round – tariff reductions

• Tokyo Round – clarification of Non Tariff Measures, participation of developing countries, various Codes on an optional basis, Dispute settlement improvements

• UR – GATS, TRIPS, Agriculture, S&D Treatment, Dispute Settlement Mechanism

Outcomes from the Uruguay RoundOutcomes from the Uruguay Round

• GATT 1947 becomes the GATT 1994

• Marrakesh Agreement establishing the WTO in 1994

• Single package approach

• S&D, but still strict disciplines applied to newly acceded developing countries and LDCs

• Rule based system, more specific Agreements (Safeguards, TBT, SPS…)

• Deeper tariff cuts

Special and Differential Treatment Special and Differential Treatment (S&D) Provisions(S&D) Provisions

• Enabling Clause – 20 November 1979 adopted by GATT Council

• Erosion of S&D Provisions in the Uruguay Round Agreements

• Today, S&D Provisions only to a large extent mean longer time frame to achieve the same objective

• Doha mandate – Strengthen S&D Provisions to make them more meaningful and enforceable

Contribution of the multilateral tradingContribution of the multilateral tradingsystem to growth and development - Isystem to growth and development - I

• Trade as a means to an end – meet the MDGs

• Chapeau of the Marrakesh Agreement

• Trade policies have to be within the parameters of the GATT and WTO provisions.

• Includes efforts to further expand the production base into higher value-added exports embodying higher technology and knowledge-based industries( Moving up the value-chain).

• Need to constantly undertake self- review of competitiveness level vis-a- vis other regions and countries, cost of doing business- like the number of working days needed to approve a business license;types of fiscal and tax incentives and other implementation measures.

.

Contribution of the multilateral tradingContribution of the multilateral tradingsystem to growth and development - IIsystem to growth and development - II

Provisions of the GATT and WTO which could be availed of:

1. Agri. Subsidies - ( export Art 9.1; domestic support Art 6.2 & 6.4 )

2. Sanitary and Phytosanitary Measures - Harmonization to international standards, equivalence; adaptation to Regional Conditions, Mutual Recognition Agreements.

3. Technical Barriers to Trade- Conformity Assessment( Art 5, TBT);

4. Private sector participation - crucial & beneficial in the development of standards and technical regulations.

5. Trade Related Investment Measures( TRIMS)- only to the LDCs;

6. Special Economic Zones ( SEZ) or Export Processing Zones ( EPZ)-

Contribution of the multilateral trading Contribution of the multilateral trading system to growth and development - IIIsystem to growth and development - III

7. Customs Valuation( GATT Art VII), use of transaction value and other valuation methods as per the CVA.

8. Import Licensing Procedures- automatic and non-automatic licensing.

9. Use of fiscal and tax incentives under the SCVM Agreement;

10. Art 27.2( of the SCVM Agreement) industrial subsidies – for LDC Members.

11. Duty Drawback schemes are allowed under the SCVM Agreement (footnote 61- schemes allowing for the remission or drawback of import charges levied on inputs that are consumed in the production of the exported product/( making normal allowance for waste). Inputs consumed in the production process are inputs physically incorporated, energy, fuels, and oil used in the production process and catalysts which are consumed in the course of their use to obtain the exported product. An efficient Duty Drawback system will help encourage production for exports.

Contribution of the multilateral trading Contribution of the multilateral trading system to growth and development - IVsystem to growth and development - IV

13.Rules of Origin( ROO) - and their use. As a CU, should use harmonized ROO. Including the provisions of Art^2 ( h) and Art 3 (d) of Annex II of the WTO Agreement on ROO.

14. Services sector – new area of growth and expansion.

15. Intellectual Property Rights, notwithstanding the transitional period till 2013 for implementation of the TRIPS Agreement and till 2016 for provisions related to patent protection for pharmaceuticals. This provides the legal certainties and assurances to investors, domestic and foreign.

Contribution of the multilateral trading Contribution of the multilateral trading system to growth and development - Vsystem to growth and development - V

16. GATT Art V- Freedom of transit

17. GATT Art VIII- Fees and Formalities connected with Importation and Exportation.

18. GATT Art X- Transparency, including appeals process- independent of the agencies entrusted with administrative enforcement.

19. The NG on Trade Facilitation- concepts such as the use of Single Window, risk assessment and release of goods based on prior information, eliminating the use of pre-shipment inspection etc.

20. Under the NAMA negotiations, proposals to do away with the use of consular fees.

Contribution of the multilateral Contribution of the multilateral trading system to growth and trading system to growth and development - VIdevelopment - VI

21. Trade remedies/ trade defense mechanisms

22. Anti Dumping, safeguards, countervailing measures duties

23. The Dispute Settlement Mechanism of the WTO

24. Apart from this formal trade adjudication process, there are also informal channels, such as through the SPS and TBT Committees- for issues related to these committees.

Addressing the ‘development crisis’ by promoting sustained trade and economic recovery and more equitable, people-centered

and sustainable development.

Key Challenge of the Financial CrisisKey Challenge of the Financial Crisis

Global Recession & Poverty Impact

• In 2009, the global economy experienced a deep recession

• World GDP growth slowed to 1.9% in 2008 & declined by 2.2 % in 2009

• For 2010, preliminary forecasts suggest a recovery in global GDP growth of 2.4%. But remains fragile. No major improvement in socio-economic

indicators.

Trade slump & weak recovery

• A sharp contraction of international trade whose growth, by the end of 2008, turned negative.

• Data for the third quarter of 2009, suggest that international trade has bottomed out and some rebound is underway.

• But world trade contracted in 2009 by about 12% relative to 2008.

Figure 1. Non-oil imports of the four largest economies, by origin (indexed to January 2007)

Sectoral performances - goods

The decline & subsequent recovery, in global trade involved all economic sectors.

• US, the largest global importer, showed some recovery in its imports in 2009.

• China, the lragest exporter, saw its exports experiencing a stronger rebound in virtually all economic sectors.

• Commodities prices trend upwards but remain uncertain.

Sectoral performancs - services

Developing countries are recovering faster

• But the recovery is slowing down

Global Trade Imbalances

Crisis-mitigation strategies and economic stimulus

1. Increasing trade financing

2. Providing stimulus / bailout packages

3. Strengthening regulatory & institutional reform

4. Improving production & competitiveness

5. Improving multilateral & regional arrangements

6. Enhancing South-South trade

Increasing trade financing

• Limited and unaffordable access to trade finance reduced global trade

• Interventions by governments and IFIs were crucial for capital injection, liquidity increase & risk mitigation support

• South-South cooperative initiatives can ease access to trade finance, reduce trade costs & spur investment

Stimulus Package

• US package of $787 billion or 5% of GDP

• China package of $585 billion or 13 of GDP

• Bangladesh package of $500 million or 0.6 GDP

• In EU from 0.2% of GDP in Italy to 2.6% in Germany

• In Latin America from 0.3% of GDP in Brazil

to 2.2% in Chile

Strengthening regulatory & institutional reform

• Regulatory failure in a deregulated environment became manifest by the financial crisis.

• Hence various reform options aim at a more stable financial sector that can provide long-term financing to productive sectors

• Many also seek greater social efficiency & equitable markets through regulation.

Strenghtening & diversifying production & improving competitivenss

• Countries adopted measures to promote the long-term competitiveness of industries.

• Many sought to identify & produce competitively new products, & exploit new markets.

• Used proactive industrial, agricultural and

services policies.

Improving multilateral & regional arrangements

Providing greater market access & entry for exports of developing countries:

• Addressing protectionism• Dealing with NTBs• Completing the DDA• Making trade preferences meaningful• Reassessing the MTS linked to MDGs• Ensuring coherence between

multilateralism & regionalism

Enhancing South-South trade

• A vibrant avenue for future trade growth of developing countries.

• The GSTP is an important tool.

• Financial & monetary cooperation is being strengthened. Eg. Chiang Mai Initiative( ASEAN)

Impact of crisis mitigation measures

• Measures have helped contain the crisis and its contagion, & propelled a quick rebound even though the recovery remains fragile.

• Continuing with recovery measures is thus important, but pay attention to debt burden.

• Stimulus packages may distort competitive conditions & influence decision on location of investment & production.

Sustained and Sustainable growth and development

Sources of ‘green’ growth production, trade & development:

a) Enhancing energy efficiency

b) Mainstreaming sustainable agriculture, including organic agriculture

c) Harnessing the use of RETs, and

d) Developing sustainable services sectors

Conclusions1. Need for more equitable and economically, socially &

environmentally sustainable growth, trade & development models, with focus on employment creation.

2. Ensuring that the fragile recovery is sustained.

3. Striking a balance between external demand & domestic demand.

4. States should be enabled to proactively support building of capabilities for strengthening and diversifying production, & trading competitively.

5. Multilateralism & global coherence & coherence between the trading, financing & monetary systems constitute architectural enables ingredients.

Thank You