Friday, May 23, 2008

What should be the Basis for Assessing the Impact of Trade Agreements?

Envisioned Regional Trade Agreements and Bilateral Trade Agreements[1]
By: Arnel D. Mateo[2]

In order to assess the impact of an impending trade agreement, it is a must that we know how regional trade agreements and how bilateral trade agreements should operate. The rules provided for by the World Trade Organization provide flexibilities which can be utilized by the developing worlds. These rules are reflected in the Uruguay Round, in the Doha Declarations and in the succeeding WTO rounds.
Here is an outline of how Regional Trade Agreements and Bilateral Trade Agreements should be which are geared toward economic development and alleviation of poverty. Entering into Regional Trade Agreements and Bilateral Trade Agreements is supposed to be the best way of negotiating trade between Developed Countries and Developing Countries.

I. An RTA or BTA…

..Must be WTO Compliant:

1. At initial stages, a level of flexibility is needed in eliminating/reducing tariff and non-tariff barriers to promote economic development of developing countries, to protect infant industries and to serve as source of government revenue. (GATS5, GATT28).

2. RTAs/BTAs must provide increase market access with enabling clauses. Enabling clauses allow giving of favorable treatment to imported goods coming from developing countries.

3. Must provide transitional time periods for development.[3] The WTO Rules generally provide a 10 year transition period before a developing country could fully eliminate or remove its tariff and non-tariff barriers.

4. Must cover substantially all trade except sensitive sectors. (GATT24) Although full liberalization is the objective to increase competitiveness of industries, sensitive industries may be excluded in order to protect the crucial sectors of the State.
5. Must not have more restrictive measures than third party trade. A State or a region cannot restrict its trade base on sensitivity of the industry by excluding some of its sectors if the same has been opened to a third party. (ex. EU-ASEAN vs. EU-US on Airlines)

..Must protect developing countries domestic interest: Developing countries must be allowed to adopt or implement strategic trade policies or selective industrial trade policies that were utilized by the present industrialized countries.

6. Government subsidies for domestic and export for developing countries must be allowed at initial stages. Although this is discouraged for it will defeat the essence of full liberalization and will lower down efficiency of domestic industries, the same can be done during the initial stages of trade in an effort to protect infant industries.

7. Must liberalize market access by imposing less restrictive rules of origin.[4] Setting lower content threshold for developing countries will avoid tariff discrimination.

8. Must incorporate special safeguards on agricultural products. It allows temporary application of an additional duty on top of applied tariffs in cases of import volume surges or import price falls.[5]

..Must involve a Process that engages the sectors:

9. There must be a clear trade policy agenda and institutional accountability. Direction must be set as to what concessions can be made and what cannot. Institutional framework must be transparent so as to clearly define the responsibilities of our trade negotiating team.

10.Must be constitutional. The RTA or BTA must be in line with the States’ national economy and patrimony principles.

11. Must recognize people’s right to effective and reasonable participation as well as right of access to information. An impending trade agreement can only be assessed by the stakeholders if negotiation exchanges are made available to them.

II. Before entering an RTA or BTA…

1. Policy makers have to consider which of their industries are ready to deal with international competition.

2. Determine if the products are along the country’s comparative advantage or if these are being produced by firms that realized economies of scale in production.

3. Policy makers must identify if these industries have ready access to infrastructures and that the educational system is able to produced skilled labor force over the next ten years or so.

4. Expenditures on social services must be made available.

5. There must be functioning financial system that will provide credit to domestic industries.

6. Government must extend support for technology, production management, organization, marketing, etc.

7. Government must provide market incentives, and

8. There must be State intervention.

[1] Author’s reflection on WTO Rules
[2] Student, 2008 Philippine Global Trade E-Learning Program
[3] Par. 8, Art. 12 of the TBT Agreement
[4] William E. James, Asian Development Bank
[5] Article 5 and under the Special Treatment provision in Annex 5 of the WTO Agreement.

2 comments:

Lawrence Villamar said...

"6. Government subsidies for domestic and export for developing countries must be allowed at initial stages. Although this is discouraged for it will defeat the essence of full liberalization and will lower down efficiency of domestic industries, the same can be done during the initial stages of trade in an effort to protect infant industries. "

I quite agree with this. My question is: will this be exclusively implemented to developing countries only? Because if we're talking about infant industries, developed countries in some instances or two also has what it considers 'infant industries".

Arnel D. Mateo said...

These are matters of negotiating mandates. These are the levels of flexibility that developing countries can use as provided for by the WTO Rules. As regards developed countries, other options are available to them like the sensitivity clause.