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GBI Study on Free Trade Agreements U.S. Agricultural Export Development Council 2010 Attaché Seminar July 14, 2010 Crystal Gateway Marriott Paul Drazek.

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Presentation on theme: "GBI Study on Free Trade Agreements U.S. Agricultural Export Development Council 2010 Attaché Seminar July 14, 2010 Crystal Gateway Marriott Paul Drazek."— Presentation transcript:

1 GBI Study on Free Trade Agreements U.S. Agricultural Export Development Council 2010 Attaché Seminar July 14, 2010 Crystal Gateway Marriott Paul Drazek DTB Associates, LLP

2 US Policy Has Driven Growth in FTAs Proliferation of FTAs began in earnest with U.S. policy of competitive liberalization. Former USTR Robert Zoellick. –Expand trade policy beyond global trade agreements to regional and bilateral deals and use with WTO to expand trade liberalization. –Example: Expand NAFTA leads to FTAA/APEC, etc. leads to global deal in WTO. –At least, that was the theory.

3 US Started Strong, But Not Much Recently FTA Year Negotiations Initiated Date Entered into Force Israel FTA19849/1/85 Canada FTA19861/1/89 NAFTA19911/1/94 Jordan FTA200012/17/01 Singapore FTA20001/1/04 Chile FTA20001/1/04 Australia FTA20031/1/05 Morocco FTA20021/1/06 Bahrain FTA20048/1/06 El Salvador - CAFTA20033/1/06 Honduras - CAFTA20034/1/06 Nicaragua – CAFTA20034/1/06 Guatemala – CAFTA20037/1/06 Dominican Rep - CAFTA20033/1/07 Costa Rica – CAFTA20031/1/09 Oman FTA20051/1/09 Peru20032/1/09 Colombia2004[signed 2006] Panama2004[signed 2007] Korea2006[signed 2007]

4 Trade Agreements No Longer in Vogue Political opposition to trade agreements in the U.S. limited negotiations: FTAA and APEC lost momentum and died. TPA expired in 2007; no serious effort to renew. In fact, only current major trade bill would mandate re- negotiation of all existing trade agreements, including the WTO on U.S. terms or require U.S. withdrawal. And Doha Round is stuck in neutral.

5 But Other Countries are Playing Lets Make a Deal Hundreds of foreign FTAs have been completed and notified to the WTO and hundreds more are in the works.

6 Andean Community (CAN) Armenia - Kazakhstan Armenia - Moldova Armenia - Russian Federation Armenia - Turkmenistan Armenia - Ukraine ASEAN - China ASEAN Free Trade Area (AFTA) Asia Pacific Trade Agreement (APTA) Asia Pacific Trade Agreement (APTA) - Accession of China Australia - Chile Australia - New Zealand (ANZCERTA) Australia - Papua New Guinea (PATCRA) Brunei Darussalam - Japan Canada - Chile Canada - Costa Rica Canada - EFTA Canada - Israel Canada - Peru CARICOM Central American Common Market (CACM) Central European Free Trade Agreement (CEFTA) Chile - China Chile - Colombia Chile - Costa Rica Chile - El Salvador Chile - Guatemala Chile – India Chile - Japan Chile - Mexico China - Hong Kong, China China - Macao, China China - New Zealand China – Peru China - Singapore Common Economic Zone Common Market for Eastern and Southern Africa (COMESA) Commonwealth of Independent States (CIS) Costa Rica - Mexico East African Community (EAC) EU - Albania EU - Algeria EU – Andorra EU - Bosnia and Herzegovina EU - CARIFORUM States EPA EU - Chile EU - Côte d'Ivoire EU - Croatia EU - Egypt EU - Faroe Islands EU - Former Yugoslav Republic of Macedonia EU - Iceland EU - Israel EU - Jordan EU - Lebanon EU - Mexico EU – Montenegro EU - Morocco EU - Norway EU – Overseas Countries and Territories EU - Palestinian Authority EU - South Africa EU - Switzerland - Liechtenstein EU - Syria EU - Tunisia EU - Turkey EU (9) Enlargement EU (10) Enlargement EU (12) Enlargement EU (15) Enlargement EU (25) Enlargement EU (27) Enlargement EC Original Treaty Economic and Monetary Community of Central Africa (CEMAC) Economic Community of West African States (ECOWAS) Economic Cooperation Organization (ECO) EFTA - Chile EFTA - Croatia EFTA - Egypt EFTA - Former Yugoslav Republic of Macedonia EFTA - Israel EFTA - Jordan EFTA - Korea, Republic of EFTA - Lebanon EFTA - Mexico EFTA - Morocco EFTA - Palestinian Authority EFTA - SACU EFTA - Singapore EFTA - Tunisia EFTA - Turkey EFTA (Stockholm Convention) EFTA accession of Iceland Egypt - Turkey El Salvador - Mexico Eurasian Economic Community (EAEU) European Economic Area (EEA) Faroe Islands - Norway Faroe Islands - Switzerland Georgia – Armenia Georgia - Azerbaijan Georgia - Kazakhstan Georgia - Russian Federation Georgia - Turkmenistan Georgia - Ukraine Guatemala - Mexico Gulf Cooperation Council (GCC) Honduras - Mexico Iceland - Faroe Islands India - Bhutan India - Singapore India - Sri Lanka Israel - Mexico Japan - Indonesia Japan – Malaysia Japan - Mexico Japan - Philippines Japan - Singapore Japan - Switzerland Japan - Thailand Japan - Vietnam Jordan - Singapore Korea – ASEAN Korea, Republic of - Chile Korea, Republic of - Singapore Kyrgyz Republic - Armenia Kyrgyz Republic - Kazakhstan Kyrgyz Republic - Moldova Kyrgyz Republic - Russian Federation Kyrgyz Republic - Ukraine Kyrgyz Republic – Uzbekistan Lao People's Democratic Republic - Thailand Latin American Integration Association (LAIA) Melanesian Spearhead Group (MSG) MERCOSUR Mexico - Nicaragua New Zealand - Singapore Nicaragua and the Separate Customs Territory of Taiwan, Penghu, Kinmen and MatsuPacific Island Countries Trade Agreement Pakistan - China Pakistan - Malaysia Pakistan - Sri Lanka Panama - Chile Panama - Costa Rica Panama - El Salvador (Central America) Panama - Singapore Panama and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu Pan-Arab Free Trade Area (PAFTA) Peru - Chile Peru - Singapore Protocol on Trade Negotiations (PTN) Singapore - Australia South Asian Free Trade Agreement (SAFTA) South Asian Preferential Trade Arrangement South Pacific Regional Trade and Economic Cooperation Agreement (SPARTEUA) Southern African Customs Union (SACU) Southern African Development Community Thailand – Australia Thailand - New Zealand Trans-Pacific Strategic Economic Partnership Turkey - Albania Turkey - Bosnia and Herzegovina Turkey - Croatia Turkey - Former Yugoslav Republic of Macedonia Turkey - Georgia Turkey - Israel Turkey - Morocco Turkey - Palestinian Authority Turkey - Syria Turkey - Tunisia Ukraine – Azerbaijan Ukraine - Belarus Ukraine - Former Yugoslav Republic of Macedonia Ukraine - Kazakhstan Ukraine - Moldova Ukraine - Russian Federation Ukraine - Tajikistan Ukraine - Uzbekistan Ukraine -Turkmenistan West African Economic and Monetary Union Australia Bahrain Chile CAFTA-DR Costa Rica Israel Jordan Morocco NAFTA Oman Peru Singapore FTAs Already Notified to the WTO

7 FTAs Completed But Yet Implemented Foreign FTAs Completed But Not Yet Implemented Canada - Colombia Canada - Jordan Canada – Panama Colombia - EFTA EU - Korea India – ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia) India – Thailand U.S. FTAs Completed But Yet Implemented Panama Colombia South Korea

8 FTAs Under Negotiation or Planned Australia – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) Australia – India Australia – Indonesia Australia – Malaysia (MAFTA) Australia – New Zealand & ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia) Bimstec Countries (Bangladesh, Buthan, India, Myanmar, Nepal, Sri Lanka, Thailand) Canada – CARICOM (Antigua & Barbuda, Bahamas, Barbados, Belize, Dominica, Granada, Guyana, Haiti, Jamaica, Monserrat, Trinidad & Tobago, St. Kitt, Nevis, St. Lucia, St. Vincent & the Grenidines, Surinam) Canada – CA4 Countries (El Salvador, Guatemala, Honduras y Nicaragua) Canada – Colombia Canada – Dominican Republic Canada – India Canada – Jordan Canada - Morocco Canada - Ukraine Canada – Singapore Chile - Malaysia Chile – Turkey Chile - Vietnam China – ASEAN (ACFTA) China – Australia China – Costa Rica China – GCC China – India China – Switzerland China - Taiwan Colombia - Guatemala Costa Rica – Singapore Costa Rica – China EFTA – GCC (EFTA: Iceland, Norway, Switzerland, and Liechtenstein) GCC: Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) EFTA – Ukraine EU – ACP Countries (African, Caribbean and Pacific Group of States: Angola, Antigua and Barbuda, Belize, Cape Verde, Comoros, Bahamas, Barbados, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo (Brazzaville), Congo (Kinshasa), Cook Islands, Cote d'Ivoire, Cuba, Djibouti, Dominica, Dominican Republic, Eritrea, Ethiopia, Fiji, Gabon, Gambia, Ghana, Grenada, Republic of Guinea, Guinea-Bissau, Equatorial Guinea, Guyana, Haiti, Jamaica, Kenya, Kiribati, Lesotho, Liberia, Madagascar, (continued) Malawi, Mali, Marshall Islands, Mauritania, Mauritius, Micronesia, Mozambique, Namibia, Nauru, Niger, Nigeria, Niue, Palau, Papua New Guinea, Rwanda, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Solomon Islands, Samoa, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Suriname, Swaziland, Tanzania, Timor Leste, Togo, Tonga, Trinidad and Tobago, Tuvalu, Uganda, Vanuatu, Zambia, Zimbabwe) EU – Andean (CAN) (Bolivia, Colombia, Ecuador and Peru) EU – ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia) EU – Canada EU – Central America (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama) EU – New Zealand EU - Pakistan EU – Philippines EU – Southern / Eastern Africa EU – Syria EU - Taiwan EU – Ukraine EU – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) EU – India EU – Indonesia EU – Mercosur (Brazil, Argentina, Uruguay and Paraguay) GCC – African Countries (Morocco, South Africa, Congo, Sierra Leone, Mozambique, Uganda, Mauritania, Senegal, Zambia, Ivory Coast, Egypt) GCC – Malaysia GCC – New Zealand India – Canada India – Chile India – EFTA (Iceland, Norway, Switzerland, and Liechtenstein) India – Egypt India – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) India – Hong Kong India – Israel India – Malaysia India - New Zealand India – Southern Africa Customs Union (SACU - Botswana, Lesotho, Namibia, South Africa and Swaziland) India - Turkey India – South Korea Indonesia – New Zealand Israel – MERCOSUR (Brazil, Argentina, Uruguay and Paraguay) Japan – ASEAN (AJCEPA) (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia) Japan – Australia Japan – Brunei (JBEPA) Japan – Chile Japan – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) Japan – India (CEPA) Japan – Israel Japan – New Zealand Japan – Pakistan Japan - Peru Japan - Taiwan Korea – Australia Singapore – Ukraine Korea – Canada Korea – China Korea – EU Korea – India Korea – Japan Korea - MERCOSUR Korea – Mexico Korea – New Zealand Korea – Peru Korea -Pakistan Mexico – MERCOSUR (Brazil, Argentina, Uruguay and Paraguay) New Zealand – Hong Kong Pakistan – Afghanistan Pakistan – Indonesia Pakistan – Mauritius Panama – Guatemala Peru – EFTA (Iceland, Norway, Switzerland, and Liechtenstein) Peru - Mexico Peru - Taiwan Peru - Thailand Peru - Uruguay Russia - Ecuador Singapore – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain) Taiwan – Dominican Republic Taiwan – Honduras – El Salvador Taiwan – Singapore Turkey - Jordan Venezuela – Mercosur US FTAs Currently Under Negotiation or Planned Trans-Pacific Partnership (TPP) - Could add three new country FTAs: New Zealand, Brunei and Vietnam

9 Why Should We Care? Global trade liberalization going forward, but U.S. largely excluded. U.S. export interests put at a competitive disadvantage. Also,many foreign FTAs probably illegal.

10 Global Business Initiative (GBI) Study Examined impact of ten non-U.S. trade agreements: EU- Chile, EU-Mexico, Japan-Mexico, Australia-Chile, Japan-Chile, China-ASEAN, China-New Zealand, Korea-Chile, Japan-ASEAN and Canada-Colombia. Examined WTO compatibility of those FTAs. Also carried out economic analysis of benefits of U.S. FTAs.

11 Participants Sponsoring groups were: U.S. Wheat Associates (lead organization), Almond Board of California, National Pork Producers Council, Northwest Horticultural Council, USA Poultry and Egg Export Council, USA Rice Federation, U.S. Apple Association, U.S. Dairy Export Council, U.S. Grains Council, U.S. Meat Export Federation, U.S. Potato Board, U.S. Soybean Export Council. Groups that carried out the study were DTB Associates, Allen F. Johnson and Associates, AgRisk Management (Iowa State), Sumner and Lee Economists, and Global AgriTrends.

12 Implications for U.S. Export Interests Impacts on U.S. export ag interests limited so far; two reasons: –Most agreements are relatively new and full preferential benefits have not yet taken effect. –Many agricultural products are sensitive for the importing country and have been excluded from the agreement. (Raises WTO legitimacy questions) Some findings were noteworthy.

13 EU-Chile: –EU imports of beef, pork and poultry from Chile expanded significantly as a result of TRQ concessions. –EU imports of apples, pears, cherries and almonds also expanded with the reduction or elimination of import duties. –Chilean imports of EU cheese, pork, potato chips and frozen processed potatoes also expanded as duties were reduced or eliminated. Implications for U.S. Export Interests

14 Japan-Mexico: –Japan significantly increased its imports of Mexican beef, pork and beef offal as a result of TRQ concessions and duty cuts. China-ASEAN: –ASEAN countries significantly increased their imports of apple, pears, and, in at least one of the ASEAN countries, poultry from China. Implications for U.S. Export Interests

15 Korea-Chile: –Korean imports of Chilean pork have increased significantly. Canada-Colombia: –Now that this FTA will enter into effect before the U.S.- Colombia FTA, Canadian exporters will gain a significant competitive advantage over the U.S. in the Colombian market for products such as wheat, pork and frozen processed potatoes. Implications for U.S. Export Interests

16 These represent results for a small sample of products from a small sample of FTAs, in which the full effects of the agreements have not yet been felt. If these FTAs are not compatible with WTO rules, the preferential duties and TRQs are, themselves, inconsistent with WTO rules. Conclusions on Economic Impacts

17 Legality of FTAs Under the WTO Article XXIV.8(b) of the (GATT) defines a WTO-consistent free-trade area as being a group of two or more customs territories in which duties and other restrictive regulations of commerce... are eliminated on substantially all trade between or among parties. Substantially all trade not defined in any of the WTO agreements and never tested in the dispute settlement system. 90 percent of trade commonly used as a rule of thumb by FTA participants.

18 Legality of FTAs Under the WTO Four methods used in GBI study for determining whether substantially all trade is covered: 1.Measure percentage of pre-agreement trade subject to duty elimination. Comment: If there is little trade in some products because of high tariffs or other barriers, exempting such products would still show substantially all trade to appear to be covered.

19 Legality of FTAs Under the WTO 2.Measure percentage of tariffs lines subject to duty elimination. Comment: A small number of tariff lines could represent a large amount of trade. For example, only 5% of tariff lines could cover 15% of trade.

20 Legality of FTAs Under the WTO 3.Require coverage of all sectors. Comment: By itself, this approach would be insufficient as a measure of substantially all trade but it could be used in conjunction with other measures.

21 Legality of FTAs Under the WTO 4.Coverage of products of significant export interest; a product that account for at least 2% of the exporting countrys total exports. Comment: As with coverage of all sectors, by itself, this approach would be insufficient as a measure of substantially all trade but it could be used in conjunction with other measures.

22 Example of WTO Compatibility Analysis: Mexico-Japan 1. Country2. Total Imports from Partner 3. Total Imports from Partner, Exempted Products 4. Exempted Products as Percentage of Total Imports 5. Total Agricultural Imports from Partner 6. Total Agricultural Imports from Partner, Exempted Products 7. Exempted Agricultural Products as Percentage of Total Imports Japan$1,851 million$256 million13.8%$407 million$216 million53% Mexico$9,059 million$94 million1.0%$5,205,486$2,950,09756% 1. Percentage of pre-agreement trade subject to liberalization under the agreement

23 Example of WTO Compatibility Analysis: Mexico-Japan 2. Percentage of tariff lines exempted from liberalization under the agreement 1. Country 2. Total Number of Tariff Lines 3. Total Number of Exempted Tariff Lines 4. Exempted Lines as Percentage of Total Lines 5. Total Number of Agricultural Tariff Lines 6. Total Number of Exempted Agricultural Tariff Lines 7. Exempted Agricultural Lines as Percentage of Total Agricultural Lines Eight-Digit HS Level Japan % % Mexico % % Six-Digit HS Level Japan % % Mexico % %

24 Example of WTO Compatibility Analysis: Mexico-Japan 3. Coverage of Sectors Most agricultural tariff lines of commercial significance either fully excluded or subject to TRQ treatment by both Japan and Mexico: Includes meat products, dairy products, most fruits and vegetables, grains, a significant number of oilseed products, a significant number of processed food products, and some animal feeds. Most tariff lines subject to full liberalization on both sides already subject to either zero or relatively low duties.

25 Example of WTO Compatibility Analysis: Mexico-Japan Coverage of Sectors Exempted Products Share of Total Value of Agricultural Production in Japan Beef9.55% Swine5.22% Poultry3.23% Meat0.02% Milk6.97% Eggs4.29% Vegetables3.40% Potatoes2.21% Soy beans0.54% Beans0.50% Chestnuts0.08% Fruit4.11% Tea2.77% Wheat1.49% Barley0.30% Maize0.43% Rice28.23% Groundnuts0.10% Sugar0.72% Tobacco0.96% Total75.10% Exempted Products Share of Total Value of Agricultural Production in Mexico Beef12.89% Swine7.51% Milk11.18% Eggs5.45% Honey0.32% Fresh vegetables1% Potatoes2.10% Beans2.41% Bananas5.33% Wheat1.47% Barley0.61% Maize11.09% Rice0.11% Grain sorghum2.30% Safflower seed0.12% Soy beans0.12% Wool grease0.01% Sugar4.31% Tobacco0.11% Total68.43% Japan ExclusionsMexicos Exclusions

26 Example of WTO Compatibility Analysis: Mexico-Japan 4. Coverage of Products of Significant Export Interest Mexican Exemptions of Products of Export interest to Japan 2. Description of Exempted Product 3. HS Number4. Percentage of Total Japanese Exports, 2008 Fish030.16% Crustaceans % Breads, Pasta % Sauces % Food Preps % Tobacco240.04% Organic Compounds % Medicine3003 & % Motor Vehicles872.66% Japanese Exemptions of Products of Export interest to Mexico 2. Description of Exempted Product 3. HS Number4. Percentage of Total Mexican Exports, 2008 Live Bovine Animals % Beef 0201 & % Pork % Fish 0302, 0303, % Dairy % Honey % Fresh Grapes % Durum Wheat % Crustaceans % Sugar and sucrose % Sugar Confectionary % Chocolate Food Preps % Groats, Meal, Starch % Prepared,preserved vegetables % Fruit juice % Coffee, Tea Extracts % Sauces % Food Preps % Undenatured ethyl alcohol % Cigars, cigarettes %

27 Legality of FTAs Under the WTO

28 Thank You!


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