Presentation on theme: "GBI Study on Free Trade Agreements"— Presentation transcript:
1GBI Study on Free Trade Agreements U.S. Agricultural Export Development Council2010 Attaché SeminarJuly 14, 2010Crystal Gateway MarriottPaul DrazekDTB Associates, LLP
2US 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.
3US Started Strong, But Not Much Recently FTAYear Negotiations InitiatedDate Entered into ForceIsrael FTA19849/1/85Canada FTA19861/1/89NAFTA19911/1/94Jordan FTA200012/17/01Singapore FTA1/1/04Chile FTAAustralia FTA20031/1/05Morocco FTA20021/1/06Bahrain FTA20048/1/06El Salvador - CAFTA3/1/06Honduras - CAFTA4/1/06Nicaragua – CAFTAGuatemala – CAFTA7/1/06Dominican Rep - CAFTA3/1/07Costa Rica – CAFTA1/1/09Oman FTA2005Peru2/1/09Colombia[signed 2006]Panama[signed 2007]Korea2006US Started Strong, But Not Much RecentlyJordan is the only agreement that made it through Congress without fast-track or Trade Promotion Authority procedures in place. It passed by voice votes in both houses shortly after 9/11.To show how moribund US FTA efforts have been in recent years, the most recently initiated FTA negotiation that has actually made it through congress (Oman) was launched five years ago.3
4Trade 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.
5But Other Countries are Playing “Let’s Make a Deal” Hundreds of foreign FTAs have been completed and notified to the WTO and hundreds more are in the works.
6FTA’s Already Notified to the WTO Andean Community (CAN)EU - Faroe IslandsFaroe Islands - SwitzerlandPan-Arab Free Trade Area (PAFTA)Armenia - KazakhstanEU - Former Yugoslav Republic of MacedoniaGeorgia – ArmeniaPeru - ChileArmenia - MoldovaEU - IcelandGeorgia - AzerbaijanPeru - SingaporeArmenia - Russian FederationEU - IsraelGeorgia - KazakhstanProtocol on Trade Negotiations (PTN)Armenia - TurkmenistanEU - JordanGeorgia - Russian FederationSingapore - AustraliaArmenia - UkraineEU - LebanonGeorgia - TurkmenistanSouth Asian Free Trade Agreement (SAFTA)ASEAN - ChinaEU - MexicoGeorgia - UkraineSouth Asian Preferential Trade Arrangement South Pacific Regional Trade and Economic Cooperation Agreement (SPARTEUA)ASEAN Free Trade Area (AFTA)EU – MontenegroGuatemala - MexicoAsia Pacific Trade Agreement (APTA)EU - MoroccoGulf Cooperation Council (GCC)Asia Pacific Trade Agreement (APTA) - Accession of ChinaEU - NorwayHonduras - MexicoSouthern African Customs Union (SACU)EU – Overseas Countries and TerritoriesIceland - Faroe IslandsSouthern African Development CommunityAustralia - ChileEU - Palestinian AuthorityIndia - BhutanThailand – AustraliaAustralia - New Zealand (ANZCERTA)EU - South AfricaIndia - SingaporeThailand - New ZealandAustralia - Papua New Guinea (PATCRA)EU - Switzerland - LiechtensteinIndia - Sri LankaTrans-Pacific Strategic Economic PartnershipBrunei Darussalam - JapanEU - SyriaIsrael - MexicoTurkey - AlbaniaCanada - ChileEU - TunisiaJapan - IndonesiaTurkey - Bosnia and HerzegovinaCanada - Costa RicaEU - TurkeyJapan – MalaysiaTurkey - CroatiaCanada - EFTAEU (9) EnlargementJapan - MexicoTurkey - Former Yugoslav Republic of MacedoniaCanada - IsraelEU (10) EnlargementJapan - PhilippinesTurkey - GeorgiaCanada - PeruEU (12) EnlargementJapan - SingaporeTurkey - IsraelCARICOMEU (15) EnlargementJapan - SwitzerlandTurkey - MoroccoCentral American Common Market (CACM)EU (25) EnlargementJapan - ThailandTurkey - Palestinian AuthorityCentral European Free Trade Agreement (CEFTA)EU (27) EnlargementJapan - VietnamTurkey - SyriaChile - ChinaEC Original TreatyJordan - SingaporeTurkey - TunisiaChile - ColombiaEconomic and Monetary Community of Central Africa (CEMAC)Korea – ASEANUkraine – AzerbaijanChile - Costa RicaKorea, Republic of - ChileUkraine - BelarusChile - El SalvadorEconomic Community of West African States (ECOWAS)Korea, Republic of - SingaporeUkraine - Former Yugoslav Republic of MacedoniaChile - GuatemalaKyrgyz Republic - ArmeniaUkraine - KazakhstanChile – IndiaEconomic Cooperation Organization (ECO)Kyrgyz Republic - KazakhstanUkraine - MoldovaChile - JapanEFTA - ChileKyrgyz Republic - MoldovaUkraine - Russian FederationChile - MexicoEFTA - CroatiaKyrgyz Republic - Russian FederationUkraine - TajikistanChina - Hong Kong, ChinaEFTA - EgyptKyrgyz Republic - UkraineUkraine - UzbekistanChina - Macao, ChinaEFTA - Former Yugoslav Republic of MacedoniaKyrgyz Republic – UzbekistanUkraine -TurkmenistanChina - New ZealandEFTA - IsraelLao People's Democratic Republic - ThailandWest African Economic and Monetary UnionChina – PeruEFTA - JordanLatin American Integration Association (LAIA)China - SingaporeEFTA - Korea, Republic ofMelanesian Spearhead Group (MSG)Common Economic ZoneEFTA - LebanonMERCOSURCommon Market for Eastern and Southern Africa (COMESA)EFTA - MexicoMexico - NicaraguaAustraliaEFTA - MoroccoNew Zealand - SingaporeBahrainCommonwealth of Independent States (CIS)EFTA - Palestinian AuthorityNicaragua and the Separate Customs Territory of Taiwan, Penghu, Kinmen and MatsuPacific Island Countries Trade AgreementChileCosta Rica - MexicoEFTA - SACUCAFTA-DREast African Community (EAC)EFTA - SingaporeCosta RicaEU - AlbaniaEFTA - TunisiaPakistan - ChinaIsraelEU - AlgeriaEFTA - TurkeyPakistan - MalaysiaJordanEU – AndorraEFTA (Stockholm Convention)Pakistan - Sri LankaMoroccoEU - Bosnia and HerzegovinaEFTA accession of IcelandPanama - ChileNAFTAEU - CARIFORUM States EPAEgypt - TurkeyPanama - Costa RicaOmanEU - ChileEl Salvador - MexicoPanama - El Salvador (Central America)PeruEU - Côte d'IvoireEurasian Economic Community (EAEU)Panama - SingaporeSingaporeEU - CroatiaEuropean Economic Area (EEA)Panama and the Separate Customs Territory of Taiwan, Penghu, Kinmen and MatsuEU - EgyptFaroe Islands - Norway
7FTA’s Completed But Yet Implemented Foreign FTAs Completed But Not Yet ImplementedCanada - ColombiaCanada - JordanCanada – PanamaColombia - EFTAEU - KoreaIndia – ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia)India – ThailandU.S. FTA’s Completed But Yet ImplementedPanamaColombiaSouth Korea
8FTA’s Under Negotiation or Planned Australia – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)EFTA – GCC (EFTA: Iceland, Norway, Switzerland, and Liechtenstein) GCC: Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)EU – UkraineJapan – India (CEPA)EU – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)Japan – IsraelEFTA – UkraineJapan – New ZealandAustralia – IndiaEU – ACP Countries (African, Caribbean and Pacific Group of States: Angola, Antigua and Barbuda, Belize, Cape Verde, Comoros, Bahamas, Barbados, Benin, Botswana, Burkina Faso, Burundi,EU – IndiaJapan – PakistanAustralia – IndonesiaEU – IndonesiaJapan - PeruAustralia – Malaysia (MAFTA)EU – Mercosur (Brazil, Argentina, Uruguay and Paraguay)Japan - TaiwanAustralia – New Zealand & ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia)Korea – AustraliaGCC – African CountriesSingapore – UkraineCameroon, 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)(Morocco, South Africa, Congo, Sierra Leone, Mozambique, Uganda, Mauritania, Senegal, Zambia, Ivory Coast, Egypt)Korea – CanadaKorea – ChinaBimstec Countries (Bangladesh, Buthan, India, Myanmar, Nepal, Sri Lanka, Thailand)Korea – EUGCC – MalaysiaKorea – IndiaCanada – CARICOM (Antigua & Barbuda, Bahamas, Barbados, Belize, Dominica, Granada, Guyana, Haiti, Jamaica, Monserrat, Trinidad & Tobago, St. Kitt, Nevis, St. Lucia, St. Vincent & the Grenidines, Surinam)GCC – New ZealandKorea – JapanIndia – CanadaKorea - MERCOSURIndia – ChileKorea – MexicoIndia – EFTA (Iceland, Norway, Switzerland, and Liechtenstein)Korea – New ZealandKorea – PeruKorea -PakistanCanada – CA4 Countries (El Salvador, Guatemala, Honduras y Nicaragua)India – EgyptMexico – MERCOSUR (Brazil, Argentina, Uruguay and Paraguay)India – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)Canada – ColombiaNew Zealand – Hong KongCanada – Dominican RepublicIndia – Hong KongPakistan – AfghanistanCanada – IndiaIndia – IsraelPakistan – IndonesiaCanada – JordanIndia – MalaysiaPakistan – MauritiusCanada - MoroccoIndia - New ZealandPanama – GuatemalaCanada - UkraineIndia – Southern Africa Customs Union (SACU -Botswana, Lesotho, Namibia, South Africa and Swaziland)Peru – EFTA (Iceland, Norway, Switzerland, and Liechtenstein)Canada – SingaporeChile - MalaysiaEU – Andean (CAN) (Bolivia, Colombia, Ecuador and Peru)Peru - MexicoPeru - TaiwanChile – TurkeyIndia - TurkeyPeru - ThailandChile - VietnamEU – ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia)India – South KoreaPeru - UruguayChina – ASEAN (ACFTA)Indonesia – New ZealandRussia - EcuadorChina – AustraliaIsrael – MERCOSUR (Brazil, Argentina, Uruguay and Paraguay)Singapore – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)China – Costa RicaTaiwan – Dominican RepublicChina – GCCEU – CanadaJapan – ASEAN (AJCEPA) (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Lao PDR and Myanmar, and Cambodia)Taiwan – Honduras – El SalvadorChina – IndiaEU – Central America (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama)Taiwan – SingaporeChina – SwitzerlandTurkey - JordanVenezuela – MercosurChina - TaiwanEU – New ZealandColombia - GuatemalaEU - PakistanJapan – AustraliaUS FTAs Currently Under Negotiation or PlannedCosta Rica – SingaporeEU – PhilippinesJapan – Brunei (JBEPA)Trans-Pacific Partnership (TPP) - Could add three new country FTAs: New Zealand, Brunei and VietnamCosta Rica – ChinaEU – Southern / Eastern AfricaJapan – ChileEU – SyriaJapan – Gulf Cooperation Council (Saudi Arabia, the UAE, Kuwait, Qatar, Oman and Bahrain)EU - Taiwan
9Why 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.
10Global 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.
11ParticipantsSponsoring 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.
12Implications 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.
13Implications for U.S. Export Interests 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.
14Implications for U.S. Export Interests 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.
15Implications for U.S. Export Interests 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.
16Conclusions on Economic Impacts 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.
17Legality 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.
18Legality of FTAs Under the WTO Four methods used in GBI study for determining whether “substantially all trade” is covered: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.
19Legality of FTAs Under the WTO 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.
20Legality 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.
21Legality of FTAs Under the WTO Coverage of products of significant export interest; a product that account for at least 2% of the exporting country’s 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.
22Example of WTO Compatibility Analysis: Mexico-Japan 1. Percentage of pre-agreement trade subject to liberalization under the agreement1. Country2. Total Imports from Partner3. Total Imports from Partner, Exempted Products4. Exempted Products as Percentage of Total Imports5. Total Agricultural Imports from Partner6. Total Agricultural Imports from Partner, Exempted Products7. Exempted Agricultural Products as Percentage of Total ImportsJapan$1,851 million$256 million13.8%$407 million$216 million53%Mexico$9,059 million$94 million1.0%$5,205,486$2,950,09756%
23Example of WTO Compatibility Analysis: Mexico-Japan 2. Percentage of tariff lines exempted from liberalization under the agreement1. Country2. Total Number of Tariff Lines3. Total Number of Exempted Tariff Lines4. Exempted Lines as Percentage of Total Lines5. Total Number of Agricultural Tariff Lines6. Total Number of Exempted Agricultural Tariff Lines7. Exempted Agricultural Lines as Percentage of Total Agricultural LinesEight-Digit HS LevelJapan9261111712.06%188499252.6%Mexico121719027.41%138561444.3%Six-Digit HS Level51134699.2%68035952.8%3937.7%33149%
24Example of WTO Compatibility Analysis: Mexico-Japan 3. Coverage of SectorsMost 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.
25Example of WTO Compatibility Analysis: Mexico-Japan Coverage of SectorsJapan’ ExclusionsMexico’s ExclusionsExempted ProductsShare of Total Value of Agricultural Production in JapanBeef9.55%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 ProductsShare of Total Value of Agricultural Production in MexicoBeef12.89%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 beansWool grease0.01%Sugar4.31%TobaccoTotal68.43%
26Example of WTO Compatibility Analysis: Mexico-Japan 4. Coverage of Products of Significant Export InterestJapanese Exemptions of Products of Export interest to MexicoMexican Exemptions of Products of Export interest to Japan2. Description of Exempted Product3. HS Number4. Percentage of Total Mexican Exports, 2008Live Bovine Animals01020.11%Beef0201 & 02020.05%Pork0203Fish0302, 0303, 03040.06%Dairy0.03%Honey0409Fresh Grapes080610Durum Wheat1001100.20%Crustaceans16050.02%Sugar and sucrose17010.14%Sugar Confectionary17040.17%Chocolate Food Preps18060.09%Groats, Meal, Starch19010.08%Prepared,preserved vegetablesFruit juice2009Coffee, Tea Extracts2101Sauces2103Food Preps2106Undenatured ethyl alcohol22080.28%Cigars, cigarettes24020.10%2. Description of Exempted Product3. HS Number4. Percentage of Total Japanese Exports, 2008Fish030.16%Crustaceans16050.05%Breads, Pasta19050.02%Sauces21030.03%Food Preps21060.04%Tobacco24Organic Compounds2931Medicine3003 & 3004Motor Vehicles872.66%