FTAAP: Why and How? Policy, Legal and Institutional Issues

Transcription

1 2007/SOM2/TPD/004 Session: 2 FTAAP: Why and How? Policy, Legal and Institutional Issues Purpose: Information Submitted by: Robert Scollay, PECC and NZ APEC Study Centre APEC Trade Policy Dialogue - Strengthening Regional Economic Integration Adelaide, Australia 22 April 2007

2 FTAAP: Why and How? Policy, Legal and Institutional Issues Robert Scollay PECC and NZ APEC Study Centre Presentation at APEC SOM Trade Dialogue, Adelaide, 22 April 2007 Two Basic Questions 1. For regional economic integration, is trade liberalisation Necessary? (Yes) Sufficient? (No) 2. Why preferential trade? De facto choice of APEC governments Key APEC economies insist on binding reciprocity only options are WTO or WTO-compatible preferential agreements 1

3 Why FTAAP? (1) What is best way of organising preferential trade for region-wide economic integration? 1. Spaghetti Bowl Market fragmentation Haphazard patterns of discrimination and exclusion Rule incoherence increased transaction costs Hub and spoke patterns Emergence of competing FTA models 2. Region-wide FTA Region-wide inclusiveness Intra-region non-discrimination Asia-Pacific region covers 70% or more of most member s trade contains near complete range of comparative advantages Rule coherence Expansion of spaghetti bowl suggests demand for region-wide liberalisation Why FTAAP? (2) What is the appropriate architecture for region wide integration? EAFTA (ASEAN Plus 3) CEPEA (ASEAN Plus 6) FTAAP FTAAP plus EAFTA or CEPEA 2

4 Asia Pacific and East Asian Integration Does East Asian economic integration make sense? (yes) Does Asia-Pacific economic integration make sense? (yes) Compared to East Asian integration, does Asia-Pacific integration offer Additional advantages (yes) Additional problems (yes) Are they potentially compatible? Should they proceed in tandem or in sequence? Is sequential approach a realistic way to handle implications for US- East Asia economic relations? Lessons from FTAA US-led push for hemispheric integration v. Brazil-led push for South American integration as pre-condition for hemispheric integration Need compromise modality that simultaneously satisfies both sides FTAAP Design Issues (1) (1) Requirements for WTO Compatibility Goods: need to satisfy GATT Article XXIV ( substantially all trade ) existing agreements exhibit range of strategies lengthy implementation periods use of TRQs and special safeguards customised schedules of concessions limited flexibility for developing countries some on coverage, some on length of implementation period existing PTAs between developing economies could utilise Enabling Clause not possible for FTAAP Services: need to satisfy GATS Article V ( substantial sectoral coverage ) flexibility for developing countries emphasised but not clearly defined positive v. negative list approaches 3

5 FTAAP Design Issues (2) (2) Basic Design Choices Rules of Origin crucial to feasibility and effectiveness of FTAAP regional value content v. change of tariff classification partly a technical issue: which approach is more efficient? partly a reflection of different interest: facilitate or constrain expansion of trade? role of vested interests experiments with dual rules of origin in some existing FTAs Services and Investment GATS style v. NAFTA style Mode 3 in services chapter with separate chapter on investment Different ways of dealing with potential overlap Modes 1 and 2 in services chapter, separate chapters on investment and Mode 4 Positive v. negative list Technical issues and economic interests both important FTAAP Design Issues (3) (3) Comprehensiveness Issues potential for WTO-Plus (or WTO-Minus ) intellectual property government procurement TBT and SPS trade remedies (questions sometimes raised re non-discrimination e.g. on trade remedies) filling gaps in the WTO Agreements investment competition policy non-tariff aspects of agriculture (export subsidies, domestic support) wide differences in degree of ambition partly reflected in differences in extent of hard obligations and enforceability in existing agreements soft, non-enforceable obligations may resemble the APEC approach inclusion of these elements not required by existing international obligations or inherent nature of preferential trade agreements 4

6 FTAAP Design Issues (4) can convergence be achieved between the different FTA models can different interests and levels of ambition be accommodated? two tier approach as a possible compromise: FTAAP as base agreement separate sets of concessions and optional deeper commitments larger economies may see this as diluting their bargaining power basic design choices still have to be made FTAA process provides some insights into potential advantages and problems FTAAP Design Issues (5) Relation to existing agreements FTAAP cannot replace existing agreements immediately transitional period of coexistence inevitable raises practical issues in management of implementation similar issues already raised in relation between ASEAN + 1 agreements and bilaterals of individual ASEAN members Possibility that some existing agreements could co-exist permanently with FTAAP alternative or complement to two-tier approach for deeper commitments interpret as deeper integration or new discrimination could provide greater flexibility e.g. on rules of origin could lead to demands for some adjustments to existing commitments 5

7 Some Possible Next Steps for APEC Agree to place FTAAP on the table in parallel to EAFTA and CEPEA Explore possibility of linking FTAAP, EAFTA and CEPEA processes Continue with model measures Make inventory of issues to be addressed before decision on whether to commence negotiations Establish and prioritise a work programme to address the prenegotiation issues Rules of origin and services/investment issues should be key priorities Include study of relevant precedents (especially FTAA process, also P4 and US-DR-CAFTA) to identify issues, difficulties and possible solutions. Analyse feasibility and advantages/disadvantages of two-tier approach as alternative or complement to co-existence of deeper integration provisions of existing agreements comparative analysis of existing Asia-Pacific FTAs to identify differences and reason for them (technical issues, economic interests or levels of development) possibility of convergence through resolving technical issues or accommodating differences in economic interest and levels of development 6