Overview of the Economic Policy Department Ministry For Finance Iman Schembri Director General April 2014 Economic Policy Department - MFIN
What is our core business? • Providing expert economic advice to Government. • Being Government’s principal technical interlocutor on economic and financial affairs with the European Union
3 Directorates are as following • Director Economic Strategy • Director Structural Economic Research • Director International Economic Relations
Providing the Following • Macro Forecasting • Fiscal Surveillance • Financial Stability Reports • Technical support to pension reform process • International economic policy under EU Common Commercial Policy (CCP) • Economic policy research and advisory service • Other “ad hoc” issues as requested.
International Economic Relations Directorate Functions include: • Representing Malta on international trade in EU Committees dealing with common commercial policy • Represents Malta in other Trade related committees • Recommendations are based on economic assessment and internal and external consultations
Representing Malta in the following Committees 1. Trade Policy Committee – Full Members where highest level of TPC and discussion of CCP is held 2. Trade Policy Committee – Deputies 3. Technical discussion of CCP 4. Trade Policy Committee – Services and Investment 5. Technical discussion – services, establishment and investment protection issues – 6. Trade Policy Committee – Steel, Textiles and other Industrial Sectors 7. Technical committee discussing industrial sectors 8. Working Party for Trade Questions
Representing Malta in the following Committees 9. Discussion of regulatory dossiers in trade 10. GSP Committee 11. Discussion on EU generalised system of preferences 12. Anti-dumping / Anti-subsidy committee 13. Discussion of AD/AS proposals 14. Committee for investment agreements 15. Discussion related to Grandfathering Regulation on MS investment protection agreements 16. GSP WG
Occasional Meetings • Ad-hoc informal and technical meetings • Could cover any horizontal or trade negotiation issue – attaché / seniors • Market Access Advisory Committee • Addresses barriers in third countries – rare attendance by attaché • Others
Important role of Directorate Consultation with Stakeholders including: • Government Ministries, Departments and Entities • Constituted Bodies • MEUSAC • Business associations
Purpose of FTA negotiations • Aim: mutually beneficial and ambitious cross-border treatment for the benefit of businesses and consumers ▫ To establish market access between the negotiating parties through removal of barriers; ▫ Economic growth through trade in goods and services and through improvement in the investment environment;
Trade Flows EU/US (Data) Direction of Goods Services Investment Total trade EU to US € 260 billion € 139.0 billion € 112.6 billion € 511.6 billion US to EU € 127.9 billion € 180 billion € 144.5 billion € 452.4 billion
EU-US Trade Flows (Goods) • In 2012 the US was the EU’s third largest import destination. • The EU was the largest exporter to the US in 2012. • The US was the EU’s largest trading partner in 2012. • Between 2008 and 2012 imports from the US to the EU grew at an annual average rate of 2.4%. • Between 2008 and 2012 exports from the EU to the US grew at an annual average rate of 4.0%.
Trade between Malta and the US • Imports from the US amounts to 3% of total imports (circa EUR 187 million in 2013) • These mainly include: ▫ Aircraft, spacecraft and parts thereof ▫ Ships, boats and floating structures ▫ Machinery and mechanical appliances ▫ optical, medical, measuring precision etc ▫ Electrical machinery
Trade between Malta and the US • Exports to the US amounts to 4% of total exports (circa EUR 170 million in 2013). • Main exports include electrical machinery and to a lesser extent pharmaceutical products. • Other significant exports include: ▫ mechanical appliances, knitted or crocheted fabrics, rubber and toys, games and sports requisites.
State of Play • Mandate given to the Commission to commence negotiations with the US in mid June 2013, with negotiations being launched in July 2013 ▫ 4 rounds of negotiations have already been held ▫ Optimistic target to conclude in about 2 years ▫ Commission is currently carrying out a consultation process wherein stakeholders are encouraged to contribute
SMEs • The negotiations will have a specific chapter on SMEs • The involvement of SMEs in transatlantic trade is a key joint EU-US objective of TTIP • Disproportionately affected by trade barriers due to lack of resources – human and financial • Commission to seek input from SMEs
Preliminary areas of concern and some of real barriers faced by small firms: • Food and drink ▫ high tariffs (e.g. 139% for some dairy products) ▫ lack of consistency in the way US government- approved laboratories measure standards ▫ various tariff disadvantages ▫ approval programme for dairy products – known as the Grade A system – is extremely difficult for foreign companies to comply with as well as outdated requirements specifying particular types of machinery and piping in dairies. ▫ differences in EU and US requirements for bacteria testing
Preliminary areas of concern and some of real barriers faced by small firms: • Food and drink ▫ Small breweries in the US pay less than half the federal excise duty that larger companies pay, but this discount only applies to US beer producers – not their many high-quality European rivals. ▫ Small European breweries are also obliged to go through an importer in order to access the US market, as opposed to selling their product directly to a distributor like their American counterparts.
Preliminary areas of concern and some of real barriers faced by small firms: • Professional Services ▫ In the US qualified European engineers who want to offer their service in the US have to register with each state they want to work in. • Transportation services ▫ In the US, maritime transport services are particularly restricted banning foreign service providers not only from US domestic shipping services, but also from high-tech support sectors like dredging and ice breaking, which involve smaller firms.
Preliminary areas of concern and some of real barriers faced by small firms: • Electrical equipment ▫ Burdensome customs requirements ▫ European producers of electronic components find it difficult to sell their products in the US. The US uses different standards, meaning products have to be adapted. Even where a US standard is almost identical to international norm, companies still need to have their product tested twice, once by European and once by American testing bodies.
Preliminary areas of concern and some of real barriers faced by small firms: • Pharmaceuticals and chemicals ▫ Smaller medicines firms would benefit if the current system of factory inspections were rationalised. They do not recognise each other's inspections to verify compliance with these rules. That means small European firms who export to the US have to go through the same process twice. SMEs in the chemicals sector would benefit from regulatory cooperation on classification and labelling. They would also gain from a lifting of US restrictions on energy exports to the EU, which may help to address energy cost differences between Europe and the US.
Preliminary areas of concern and some of real barriers faced by small firms: • Wood Products ▫ Customs duties • Textiles, clothing and footwear ▫ Tariffs are a major issue across all three sectors • Other manufacturing ▫ Barriers faced can include the extensive customs or the duties and customs formalities whose products are often held for inspection by the US authorities for up to six weeks.
Economic Analysis by the EC relating to TTIP on wages and job creation • GDP - Potential overall increase in EU GPD by 0.5% (86 billion euro) and in US GPD by 0.4% (65 billion euro) • Wages - positive impact both on skilled and less skilled workers’ wages, raising each by close to the same amount, roughly 0.5%. • Jobs moving between different sectors – reallocation of jobs among the different sectors of the economy. Workers attracted to other sectors offering higher wages. • Impact of TTIP on job creation overall - Every billion Euros of trade in goods or services supports around 15,000 jobs in the EU. .
Thank you Economic Policy Department MINISTRY for FINANCE (MFIN) Postal Address: St. Calcedonius Square, Floriana, FRN 1530 Malta t + 356 2124 9359 f + 356 2124 9359 e economicpolicy@gov.mt www.economicpolicy.gov.mt
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