Session 5 : KEY PILLARS OF FTA NEGOTIATIONS: TRADITIONAL NEGOTIATING ISSUES Jakarta, Indonesia 5-7 September 2017 Wenguo Cai Director, International Programs Partner: The Conference Board of Canada Project Executed by:
Presentation Outline • “WTO Plus” Commitments & Standards • Four Key Traditional Negotiating Issues ❖ Industrial goods ❖ Agriculture ❖ Services ❖ Trade rules and regulations • Managing/Advancing FTA Negotiations on Traditional Issues
Identify Identifying T ing Traditio aditional Issues nal Issues for FT or FTA Ne A Negotia gotiations tions • Seeking WTO+ Commitments/Concessions ➢ Industrial Goods (tariffs and RoOs) ➢ Agriculture (MA and TRQs) ➢ Services (including E-Commerce and Movement of Nature Persons) ➢ Trade Rules and Regulations
Traditional aditional Issue Issues s – Indus Industrial go trial goods ods • Trade in Goods – Negotiating Issues ❖ Preferential market access (WTO+ concessions) ❖ Tariff lines established for tariff elimination ❖ Phase-out schedule for tariff elimination ❖ A system of rules of origin to be established ❖ Customs procedures for FTAs ❖ Approach to the use of trade remedies
Traditional aditional Issue Issues s – Indus Industrial G trial Goods oods • Tariff Negotiations for FTAs ❖ GATT Article XXIV requires the elimination of tariffs on substantially all goods and no sector is exempted ❖ The Harmonized System (HS) – starting point ❖ How to identify tariffs for elimination (to start with applied rates – why not bound rates?) For developed country FTA partners, can ❖ developing country partners ask them to use the basis of their GSP rates rather than MFN rates for the FTA tariff negotiations – any difficulties for this approach/request?
Traditional aditional Issue Issues s – Indus Industrial G trial Goods oods • Tariff Negotiations (continued) ❖ There are more than 9,000 six-digit HS tariff headings – it would be time-consuming to do it one by one – elimination of most industrial tariffs; can a formula be used for FTA tariff negotiations? ❖ The focus of tariff negotiations will be always on the elimination of tariffs all the times ❖ all applied tariff rates of 5% or less should be eliminated on entry into force of FTA, etc. ❖ Phasing-out arrangements for tariff negotiations - consider the phased tariff elimination in 5-10 years
Traditional aditional Issue Issues s – Indus Industrial G trial Goods oods • Phased tariff reductions: a NAFTA example (NAFTA entered into force on 1 Jan. 1994) ❖ Category A: eliminated on entry into force ❖ Category B: by 1 Jan. 1998 in 5 equal stages ❖ Category C: by 1 Jan. 2003 in 10 equal stages ❖ Category C+: by 1 Jan. 1998 in 15 equal stages ❖ Category D: remained duty-free on 1 Jan. 1994 NAFTA also contains a provision allowing for the negotiations of accelerated tariff reductions.
Traditional aditional Issue Issues s – Indus Industrial G trial Goods oods • Rules of Origin ❖ Every FTA needs a mechanism to identify the goods eligible for preferential market access – Rules of Origin (RoO) ❖ Non-preferential rules of origin vs. preferential rules of origin ❖ Preferential rules of origin: reciprocal rules (FTAs) vs. non-reciprocal rules (GSP) ❖ Increased complexity of RoOs - spaghetti-bowl effect
Traditional aditional Issue Issues s – Indus Industrial G trial Goods oods • Rules of Origin (Continued) ❖ Wholly obtained and produced, or substantially transformed – qualified for RoO under FTAs ❖ What goods are wholly obtained/produced? ❖ Substantial transformation – double transformation (fabric-forward rule) and triple transformation (yarn- forward rule) ❖ three methods to determine substantial transformation: (1) change-in-tariff heading; (2) process-based methods; and (3) value-added method (by %) ❖ Certificate of origin – through self-certification or other agreed means ❖ Cumulation and cross-cumulation rules
Traditional aditional Issues Issues – Ag Agricult ricultur ure • Agricultural Negotiations ❖ Many negotiating issues for industrial goods also apply to agricultural market access ❖ Agriculture is more sensitive than industrial goods ❖ Agricultural MA negotiations are linked with food safety and food security issues ❖ Agricultural negotiations are also linked with poverty reductions (farmers) and gender equality (many women and girls working in the agricultural sector) ❖ Agriculture is closely linked with SPS issues.
Traditional aditional Issues Issues – Ag Agricult ricultur ure • Agricultural Negotiations (continued) ❖ Tariff rate quotas – how do they work? ❖ Export competition (subsidies) ❖ Intellectual property rights – geographical indications ❖ Services and investment relating to agricultural/food trade ❖ Impact of FTA agricultural negotiations and adjustments/compensations
Traditional aditional Issues Issues – Ag Agricult ricultur ure • Canada-EU CEPA on Agriculture – Some Examples ❖ Eliminated over 95% of EU ag tariffs and 92% Canadian ag tariffs ❖ Immediate duty-free treatment for many ag products for Canada: fruits and vegetables, processed foods, cooking oils, cat/dog foods, etc ❖ Tariff elimination over 7 years for: wheat, barley, oats, etc. ❖ EU’s TRQs: beef: duty -free TRQs: 50,000 tonnes; Pork: 80,000 tonnes; Boson: 3000 tonnes; corn: 8,000 tonnes ❖ Canada’s TRQs: cheese; 16,000 tonnes ❖ Geographical indications
Traditio aditional Issues nal Issues – Ser Services vices • Services Negotiations in FTAs ❖ General Agreement on Trade in Services (GATS) ❖ Seeking GATS plus commitments/concessions ❖ Revisit of GATS delivery modes: ➢ Mode 1: Cross-border supply ➢ Mode 2: consumption abroad ➢ Mode 3: Commercial presence ➢ Mode 4: Movement of natural persons Mode 5: ??? ❖ Services Sectors/Sub-Sectors: CPC
Traditio aditional Issues nal Issues – Ser Services vices • Services Schedules – Positive Listing ❖ GATS-type Services Schedule: only services included in the schedule enjoy preferential treatment ❖ Advantage: (1) Developing countries are familiar with the GATS-type approach; (2) more predictable ❖ Disadvantages: (1) need to amend it each time FTA partners want to liberalize a service; (2) UNCPC does not cover all services – classification is a problem ❖ Horizontal versus sectoral specific commitments ❖ Three columns: (1) MA limitations, (2) NT limitations & (3) Additional Commitments ❖ Specific commitments: None, Unbound and something in between (to be specified)
Traditional aditional Issues Issues – Ser Services vices Source: Japan – Singapore FTA
Traditio aditional Issues nal Issues – Ser Services vices • Services Schedule – Negative Listing ❖ All services except those listed in the schedule are subject to preferential treatment ❖ Advantages: (1) new services are automatically covered; (2) normally leading to deeper liberalization ❖ Disadvantages: (1) may risk committing something unknown; (2) many developing country negotiators are not familiar with the approach. ❖ FTA partners have the right to regulate – in the end, all the services are subject to the regulatory framework – do not worry too much about over- commitments
Traditional I aditional Issues ssues – Ser Services vices Source: Australia – New Zealand FTA
Traditional aditional Issues Issues – Ser Services vices Negative Listings Example (continued)
Box 7.5: Negative listings: an example The Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) uses negative listings for its commitments on services. Services providers from New Zealand and their services are treated in the same way as Australian providers in all services except the following: Air Services State governments hold powers to regulate intrastate aviation on economic and public interest grounds. Scheduled passenger and freight services within and between Australia and New Zealand are governed by an air services agreement which has treaty status and by the Australia-New Zealand Single Aviation Market Arrangements of 1996.
Traditio aditional Issues nal Issues – Ser Services vices • Services Scheduling – Negative Listing ❖ Non-conforming measures (inconsistent measures) ❖ Standstill – Previous liberalizations cannot be made more restrictive now or later ❖ Ratchet – Future liberalizations will be locked in without a turning back – cannot challenge decisions and choices made by previous governments ❖ With standstill and ratchet, no reversal of services liberalization ❖ A few sectors could be reserved: for example, social services – but most sectors are open.
Traditio aditional Issues nal Issues – Ser Services vices • Sectoral/thematic issues normally included in FTA services negotiations ❖ trade in financial services ❖ trade in telecommunications services ❖ electronic commerce ❖ movement of natural persons
Traditiona aditional l Issu Issues es – Rules ules • What to Negotiate on Trade Rules? ❖ trade remedies (antidumping, countervailing duties and safeguards) ❖ rules of origin ❖ customs procedures/trade facilitation ❖ technical barriers to trade ❖ sanitary and phytosantory measures ❖ intellectual property rights ❖ transparency in administration of trade rules ❖ consultations of dispute settlements, etc. ❖ labour and environment for some FTAs too
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