Public Meeting TSIA of EU-ASEAN FTA Global Analysis Report By: Paul Wijmenga, Floor Smakman, Saara Tamminen, Leon van Berkel Brussels, 11 September 2008

Overview Introduction CGE Modelling Screening Scoping Issues for Discussion Contact

1. Introduction (1): Organisation of the Study ECORYS as lead contractor Modelling team headed by Prof. Joe Francois ASEAN partners in 5 different countries: Indonesia, Philippines, Singapore, Thailand and Vietnam

1. Introduction (2): TSIA Methodology Analyse the economic, social and environmental impacts of trade measures negotiated within an FTA. Quantitative and qualitative approach: CGE modeling and Causal Chain Analysis. 50% modeling & analysis; 50% consultations and inputs from key stakeholders and civil society: www.tsia.ecorys.com/asean 3 Phases of the study: 1): scenario building, screening and scoping (GAR); 2): in-depth studies of selected sectors/issues; 3): policy recommendations on enhancing or mitigating measures

1. Introduction (3): The Phase 1 Report (GAR) Overview of current economic, social and environmental issues and trends in the EU and ASEAN Computable General Equilibrium (CGE) analysis Screening & Scoping Consultations EU and ASEAN End of phase 1: Sector / HI selection

2. CGE Modelling: (1) The Model Aim of modelling: quantitative analysis of the expected outcomes of the FTA in general equilibrium; Scenario definitions: Base year, 2004 (GTAP 7.0); Experiment 1. Limited FTA Agreement; Experiment 2. Extended FTA Agreement; Experiment 3. Extended FTA Plus Agreement. The scenarios are based on the EU – ASEAN overview (Ch. 2), discussions in the kick-off meeting and the inception report (also online).

3. CGE Modelling: (2) Scenarios Analysis of three scenarios: Tariff reductions: Limited FTA 90%, Extended FTA 97%, Extended plus FTA 97% for food and non-food; Services (AVE reductions): Limited FTA 25%, Extended FTA 75%, Extended plus FTA 75% Trade facilitation: Limited FTA 1%, Extended FTA 2%, Extended plus FTA 3% (some sectors)

2. CGE Modelling: (3) Outcomes Macro-economic outcomes include: changes in income, GDP, wages of high and low skilled labour changes, etc. The CGE model also provides outcomes per sector: output effects, employment effects (high- and low-skilled), price effects, change in value of imports and exports

2. CGE Modelling: (4) Outcomes (ext. FTA) Table 1: Summary of Macro-economic changes Scenario / variable India Bang Pak Sri Lanka Other South Asia Other LDCs ROW Scenario 2: Extended FTA (short run) National inc. (change in mln €) -799 -54 -232 -30 -11 -61 -5 499 GDP (% change) -0.04 -0.08 -0.02 -0.01 Skilled Real Wage (% change) -0.20 -0.11 -0.09 -0.03 Unskilled Real Wage (% change) -0.05 -0.07 -0.10 Value of exports (% change) 0.02 -0.52 -0.16 -0.61 -0.06 Scenario 2: Extended FTA (long run) National inc. (change in mln €) -3.469 -110 -963 -60 -21 -144 -27 076 -0.23 -0.66 -0.13 -0.25 -0.14 -0.71 -0.19 -0.15 Unskilled Real Wage (% change) -0.57 -0.18 -1.02 -1.99 -0.55 0.15 0.06

2. CGE Modelling: (5) Outcomes (ext. FTA) Decomposition of Dynamic Real Income Effects (millions of 2007 Euros) Measure Scenario Country Tariffs Services NTB Total Ambitious FTA EU 6,737 14,857 5,225 26,820 Cambodia 74 79 114 267 Indonesia 3,377 7,716 2,022 13,115 Malaysia 2,493 6,124 2,087 10,703 Philippines 2,268 1,216 2,401 5,885 Singapore 763 16,999 2,556 20,317 Thailand 4,473 4,349 2,722 11,543 Vietnam 4,414 1,423 1,143 6,980 Other ASEAN 90 -32 207 264

% share of sector in total value-added* 2. CGE Modelling: (6) Sector outcomes EU Table 3: Change in Sectoral Output for EU27 Static/Short Run Dynamic/Long Run Limited FTA Ambitious FTA Ambitious Plus FTA % share of sector in total value-added* Processed Foods 0.4 0.5 0.6 0.9 4.1 Textiles -0.9 -1.0 -1.3 -0.8 -0.7 0.8 Wearing apparel -1.5 -2.0 -2.3 -1.7 -2.2 -2.6 Leather products -13.7 -17.6 -18.7 -17.3 -21.4 -23.7 0.3 Chemical, rubber, plastic products 0.0 0.1 0.2 4.8 Metal products 2.1 Motor vehicles and parts 0.7 1.0 3.3 Electronic equipment -1.1 -2.5 -3.0 -3.1 -3.8 1.7 Machinery and equipment nec 4.7 Manufactures nec 1.3 trade services 11.1 Utilities 0,01 0,02 0,07 0,13 0,14 Construction 0,05 0,11 0,1 0,2 0,21 Communication -0,04 -0,08 Business services, nec 10.2 Other services 15.8

2. CGE Modelling: (7) Sector outcomes ASEAN Table 4: Main positive and negative sectoral impacts in ASEAN countries Country Main sectors with increased outputs Main sectors with reduced output Cambodia Textiles & wearing apparel Manufacturers nec, Machinery and equipment nec, Transport equipment nec Indonesia Electronic equipment, Wearing apparel Business services nec, Motor vehicles and parts Malaysia Leather products, Electronic equipment Minerals nec, Machinery and equipment nec Philippines Motor vehicles and parts, Textiles & Wearing apparel Gas, Cereal grains, Machinery and equipment nec, Transport equipment nec. Singapore Textiles Insurance Machinery and equipment nec, Gas Thailand Wood products, Mineral products nec (SR) Vietnam Trade Other ASEAN Textiles, Motor vehicles, Motor equipment nec, Ferrous minerals

3. Screening: (1) Criteria …. for choice of sectors and horizontal issues Cr1: Importance of sector/horizontal issue for EU and ASEAN economies and EU-ASEAN relations; Cr2: Size of the expected impact of the FTA on sector’s trade between the EU and ASEAN; Cr3: Expected social and/or environmental impact of the sector for the EU and ASEAN; Cr4: Comments and feedback from consultations with key stakeholders and civil society.

3. Screening: (2) Overview Table Sectors Table 5: Screening and selection of sectors Cr1: Importance sector/issue Cr2: Economic Impact (output/ employment) Cr 3:* Social / environmental effects Cr4: Comments civil society Cereals, grains, nec X Electronic equipment Financial services Fishing Gas Leather products Mineral products nec Motor vehicles Oil Oil seeds Petroleum, coal products Processed food Textiles Transport services Wearing apparel Provisions of services and movement of natural persons/GATS mode 4/issues related to economic migration

3. Screening: (3) Overview Table H.I. Table 6: Screening and selection of horizontal issues Cr1: Importance sector/issue Cr2: Economic Impact (output/ employment) Cr 3:* Social / environmental effects Cr4: Comments civil society Competition policy X Intellectual property rights Investment conditions Other services, environmental services Public procurement Rules of origin Sanitary- and Phytosanitary measures Technical standards for industrial products Trade facilitation

3. Screening: (4) Preliminary Results Based on the screening criteria, we propose to look at the following sectors and horizontal issues: Sectors: (1) Cereals and Grains, (2) Motor Vehicles & Automotives, (3) Textiles, Clothing & Footwear, (4) Electronic Equipment and (5) Transport services (maritime transport). Horizontal issues: (1) Investment Conditions, (2) SPS, (3) Trade Facilitation, (4) IPR and (5) RoO, or….

3. Screening: (5) Possible Alternatives Sectors Fisheries Food processing Telecommunications Distribution Services (wholesale & retail) Financial services Energy sector Other ……….? Horizontal issues Government Procurement Competition Policy

4. Scoping Having identified the sectors and horizontal issues, what are the main topics that need to be researched in Phase 2? BASED ON: Your suggestions (feedback form, also online) Suggestions by our sector experts Bilateral meetings with civil society and other key stakeholders FOCUS: In-depth analysis of sectors and horizontal issues – main issues in detail  See Feedback Form (hand-out)

6. Issues For Discussion - Discussion - A) You are invited to ask questions and provide comments on the GAR - Q&A - B) You’re invited to provide inputs and suggestions for next steps in study, specifically on: Definite sector and HI selection – Final selection after TSIA Workshop in Bangkok (27 October 2008); There are several ‘alternative sectors’ that may be chosen over preliminary selection – suggestions (including argumentation)? We are at the beginning of Phase 2: what are main issues for the sectors and HI (preliminarily) chosen? Any suggestions for interesting Case Studies? - Discussion -

6. Contact For more information, downloading of feedback form or providing feedback directly, contact us at: Website: www.tsia.ecorys.com/asean Email address: tsiaasean@ecorys.com