Options and recommendations for countries negotiating North-South agreements Short courses on key international economic issues for delegates from permanent missions in Geneva Trade agreements between developed and developing countries 16 April 2010 Luisa Rodriguez

Outline Potential positive and negative effects of RTAs Implications of North-South Agreements What is important –A framework to assess needs and priorities in an RTA negotiation Specific recommendations regarding some problematic areas in RTAs –Scope of agreements Example: Government Procurement in EPAs –Development aspects of RTAs Example: Agriculture related commitments in EPAs –Conclusions

Potential effects Positive Welfare gains Creation of larger markets for goods and services/economies of scale Economic efficiency Attraction of FDI Positive externalities from institutional changes Negative Loss of tariff revenue Displacement of local industry Implementation cost of regulatory harmonization Broader coverage of domestic policy space These effects will depend on…

Implications of N-S Agreements Adjustments costs accrue to Dev/ing countries –Reciprocal, as opposed to non-reciprocal Dev/ing tend to have higher tariffs, import dependence, dependence on tariffs on tariff revenue –Limited scope for improved market access Low MFN rates and unilateral preferences in Dev/ed Deep integration under new generation RTAs –Broader coverage of behind the border measures

What is important Approaching negotiations in a coherent and strategic manner –Need for a policy framework and assessment of costs and benefits –Identification of national objectives, consistent with national trade and development policies, to pursue different levels of integration Maximizing trade gains in different levels of integration –Market access, –Development support, –Regulatory cooperation –Global value chain integration Strengthening administrative capacity of developing countries to implement and monitor commitments

Needs assessment 1.Economic relationship between partners 2.FTA or customs union? 3.Overlap with other agreements 4.Expected difficulties in negotiation 5.Barriers to trade 6.Elements of deep integration 7.WTO compatibility 8.Role of aid donors 1.Size, asymmetry, tariff levels, cost differences 2.Flexibility, rules of origin 3.Complementarities or spaghetti bowl? 4.Depth and scope of PTA, sensitive sectors, exceptions 5.Tariffs, NTBs-incidence, level and range 6.Trade facilitating institutions and policies: investment rules, competition policy, labor mobility standards property rights, dispute resolution 7.Important if third countries might be affected 8.Political motivation behind agreements, presence of technical and development assistance

Problematic issues Scope of agreements Regional integration Development aspects of RTAs –Asymmetric provisions with respect to liberalization –Cooperation

On the scope of the agreements Experimentation with trade related disciplines (Government procurement, investment competition) –at the national and regional level –prior to engaging in N-S agreements Assessing regularly the development impact of provisions (linked to review of commitments) –Facilitating exchange of experiences, best practices and lessons learnt

Provisions of EPAs on Government Procurement (CARIFORUM) National treatmentNational treatment –No discrimination (= No preference to local producers/local suppliers of services) Progressive liberalizationProgressive liberalization –Positive lists –Central Government entities – only –Over certain thresholds –… but EC-CARIFORUM Council may decide otherwise… Transparency:Transparency: –Publications of laws, regulations and procedures –… in electronic media, in a particular time-frame –Creation of online facility for tendering –Transition period: 5 years (lesser developed countries) Technical specificationsTechnical specifications (Internationally agreed standards) No Special and Differential TreatmentNo Special and Differential Treatment (few and weak provisions) Technical CooperationTechnical Cooperation ExceptionsExceptions (security-related)

Implications for development Concerns related to EPA provisions on GP: –Prohibition of use of preferences to local producers and suppliers Reduced used of important instrument for industrial and development policies –Cost of compliance Transparency rules: High cost, as most countries have not adopted UNCITRAL reforms (Woolcock study) Institutional capacity: Surveys identifying lack of trained professionals and lack of regulatory as a major challenge –Inadequate support and assistance provided for in EPAs –Potential impact on fostering regional complementarities using procurement policies EPAs = adoption of common rules in regions (positive) However, small markets and limited supply capacity Open too soon = benefits accruing to one partner only

Development aspects of RTAs Reduction of tariff peaks by developed countries Less than full reciprocity for developing countries Adjustment support –Social cohesion/structural funds (EU) –Regional infrastructure programs (Lat. Am.) Technological support and technical assistance Facilitating mobility of workers Developing trade remedies

Example 2: Concerns related to agriculture provisions in EPAs Concerns related to market access commitments by developing countries –Significant reduction of tariffs + standstill provision –Lost capacity to implement quantitative restrictions –Safeguard mechanism might not be not useful Level of subsidies is maintained (EU) Development cooperation are largely non- actionable (lacking binding financial commitments beyond 10th EDF) Cooperation related to standards (SPS/TBT) is limited to information exchange

Conclusions RTAs can have potential negative and positive effects in terms of economic development These will depend on the design of the RTA and the capacity of countries/businesses to adapt to a changing competition environment North South RTAs entail policy challenges because of the asymmetries among partners (Institutional, supply-side constraints, financial means) –They imply greater concessions from developing countries (in terms of reducing border and behind the border measures) Maximizing potential positive effects will depend on: –Approaching negotiations in a coherent and strategic manner –Adequate assessment of Cost and benefits prior to negotiations Development impact after negotiations (implementation surveillance with the possibility of reviewing commitments) –Ensuring coherence between RTAs/MTS –Adequate SDT provisions