Pacific Region Civil Society Workshop on Trade and Development, Aggies resort, Mulifanua 25 – 27 May 2010 An Overview of WTO and EPA,the Implications, Issues, Opportunities, Challenges and Relevance for the Civil Society. Stephen Musubire, Commonwealth Secretariat (Hubs and Spokes Project) Summary of Presentation WTO: 1. What is the WTO? 2. Principles 3. What Happens at the WTO? 4. How are Decisions made? 5. Issues of concern to Forum Island Countries(FIC) & Small and Vulnerable Economies(SVEs) in the DDA DDA? 6. Non Non-State Actors: – Parliamentarians – Non Non-Governmental Organizations. EPA • What is EPA? • Beginning of Negotiations. • The Interim EPA. • Contentious Issues. • Enhancing Non Non-State Actor Input in the Negotiation Process towards a comprehensive EPA. 500 pages of (Agreements) Rules/23,000 pages of Commitments What is the WTO? A set of International Trade Rules agreed by Members through NegotiationsMultilateral set of trade rules: • General Agreement on Tariffs and Trade 1994. • General Agreement on Trade in Services. • Trade Trade-Related Aspects of Intellectual Property. What is the WTO? • Dispute Settlement Understanding. • Trade Policy Review Mechanism. • Plurilateral Agreements. • Non Non-discrimination: – Members cannot discriminate between trade partners. – Exceptions: Free trade agreements, tariff preferences for developing developing-country products, GATT Article XX and WTO: Principles trade remedies. • National treatment: – Imported and domestic goods should be treated equally. – Applies only when the product or service has entered the market. • Freer trade: – Through negotiations. – Gradually lower trade barriers. – Progressive liberalization. • Stability and Predictability: – Improves business and investment environment. WTO: Principles (Cont’d) – Commitments at the WTO are binding. • Transparency requirements requirements. Promoting fair competition: – Rules on dumping and subsidies. • Encourage development and reform: – Flexibilities for developing countries and economies in transition. – Transition periods. – Technical assistance. The first step is to talk talk. This is where governments go to try to sort out their trade problems. What happens at the WTO? WTO: not just for liberalizing trade. Sometimes the rules support trade barriers — e.g. to protect consumers or prevent the spread of disease. Somewhere to talk Skip >>>• Member Member-driven and consensus consensus-based. • Ministerial Conference: – Topmost decision decision-making body. – Meets at least once every two years. • General Council: How are decisions made at the WTO? – On behalf of the Ministerial Conference. – Meets in Geneva. • Councils: – Trade in Goods. – Trade in Services. – Trade Trade-Related Aspects of Intellectual Property Rights. • Various Committees. Importance of the WTO to the Pacific • The pacific consists mainly of Small Island economies. • International trading system, based on rules and principles of free trade and competition, was not established with either the interests or the needs of small economies, such as the FICs, in mind. • But Small economies can make use of the system to secure their interests especially on issues such as special and differential Treatment(S&DT) through the small Economies Work Programme(SEWP). • SEWP is the result of demands made by small economies, including the FICs, that their interests be recognized within the WTO system -recognized by Ministers in their Declaration done in Doha, Qatar in 2001. • All major trading partners of the FICs, however, are members of the WTO and are bound by its rules rules. • This has implications on all the FICs, including for those FICs that are presently not members of the WTO but are currently negotiating the Economic Partnership Agreement (EPA) with the EU as new trading arrangements in the EPA that are required to be WTO WTO-compatible compatible. • Meaningful protection of FICs’ interests can, therefore, only be assured from within the WTO system system.• Agriculture; • Industrial Products (NAMA); • Sanitary and Phyto Phyto-Sanitary (SPS), Trade Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Technical Barriers to Trade (TBT) Agreements; • Access fees, fiscal incentives and assistance to small small-scale fisheries; Issues of concern to FIC FIC-WTO & SVEs in the DDA? • Accession to the WTO; • Article 27.4 of the Subsidies and Countervailing Measures (SCM) Agreement; • Domestic Regulations; • Regional Approaches to Trade Facilitation; • Special and Differential Treatment; and • Aid for Trade. Agriculture • constitutes the mainstay of the economies of the SVEs, whose production and export profile is concentrated on a limited number of agricultural commodities and export markets. • uncertainty surrounding the general provisions/proposals on market access in agriculture and related Special and Differential Treatment provisions; SVEs in their submission wanted; • Provisions for the substantial improvement in market access for products of export interest to SVEs; • SVEs to designate Special Products (SPs) based on their food security, livelihood security and rural development needs and those SPs to be exempt from tariff reductions and tariff rate quota commitments; • All agricultural tariff lines to be eligible for the Special Safeguard Mechanism (SSM) and the SPs of SVEs to have automatic access to the SSM; • Effective and flexible remedy measures to be developed that address the needs of SVE, which are to include price and volume triggers. NAMA • loss of tariff revenue; • potential weakening of competitiveness and • losses incurred from erosion of preferential tariffs; • Special treatment for Fiji Islands, where due to a low binding coverage rate (of less than 50 per cent), Fiji shall be 5% • Paragraph 21 of the Hong Kong Ministerial Declaration expressed the need to consider the difficulties faced by SVEs as a result of the NAMA tariff negotiations, by stating: • “We note the concerns raised by small, vulnerable economies, and instruct the Negotiating Group to establish ways to provide flexibilities for these Members without creating a sub sub-category of WTO Members” Access fees, fiscal incentives and assistance to small small-scale fisheries; • new disciplines on fisheries subsidies would require special treatment provisions to ensure adequate policy space for small coastal states; • This would safeguard their rights to develop their fisheries sector and provide adequate support for artisanal fishing. • It would also allow access payments by distant water fishing fleets and preserve revenue resources by granting foreign access to national Exclusive Economic Zones (EEZs); Accession to the WTO • Wanted Special and differential provisions for LDCs and developing countries during the accession process; • Less commitments to be undertaken by the above category of countries; • Process to be made less cumbersome for acceeding countries including timeframes and demands from the WTO members. Article 27.4 of the Subsidies and Countervailing Measures (SCM) Agreement • An extension of fast fast-track procedures and extension of timeframes for phasing out of export subsidy programmes under the special subsidisies procedures; • the right to request for further extensions beyond the granted extension extension-period; financial capping and capping on the number of beneficiaries; enhanced transparency provisions; and the nature of technical assistance; • Under the list of export subsidy programmes subject to Article 27.4, Fiji had notified three programmes, namely: The Short Short-Term Export Deduction Scheme; the Export Processing Factories/Export Processing Zones Schemes and the Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 2000); • Similarly, Papua New Guinea had notified its Section 45 of the Income Tax Act under the list of programmes subject to Article 27.4 extensions under the procedures; Domestic Regulations • Particular emphasis is being placed on capacity constraints related to financial, administrative and institutional capacity as well as size and level of development in developing and implementing domestic regulations to cater for Qualification Requirements and Procedures, Licensing Requirements and Procedures and Technical Standards; • SVEs have also pursued the development dimension as a cross cross-cutting issue in the formulation of disciplines in every issue under the negotiations on domestic regulation, with sufficient flexibility to take specific concerns of developing and small economies into account Trade Facilitation • Barbados, Fiji, Papua New Guinea and Solomon Islands tabled a proposal on trade facilitation. • The proposal spoke specifically of the need for a regional approach to enquiry points for small, vulnerable countries that often lack adequate financial, technical and administrative capacities to implement all proposed trade facilitation measures at the national level; • Advocated for disciplines that carry flexibility with regard to whether countries adopt a national and regional approach to enquiry points (with the objective to arrive at a broad agreement on enquiry points) Aid For Trade • In accordance with the mandate of the 6th Ministerial Conference of WTO on the “Aid for Trade Initiative” (AfT), a Task Force (TF) was established in February 2006 to provide recommendations on how to operationalize AfT. The WTO AfT Task Force submitted its recommendations in July 2006. • At its meeting of 10 October 2006, WTO Council endorsed the recommendations of the TF. • The general sentiment expressed by Members was that these recommendations should be implemented expeditiously. • Hence there is a need to engage in close consultations on a roadmap for the expeditious implementation of the TF recommendations, including the need for support to mainstream trade into national strategies and to identify trade trade-related priorities for possible donor funding associated with the aid for trade initiative. Regional Trade Agreements(RTAs) • stressed the need for fair multilateral rules governing regional economic integration; • existing WTO rules are based on reciprocity and do not take into account the situation that arises when weaker parties engage in a regional trade agreement between economies of unequal strengths; • GATT Article XXIV should reflect fair roles that recognize these trade asymmetries and allow weaker countries to assume obligations commensurate with their level of development; • Sought a change in Art. XXIV of the GATT to make it more flexible so that adequate special and differential treatment (in the form of less coverage, longer transition periods) is foreseen for developing countries in the future Free Trade Areas (FTAs) between developed and developing countries. EPA What is EPA? • EPA is a free trade agreement (FTA), based on reciprocal opening of markets by the parties.Prior Trade arrangements i.e. EBA,GSP,are non non-reciprocal. • Overall objectives: – ensure the sustainable development of ACP countries; – their smooth and gradual integration into the global economy; and – the eradication of poverty. • Specific objectives: – promotion of sustained growth; – increasing the production and supply capacity of the ACP countries; – structural transformation and diversification of the ACP economies; – to allow them to be more competitive globally; and – promotion of regional integration. What is EPA,Cont’d… • The EPA provides the best market access (DFQF + improved RoO ) compared to GSP schemes schemes. • Unlike other schemes that are unilateral and can easily be withdrawn preferences successfully negotiated within the EPA would be legally binding binding. • LDCs have the EBA which provides DFQF market access on all products except arms and ammunitions . • Non Non-LDCs that did not initial EPAs were relegated to the GSP contrary to Art Art. 37 37.6 of the CA (alternatives providing equivalent access) Beginning of Negotiations • ACP States and the EC agreed to negotiate the EPA under the Cotonu Agreement (Art Art. 36 36.1) “… the parties agree to conclude new World Trade Organisation compatible Trading arrangememnts,removing progressively barriers to trade between them and enhancing co co-operation in all areas relevant to Trade Trade…” • Negotiations commenced in September 2002 and the EPAs were supposed to enter into force by 1 January 2008 (Art Art. 37 37.1 CA) CA). • Regional EPA negotiations between the Pacific ACP States (PACPS) and the European Commission (EC) commenced on 10 10th th September 2004 and intensified throughout 2007 2007.Beginning of EPA Negotiations Cont’d • Deadline not archieved and as a result PACPS proposed Interim EPA(IA) focussing on finalising trade in goods arrangements to preserve market Access for PACP goods into the EU when the WTO waiver expired expired. • Other issues that included services,fisheries,development left for 2008 2008. • 36 36/77 ACP States initialled/signed Interim Agreements( I.As As) to avoid market disruption disruption. • In the Pacific region, only Fiji and PNG initialled the I.A and later signed in late 2009 2009.The Interim EPA • IA is free trade agreement covering trade in goods • IAs concluded in African regions and in Pacific • Pacific IA initialed by Fiji, PNG and EC in November 2007 • Puts in place: Preferential duty duty-free market access for Fijian/PNG exports to the EU (for sugar, fish etc) Rules of Origin Fiji/PNG tariff liberalisation schedules for EU exports Rules governing Trade in Goods, Safeguards, Customs and SPS, Institutions and Dispute Settlement Archievements in the I.A • Improvements to ROO in the IA for: Fisheries: canned tuna – universal sourcing Textiles: ‘double’ to ‘single transformation’ rule Some agricultural goods: including some processed foods Costs in I.A • Main cost will be tariff liberalisation: – 80 % by import value (GATT SAT) – 80 % of tariff lines • Excluded list of products on which remains free to apply tariffs: – mainly for protection purposes and revenue reasons • With the data data-set tool PACPS able to make estimates of revenue losses for commitments undertaken in tabling goods offers. Contentious Issues • substantially all trade and transitional periods for tariff liberalisation • export taxes • infant industries • standstill clause • the most favoured nation (MFN) clause • Rules of origin,0304 0304-0305 • the ‘non non-execution’ clause SAT • The Principle; WTO: liberalise ‘substantially all trade’ over a ‘reasonable length of time’; EU minimum threshold: 80% over 15 years Advantages • Benefits from liberalization • 20% exclusion basket sufficient to protect sensitive products • Safeguards is more needed • WTO WTO-defendable Disadvantages. • Adjustment costs of liberalization • Need for strong asymmetry and sufficient time • Take account of level of development • WTO WTO-defensible Export Taxes The Principle; Restrictions and elimination of export taxes Advantages • Reduces trade distortions • use more efficient instruments • Governance • EU Strategy on Raw Materials Disadvantages • Revenue support • Management of resources and environment • Industrial or export diversification policy • Macro Macro-economic stability • Transparent instrument Infant Industries • The Principle; Suspend its tariff liberalisation in case of increase in quantities imported that cause serious injury or creates disturbances ;temporary protection for infant industry during transition period(sunset clause) Advantages • flexibility to prevent unforeseen negative outcomes of liberalisation • the goods chapter as a ‘package’ • WTO WTO-compatibility Disadvantages • terms unclear (GATT: ‘serious injury’ or GSP: ‘disturbance’) • no volume or price triggers • Inefficient infant industry clause (as linked to import surge; transition period only Standstill Clause • The Principle; No new tariffs; no tariffs re re-imposed or increased for liberalized goods Advantages • Aim to liberalise trade • Baseline rate for liberalisation Disadvantages • Aim to liberalise trade • Baseline rate for liberalisation • Freeze exceptionally low • Start rates for liberalisation need not be applied rates • Common External tariff alignment • Allow higher safeguard duty rates Most Favoured Nation Clause(MFN) • The Principle; Treat the other party no less favorably than a third party. Any other benefits accorded to another party in a separate arrangement would equally and automatically have to be accorded to the party to the EPA.What if the other party has given more to deserve better preferences? Advantages • Fair treatment • Limits requests from future ACP partners Disadvantages • EU self self-interest = against development goals of an EPA • Constraints on sovereign decision to pursue other partnerships (including with major DCs = South South-South) • Ambiguous clause (e.g. FTA; scope; etc) ROO • The Principle; Simplification of ROO(current 170 pages of complex product specific rules).The need for ROO to cater for exportation of fish in its natural state under Hs.0304 0304-0305(fish pieces and fillets). Advantages • For the pacific , a new set of rules defining the origin of fish for processed goods goods-allowing fish to be sourced from anywhere in contrast to earlier highly restrictive rule rule-a major concession on the part of the EU and limited to the Pacific region. • The concern on simplication of ROO has gained support from international organizations and commissions ie (World Bank and the Blair Commission Disadvangtes • Complex Roo often increases the cost of meeting the rules, lessens the value of the preferential market access on thereby acting as a deterrent to private sector investors; • For the ROO granted to the Pacific, these stand to benefit mainly countries/sub sub-regions with processing companies. Non Non-Execution Clause • The Principle; Possibility of trade sanctions in the event of violations of democratic or human rights principles or rules of law Advantages • Status quo with Cotonou • Important principles Disadvantages • CPA sanctions have never been applied to trade (aid only) • EPA about trade, not political Adverse regional effect • Not WTO compatible (GATT Art.XXIV) Enhancing Non Non-State Actor Input in the Negotiation Process towards a comprehensive EPA. • Continue the Good work of Lobbying but strengthen dialogue with Negotiators in Government through national consultative committees or direct engagement where such committees are non non-existing to clearly identify what we expect from a particular negotiation bearing in mind that that;--The EU has its global strategy, duly adopted and under implementation, for building its competitiveness and creating jobs jobs. -Key elements of this strategy are to aggressively seek markets all over the world for its products and its investors, the access is intended to be on the best preferential terms that enable the EU to out out-compete rivals such as the Americans, the Chinese, and the Indians for now now. -EPAs are instruments the EU is using to this end in the African Caribbean and Pacific regions amongst other things things.Enhancing Non Non-State Actor Input in the Negotiation Process towards a comprehensive EPA,Cont’d. -We shouldn’t misunderstand the EU for pursuing an economically viable strategy but rather work in partnership with our governments to obtain the best deal possible possible. • Assist negotiators with evidence based written positions citing actual cases prior to and during negotiations(It is a known fact that compared to developed country negotiating delegations,PACPS and other developing countries lack a sufficient pool of human resources to provide technical back back-up support on different aspects under negotiation negotiation; • Build on existing Ministerial mandates to enable continuous participation as observers during negotiations negotiations; • Non Non-state actors should also acknowledge some of the positive outcomes from negotiations whilst strategically lobbying for more in line with nationally agreed upon Trade strategies strategies;Conclusion • All having been said the key question is are there sufficient resources available to genuinely implement the objectives of the EPA? • Sources?EDF? Article 58 58(3)-Non Non-State Actors now eligible for funding according to modalities agreed in the national and regional indicative programmes programmes.. ..are Non Non-state actors engaging with respective regional and national authorising authorities to ensure that projects are priotised for consideration for funding to enable them investigate and compile evidence to reflect the challenges on ground?