INR 3933 Reading Notes Post Final Week 9 10 WTO World Trade Report Section D Originally week 8 rdg pushed off midterm I Are lower tariffs still important for PTAs a Tariffs have fallen since GATT 8 rounds of negotiations b MFN great reductions i Significant barriers still in agricultural manufacturing sectors c PTA s aren t caused by wishing to remove tariff peaks b c most sensitive industries maintain higher tariffs in PTAs d Preferential rates are no lower than MFN rates i Negative value country worse market condition than competitors ii Domino effect II Patterns in the content of PTA s a Sectoral coverage and enforceability i Methodology 1 WTO provisions subject to form of WTO agreements a of these is increasing 2 WTO X outside of mandate of WTO more common a Largely regulatory in nature b Deepening commitments c Competition policy intellectual property rights investment and movement of capital i Environment labor standards asylum 3 Legal Enforceability higher w more clear language a Ex should vs shall b Developed countries usually have legally enforceable agreements w each other developing countries usually do not 4 Depth of Obligation Is it binding in practice 5 Most of EU s PTAs neighbors US s everywhere ii Empirical evidence on PTA content by income policy area over time b PTA commitments in selected policy areas i Services 1 Most services PTAs share broad commonality a National treatment market access domestic regulation ii How much more market access than under GATS 1 Services PTAs offer better level of treatment than GATS 2 PTA commitments are different w each country but no exact explanation why and generally more far reaching than those in GATS a Reciprocity economy size possible factors i Mode 1 ii Mode 3 1 BITs iii Investment 1 What are investment provisions in PTAs commonly about a Investment trade covered by diff treaties b c diff but complimentary objectives i Trade increase trade opportunity 1 Investment protect promote foreign investment a BITs PTAs help spread int l production networks b Coverage i Broad FDI portfolio investment ii Narrow enterprise based c Principle of non discrimination i Negative list 1 Likely to yield greater investment opportunities ii Positive list d Standard of treatment i Fair equitable treatment ii Freedom in transferring payments abroad e Investor protection i Protection compensation if nationalized f Senior management and personnel i Possible stipulations of their nationality g Dispute settlement i Coordination negotiation ii State to state iii Investor state NAFTA 2 Patterns over time a Later agreements more open than early ones 3 Are there families of investment provisions a PTA s i NAFTA like Establishment acquisition post establishment operations resale 1 Agreements btw developed countries often go past multilateral level provisions ii Developing countries 1 MERCOSUR open gradually iv Technical barriers to trade 1 What are the TBT provisions in PTAs normally about a Mutual Recognition b Harmonization of Regulations i Promote transparency opening ii Harm Better to match products 1 More negotiation costs 2 Who Integrates TBT provisions the most a Countries at similar development levels deeper i Likely to trust e o similar objectives etc b North North highest integration of TBT s 3 Are there families of PTAs in the context of TBT integration a EU prefers harmonization i Likely has hub and spoke characteristics b North American prefers mutual recognition v Competition policy 1 Monopolies Cartels a Prevent multinational corps from true benefits costs b ITO failure but included restrictive businesses practices provisions c Transparency publication of laws promoting fair competition addressing anti competitive actions d Procedural Fairness admin proceedings consistent impartial reasonable it s possible to renew appeal admin made decisions 2 Pattern over time a Commitment to promote competition increased 3 Are there families in the PTA in context of competition policy a Horizontal principles more pronounced in US centered PTAs 4 Are competition Rules Preferential a Can t be b c of transparency b Spillovers from info sharing cooperation III Production Networks and Deep PTAs a Greater depth of agreement big increase in trade w PTA members i PTAs vehicles to narrow gaps btw countries regulations laws b Deep integration and production networks An empirical analysis i Do higher levels of trade in parts and components increase the likelihood of signing deeper agreements Yes positive impact c ASEAN from regionalization to regionalism i Manufacturing int l trade more intertwined networks more countries diff income levels intra firm arm s length relationships ii ASEAN est to deal w territorial tensions 1 1992 Cooperation led to FTA reduce tariffs to 0 5 in 10yrs 2 From ISI to export promotion EOI 3 Japan regional hegemon JAP Firms big role in development iii Production networks require low trade costs predictable econ policy iv ASEAN has played major role managing big power rivalries in E Asia d Costa Rica i Trade opening accompanied by FDI attraction hi tech manufact ii Intel established huge semiconductor assembly test plant there iii C R Participation in int l prod networks trigger trade w US China IV African Regional Cooperation lessons from deep integration a Lack of economies of scale need to combine econ markets political ideals b Lagos Plan of Action LPA i ECOWAS ii PTA covering east southern Africa precursor so COMESA iii ECCAS Economic Community of Central African States iv SADCC SADC 1992 awaiting S Africa democratic transition 1 Good example of linear model of progressive integration v Regional Indicative Strategic Development Plan of 2003 1 FTA 2008 CU 2010 C Mkt 2015 MU 2016 1 currency 2018 vi Time consuming inefficient border measures worse than tariffs 1 Geography Ex good waterways can mean bad railroads World Bank Trade Blocs Ch 5 I II Intro How RIAs set external tariffs a Krugman s Argument i Trade barriers lowest income greatest with 1 Global free trade multilateralism 2 Market power set by countless small countries a No incentive to deviate from free trade ii In between both extremes 1 3 RIAs worst prisoner s dilemma b WTO rules prohibit increase in trade barriers i Rules ambiguous poorly enforced c Foroutan study i Effectiveness of RIAs 1 Average applied tariffs and nontariff barrier coverage a South American RIA lowest tariffs NTB most liberalization since 80 s 2 Uruguay Round concessions a Refutes idea that RIAs lead to