Liberalizing International Trade: Trade Multilateralism and Regionalism
As Tools of Liberalisation in International Trade: Multilateralism and Regionalism
By Halit AKCAGLAYAN Head of Department Undersecretariat for Foreign Trade G.D. for Agreements
Trade Policy Making
Three main contexts for government to government deals for better market access:
Multilateral: GATT/WTO Regional Integrations Bilateral Preferential Agreements or FTAs
Multilateral Trading System vs. RTAs ? Undersecretariat for Foreign Trade
2
Recent Trends in International Trade: Global Crisis
Global crisis and sharp contraction in demand
The volume of world trade have declined 12%: back to the 2006 level FDI declined by 39%
Early signs of recovery: Sustainable or Still Fragile?
Developed countries’ exports grew by 4% (Q4) Dev’ing countries’ exports grew by 9% (Q4) Possibility of “double dip”: Recovery may be temporary Current growth in trade can be the result of government stimulus packages and buy local clauses Undersecretariat for Foreign Trade
3
Volume of Monthly Exports (2000-2009)
Undersecretariat for Foreign Trade
4
Volume of Monthly Imports (2000-2009)
Undersecretariat for Foreign Trade
5
Turkish Imports and Exports
Undersecretariat for Foreign Trade
6
WTO: Principles of Multilateralism
Trade without discrimination
Most-Favoured-Nation (MFN) National treatment: Treating foreigners and locals equally
Predictability: through tariff bindings and rules for transparency Freer trade: gradual elimination of tariffs and NTBs and setting rules through negotiation Undersecretariat for Foreign Trade
7
GATT/WTO Negotiation Rounds Name
Year Topics
Participant Countries
1. Cenevre Round 2. Annency Round 3. Torquay Round 4. Cenevre Round 5. Dillon Round 6. Kennedy Round
1947 Tariffs 1949 Tariffs 1951 Tariffs 1956 Tariffs 1960-1961 Tariffs 1964-1967 Tariffs and anti-damping measures
23 13 38 26 26 62
7. Tokyo Round
1973-1979 Tariffs, non-tariff measures and framework agrements 1986-1994 Tariffs, non-tariff measures, rules, services, TRIPs, DSU, textiles, agriculture, establishment of WTO
102
8. Uruguay Round
Undersecretariat for Foreign Trade
123
8
Doha Development Round Negotiations
Launched in 2001-Qatar Carries the burden of being the first WTO Round Currently the longest round of multilateral trade negotiations There is an overall consensus on all but few negotiation topics Completion of the Round may boost global trade by 336 billion $ and real income by 59 billion $ Undersecretariat for Foreign Trade
9
Why Multilateralism?
GATT/WTO system has set the “rules of the game” for last decades
International trade regime is defined around binding agreements
DSU mechanism is efficiently functioning
Given these advantages, membership has grown nearly sevenfold since 1948: from 22 to 153 Undersecretariat for Foreign Trade
10
“Enabling Clause”
“Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries” GATT Decision of 28 November 1979 (L/4903) Ensures that developed countries do not expect developing countries, in the course of trade negotiatinos, to make contributions which are inconsistent with their development, financial and trade needs. Thus, RTAs among D’ing-LDCs are not subject to GATT Ar. XXIV Undersecretariat for Foreign Trade
11
Multilateralism and Regionalism
Despite multilateralism is promising, RTAs have mushroomed especially in the last two decades. Undersecretariat for Foreign Trade
12
Global Picture of RTAs (Goods-2006)
Undersecretariat for Foreign Trade
13
Global Picture of RTAs (Services-2006)
Undersecretariat for Foreign Trade
14
RTAs in Numbers
EU has been one of the most frequent appliers of regional agreements: 29 RTAs USA has 11 RTAs. Turkey’s RTAs are listed below:
EC-Turkey EFTA Egypt Albania Bosnia-Herzegovina Croatia
Macedonia Georgia Israel Montenegro Morocco Palestine Syria Tunusia
Undersecretariat for Foreign Trade
15
Why Regionalism?
Still, regional trade agreements are flourishing too. FTAs, customs unions, common markets are forms of regionalism As of February 2010, 462 RTAs have been notified to the GATT/WTO
345 RTAs fall under Article XXVI 31 RTAs fall under Enabling Clause 86 RTAs fall under Article V of GATS Undersecretariat for Foreign Trade
16
Regionalist Tendencies
If multilateralism is so promising, why to have regional agreements?
Negotiation fatigue: DDA has been on the agenda nearly for the last decade Increase in bargaining power: Regional agreements facilitate establishment of groups, and more importantly, ensure sustainability of them Increase in market share and market access: Virtually every country is a member of a type of an RTA Facilitated trade: Barriers to trade are mutually reduced and non-tariff barriers are eliminated as much as possible. Tacit insurance: Developments such as failure to reach a multilateral agreement turns out to be less costly owing mainly to already secured open access to RTA members’ markets Undersecretariat for Foreign Trade
17
Pros and Cons of Regionalism Pros:
Cons:
Better market access
Criteria for rules of origin
Reduced or eliminated tariffs
Reduced or eliminated nontariff barriers
Exclusion of non-members from the market: “Stumbling blocks”
Clashing and conflicting rules resulting from multiple RTA memberships: “Spagetti bowl”
Ensuring better dialogue fostered by cooperation in trade
Undersecretariat for Foreign Trade
18
The Road Ahead
Past experience points to the fact that, as multilateral negotiations tend to fail to liberalize international trade, regionalist tendencies proliferates. Given slow progress in the DDA, we can expect regionalism continue to flourish. WTO can help easing difficulties experienced by multiple, overlapping and complicated schemes and provide a solution to the egress of spaghetti bowl of RTA Undersecretariat for Foreign Trade
19
Thank You
By Halit AKCAGLAYAN Head of Department Undersecretariat for Foreign Trade G.D. for Agreements
Trade Policy Making
Three main contexts for government to government deals for better market access:
Multilateral: GATT/WTO Regional Integrations Bilateral Preferential Agreements or FTAs
Multilateral Trading System vs. RTAs ? Undersecretariat for Foreign Trade
2
Recent Trends in International Trade: Global Crisis
Global crisis and sharp contraction in demand
The volume of world trade have declined 12%: back to the 2006 level FDI declined by 39%
Early signs of recovery: Sustainable or Still Fragile?
Developed countries’ exports grew by 4% (Q4) Dev’ing countries’ exports grew by 9% (Q4) Possibility of “double dip”: Recovery may be temporary Current growth in trade can be the result of government stimulus packages and buy local clauses Undersecretariat for Foreign Trade
3
Volume of Monthly Exports (2000-2009)
Undersecretariat for Foreign Trade
4
Volume of Monthly Imports (2000-2009)
Undersecretariat for Foreign Trade
5
Turkish Imports and Exports
Undersecretariat for Foreign Trade
6
WTO: Principles of Multilateralism
Trade without discrimination
Most-Favoured-Nation (MFN) National treatment: Treating foreigners and locals equally
Predictability: through tariff bindings and rules for transparency Freer trade: gradual elimination of tariffs and NTBs and setting rules through negotiation Undersecretariat for Foreign Trade
7
GATT/WTO Negotiation Rounds Name
Year Topics
Participant Countries
1. Cenevre Round 2. Annency Round 3. Torquay Round 4. Cenevre Round 5. Dillon Round 6. Kennedy Round
1947 Tariffs 1949 Tariffs 1951 Tariffs 1956 Tariffs 1960-1961 Tariffs 1964-1967 Tariffs and anti-damping measures
23 13 38 26 26 62
7. Tokyo Round
1973-1979 Tariffs, non-tariff measures and framework agrements 1986-1994 Tariffs, non-tariff measures, rules, services, TRIPs, DSU, textiles, agriculture, establishment of WTO
102
8. Uruguay Round
Undersecretariat for Foreign Trade
123
8
Doha Development Round Negotiations
Launched in 2001-Qatar Carries the burden of being the first WTO Round Currently the longest round of multilateral trade negotiations There is an overall consensus on all but few negotiation topics Completion of the Round may boost global trade by 336 billion $ and real income by 59 billion $ Undersecretariat for Foreign Trade
9
Why Multilateralism?
GATT/WTO system has set the “rules of the game” for last decades
International trade regime is defined around binding agreements
DSU mechanism is efficiently functioning
Given these advantages, membership has grown nearly sevenfold since 1948: from 22 to 153 Undersecretariat for Foreign Trade
10
“Enabling Clause”
“Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries” GATT Decision of 28 November 1979 (L/4903) Ensures that developed countries do not expect developing countries, in the course of trade negotiatinos, to make contributions which are inconsistent with their development, financial and trade needs. Thus, RTAs among D’ing-LDCs are not subject to GATT Ar. XXIV Undersecretariat for Foreign Trade
11
Multilateralism and Regionalism
Despite multilateralism is promising, RTAs have mushroomed especially in the last two decades. Undersecretariat for Foreign Trade
12
Global Picture of RTAs (Goods-2006)
Undersecretariat for Foreign Trade
13
Global Picture of RTAs (Services-2006)
Undersecretariat for Foreign Trade
14
RTAs in Numbers
EU has been one of the most frequent appliers of regional agreements: 29 RTAs USA has 11 RTAs. Turkey’s RTAs are listed below:
EC-Turkey EFTA Egypt Albania Bosnia-Herzegovina Croatia
Macedonia Georgia Israel Montenegro Morocco Palestine Syria Tunusia
Undersecretariat for Foreign Trade
15
Why Regionalism?
Still, regional trade agreements are flourishing too. FTAs, customs unions, common markets are forms of regionalism As of February 2010, 462 RTAs have been notified to the GATT/WTO
345 RTAs fall under Article XXVI 31 RTAs fall under Enabling Clause 86 RTAs fall under Article V of GATS Undersecretariat for Foreign Trade
16
Regionalist Tendencies
If multilateralism is so promising, why to have regional agreements?
Negotiation fatigue: DDA has been on the agenda nearly for the last decade Increase in bargaining power: Regional agreements facilitate establishment of groups, and more importantly, ensure sustainability of them Increase in market share and market access: Virtually every country is a member of a type of an RTA Facilitated trade: Barriers to trade are mutually reduced and non-tariff barriers are eliminated as much as possible. Tacit insurance: Developments such as failure to reach a multilateral agreement turns out to be less costly owing mainly to already secured open access to RTA members’ markets Undersecretariat for Foreign Trade
17
Pros and Cons of Regionalism Pros:
Cons:
Better market access
Criteria for rules of origin
Reduced or eliminated tariffs
Reduced or eliminated nontariff barriers
Exclusion of non-members from the market: “Stumbling blocks”
Clashing and conflicting rules resulting from multiple RTA memberships: “Spagetti bowl”
Ensuring better dialogue fostered by cooperation in trade
Undersecretariat for Foreign Trade
18
The Road Ahead
Past experience points to the fact that, as multilateral negotiations tend to fail to liberalize international trade, regionalist tendencies proliferates. Given slow progress in the DDA, we can expect regionalism continue to flourish. WTO can help easing difficulties experienced by multiple, overlapping and complicated schemes and provide a solution to the egress of spaghetti bowl of RTA Undersecretariat for Foreign Trade
19
Thank You
