Assessing and Addressing the Effects of Trade on Employment

1. International Labour Organization Assessing and Addressing the Effects of Trade on Employment Multilateral Trading System and Trade Negotiations Indonesia 12 - 16 July 2010 Ralf Peters Chief Technical Advisor ILO Trade and Employment Programme peters@ilo.org

2. The Liberalisation Game

3. The Liberalisation Game Trade Negotiations because of Prisoners Dilemma

4. Applied Tariffs Changes

5. “Three Levels” Trade Agreements • Multilateral • Trading • System • All countries (all WTO members) • WTO agreements • (Plurilateralagreements) • Regional Trade • Agreements • (Free Trade • Agreements) • Preferences • EU, NAFTA • ASEAN • GSP, AGOA • Bilateral Trade • Agreements • Indonesia – Japan • EU – Mercusor • Accession to WTOBelarus - WTO

6. Outline • The Multilateral Trading System • The Doha Round • Regional Trade Agreements

7. WTO and GATT Source: WTO

8. Main Objectives of the WTO • Trade without discrimination • Freer trade: gradually, through negotiation • Predictability: through binding and transparent commitments • Promoting fair competition • Encouraging development and economic reform

9. GATT Basic Principles: Trade without Discrimination • MFN-clause (Most-Favoured-Nation): Art. ICountries cannot (normally) discriminate between their trading partners. E.g. give the same tariff to all trading partners (between foreign suppliers) • National treatment: Art. IIIOnce goods have cleared customs, imported goods must be treated equally to domestically-produced goods (between domestic and foreign supplier)

10. Other Key GATT Articles • II: Schedule of Concessions (Bound rates: maximum ceiling level) • XVIII bis: Tariff negotiations(GATT to sponsor negotiations time to time) • XI: Elimination of quantitative restrictions (Export restrictions allowed for food security) • XIX: Safeguard (emergency action on imports if quantity increased AND causes or threatens to cause serious injury) • XX: General exceptions (protect human, animal or plant life or health) • XIV: Free-trade Agreements (only under conditions) • XVIII: Modification of schedules (negotiate change but pay compensation)

11. Similar Provisions for Services Trade • Most Favoured Nation Treatment: Article II (1) of the GATS: “…each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.”

12. Country Schedules(specific commitments by service sector and mode of supply) Country X - Schedule of Specific Commitments Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

13. Outline • The Multilateral Trading System • The Doha Round • Regional Trade Agreements

14. subscribing members and subjects covered by the international trade rounds

15. Market Access: Current Tariffs Source: UNCTAD TRAINS and UNCTAD calculations based on WTO CTS • Specific Problems: • Tariff escalation • Tariff peaks

16. European Union: bound and applied tariff rates, agriculture Note: New AVEs (Paris), Five products with tariffs above 500% not plotted. Olive oil, refined Sugar, raw Tea

17. Developing countries: bound and applied tariff rates, agriculture Bound at ceiling level Tariffs in per cent Lower applied rates Number of tariff lines

18. Developing countries: bound and applied tariff rates, agriculture Tariffs in per cent Number of tariff lines

19. SUPPORT TO PRODUCERS% of the total farm receipt Source: OCDE, Politiques agricoles des pays de l’OCDE, 2001

20. AMS • Final bound AMS of OECD countries for the year 2000 = US$158 billion 97 % OCDE

21. Initial Tariffs Trade Weighted Averages Developing countries have higher tariffs Source: WITS/TRAINS *Final Uruguay Round, **Last available year, mostly 2001

22. Bilateral average applied tariffs Trade weighted applied tariffs, Source: UN COMTRADE and UNCTAD TRAINS

23. Peaks: Tariffs above three times national average Initial tariff peaks Percentage of Items with Peaks in all Tariff Universe Developed countries have lower average tariffs but more peaks => Harmonizing approach Source: WITS/TRAINS

24. Silk tariff escalation (weighted average tariffs) Finished silk Woven silk Raw silk Silk yarn

25. Doha Round Overview

26. Doha: Negotiating Mandate • Single undertaking • Impl. Issues and SDT review • Agriculture • Services Market access (reduction of trade barriers) • NAMA • Rules (AD, SCM & RTAs) • TRIPS • Trade and Environment • Singapore issues • Trade Facilitation (part of single undertaking) • Non single undertaking • DSU Review AD = Anti Dumping SCM = Subsidies Countervailing Measures RTA = Regional Trade agreements TRIPS = Trade Related Interlectual Property DSU = Dispute Settlement Understanding

27. “Three Pillars” Outline of the Agreement on Agriculture • Export Subsidies • Reduction • Prohibition of new subsidies • Market Access • Tariffication • Tariff reduction • Minimum access • Special Safeguard • Domestic Support • AMS reduction • Green Box • de minimis • Special and Differential (S&D) Treatment for DCs and LDCs • Related Agreements, e.g. Marrakesh Decision • Establishment of a Committee on Agriculture • Continuation of the reform process

28. Outline of the Negotiations on Market Access for Non-Agricultural Products Issues • NTBs • Formula • Formula • Preferences • Sectorial Approach • Sectors • Participation • Tariff Binding • Coverage • Level Special and differential treatment • Specific groups • Recently acceded members • SVE Flexibilities for DCs and SDT for LDCs

29. Formulae

30. Conclusion Trade Negotiations • Doha Round Negotiations are ongoing • Very sensitive in most countries • Whatis a « good » level of commitments? • How muchpolicyspace do developing countries need? • Whatis the impact on employers and workers?

31. Change in producer surplusCancun and Harbinson Source: ATPSM, only agriculture

32. Change in consumer surplusCancun and Harbinson Source: ATPSM, only agriculture

33. Change in welfare: Cancun and Harbinson Source: ATPSM, only agriculture

34. RISKS: Sectoral Unemployment Percent Changes in Labour Usage Relate to Base, by Sector Swiss Formula, Ambitious Scenario Source: GTAP, NAMA

35. Outline • The Multilateral Trading System • The Doha Round • Regional Trade Agreements

36. Number of Notified RTAs by Year of Entry into Force: 1948-2009 36 Source: WTO

37. RTA proliferation means increased share (%) of world trade under RTAs 51.2% 43.2% Note: Estimate based on 113 RTAs in force in 2000 with trade data of 1999. Source: WTO, World Trade Report 2003.

38. FUTURE PROSPECTS Dominican Republic Nicaragua Myanmar Cambodia El Salvador Guatemala Honduras Russia Panama Indonesia Costa Rica Bhutan, Maldives, Nepal, Pakistan Brunei Darussalam Viet Nam Laos USA Philippines Malaysia Paraguay Bangladesh Thailand Brazil Argentina India Singapore Uruguay Sri Lanka New Zealand Chile Mexico Japan People’s Rep. of China Peru Colombia Hong Kong, China Korea Canada Bolivia Ecuador Chinese Taipei Australia Venezuela Fiji, Solomon Islands, Vanuatu Papua New Guinea Bahamas Haiti Fed. States of Micronesia, Marshall Islands, Kiribati, Palau, W. Samoa,Tonga, Vanuatu, E. Timor, Cook Islands, Nauru, Niue, Tuvalu Dominica, Suriname, Jamaica, St. Lucia, Belize, St. Kitts & Nevis, Grenada, Barbados, Guyana, St. Vincent & the Grenadines, Antigua & Barbuda, Trinidad & Tobago ASIA AMERICAS Source: Estevadeordal (2004)

39. Welfare Effects of an RTA Positive • RTAs creates trade (static trade creation) • RTAs generates dynamic gains from scale economy, greater competition, FDI inflows & technology transfer Negative • RTAs diverge trade from more efficient third countries to less efficient RTA partners