Private sector ignored in rash of trade deals

THE ‘missing element’ in all discussions about regional trade agreements is the opinion or view of the private sector, says a trade specialist at the WTO. As a result, often there is no value to an SME in the deal . . . 

AS GOVERNMENTS push ahead with their own (at times political) agendas in negotiating regional or bilateral trade agree- ments, the private sector is left to implement what has actually been negotiated.

And that implementation in the real world can throw up a number of challenges.

A specialist on regional trade agreements (RTAs) within the World Trade Organisation (WTO) confirms that businesses have to deal with issues such as different sets of rules of origin. “It becomes difficult for an SME to tailor its production process to meet these different rules of origin,” the specialist told ATI.

“If the tariff is already very low, it may not be worth changing the production processes — they can simply go the MFN (most favoured nation) route. And the (trade) agreement is of no value to them.” (Under the WTO MFN prin- ciple, all countries must be allowed to trade equally, and there should be no discrimination between trading partners.)

The specialist says: “In the end, it makes more economic sense to have one set of rules.” Her sentiments are the same as those often ex- pressed by business groups (see interview with Terry McGraw, page 11) where the preference is for a multilateral trade agreement.

The specialist adds that the “missing element” in all discussions about RTAs is the opinion or view of the private sector.

When the WTO hosted a seminar on RTAs last year, it had hoped to include the private sector to hear its views on various issues, but unfortunately, members were divided. Some objected, and the idea was dropped.

The specialist notes that ASEAN has set out to harmonise rules of origin, but complications arise when each ASEAN country has individual 

agreements with its major trading partners out- side ASEAN. “How do you reconcile all of the different sets of rules?,” the specialist asks.

(ASEAN is attempting to address this prob- lem with its Regional Comprehensive Economic Partnership (RCEP), through which it hopes to standardise all concessions in existing bilateral agreements.)

The WTO has been notified of 262 RTAs currently in force, but there are close to 100 other RTAs that are being enforced where no formal notification has been presented to the WTO. Judging from negotiations currently under way in various parts of the world, the trend is for the number of RTAs to continue to increase.

The specialist told ATI: “In general you are seeing greater liberalisation in goods and services trade in the RTAs. But in other areas, for instance on anti-dumping, the outcomes are mixed. RTAs have not moved beyond what is already in the WTO agreement. Overall, they simply reaffirm WTO rules. ”

However, she says RTAs cover investment rules, environment and-ecommerce, so, in this sense, they go beyond WTO obligations as there are currently no WTO rules in these sectors. Gradually, it is hoped that some of the RTAs will be brought into the broader WTO membership. An example is a government procurement agreement (GPA) to which some countries are not yet party.

“So it could be that countries which are not party to the GPA but have made commitments in their RTAs with their trading partners might consider joining the GPA. You would think it would be in their interest to do so. But this is supposition on the part of the WTO. In the end it is up to the member countries to decide what they want to do in terms of the GPA.”

Increasingly, countries which initially resist- ed the temptation to form RTAs are jumping on the bandwagon. Japan and India were among these. Others, like Singapore, were among the first to embrace RTAs.

“I think they have gone down this route part- ly out of necessity because they feel that they are losing their market access in the main export markets,” the specialist says.

“They are not getting preferential tariffs under RTAs,which they are not party to. This is true of countries in the Indian subcontinent. India is trying to negotiate outside the region, because it feels the need to re-establish with countries where it can get preferential access.”