Transcript PREFERENTIAL RULES OF ORIGIN

FTA and WTO
Eki KIM
WTO
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World Economy and Trade
World
US
EU
China
India
NICs
GDP
Exports
2008 2009 2010 2008 2009 2010
1.4 -2.4
3.6
2.2 -12.0 14.5
0.0 -2.8
3.0
5.8 -14.0 15.4
0.5 -4.2
1.8
0.0 -14.5 17.4
9.6
9.1 10.3
8.5 -11.2 23.1
6.4
5.7
9.7 14.4 -6.8 19.9
1.9 -0.8
7.7
4.9 -5.7 21.3
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World Exports of Merchandise and Services (2010)
(billion $)
Merchandise:
15,238
Services:
Transport:
Travel:
Other:
3,665
783
936
1,945
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World Merchandise Exporters (2010)
(billion $)
1.
2.
3.
4.
5.
6.
7.
China:
United States:
Germany:
Japan:
Netherlands:
France:
Korea:
1,578
1,278
1,269
770
572
521
466
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World Service Exporters (2010)
(billion $)
1.
2.
3.
4.
…
14.
United States:
Germany:
United Kingdom:
China:
Korea:
515
230
227
170
82
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• Contractual Trade Regime:
Bilateral FTAs (US-Korea, EU-Chile), Regional
FTAs (NAFTA, Pan-European System, ASEAN,
COMESA etc.)
• Autonomous Trade Regime:
GSP, US Caribbean Basin Initiative, EBA, etc.
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Proliferation of PTA
– Multilateral approach stumbled
– Surge in PTA in 21st century
– 70 PTA in force in 1990, 300 by 2010.
Alliance with anyone you can
Expansion of market
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Key Facts and Findings
• All WTO Members (except Mongolia)
belong to at least one PTAs.
• Intra-PTA trade represents 35% of total
world merchandise trade in 2008
(excluding intra-EU trade).
• 13 is the average number of PTAs that a
WTO Member is party to.
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Causes and effects of PTAs
• Earlier times: to avoid relatively high tariffs.
• Recently: tariffs have fallen markedly →
new regulatory matters are increasingly on PTA
agendas (investment, competition policy,
government procurement and services).
• In 20 largest importer, only 16% qualified as preferential
trade.
• Preferential tariffs reduce average tariff by
1 percentage point (US 2.5%, Korea 8.1%).
• Less than 2% of world trade is eligible for preference
margins above 10 percentage points.
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PTA and Investment
• Protection against expropriation.
• Commitment to compensate investors in the
case expropriation.
• Right to invoke the PTA’s dispute settlement
mechanism:
-
NAFTA allows investor-state dispute
settlement (investors may submit to
international arbitration a claim that a
PTA state has breached obligations).
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Integration level
SHALLOW
INTEGRATION
↓
DEEP INTEGRATION
Table C:1 Shallow versus deep integration
Type of PTA
Features
Free trade agreement (FTA)
Members liberalize internal
trade but retain their
independent external tariffs
FTA+
An FTA that in addition
harmonizes some beyond the
border standards (e.g.
environmental standards)
Customs Union (CU)
Members liberalize trade
within the union and adopt
common external tariffs
against the rest of the world
Common Market
Establishment of the free
movement of all factors of
production within the PTA,
including labour and capital
Monetary Union
Establishment of a common
currency and completely
integrated monetary and
exchange rate policy
Fiscal Union
Establishment of a common
fiscal policy
Example
US-Israel
FTA
NAFTA
SACU
EU
Euro Area
US
Note: The depth of integration of PTAs might overlap across types of agreements in certain circumstances.
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Avoiding “trade deflection” in RTAs
• The partner with the lowest external tariffs
would serve as “port of entry” for the whole
bloc.
A
External tariff: 20%
C
B
External tariff: 5%
• Stringent ROO is required.
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Diverse and Complex ROO
• Origin criteria: VA, CTC
• Value thresholds:
35%-80%
• Calculation methods (ex-work price, gross factory
cost, FOB price, averaging costs, etc).
Compliance cost: 5-15.%
Managed trade: nothing free about free trade
• 7% of tariff lines are excluded (agricultural, food,
footwear and textiles).
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Supply Switching
• More stringent ROO favours intermediate
goods originating in the region to inputs
from outside the FTA
More
trade
diversion, less trade creation
• Less stringent ROO
Less industry
protection, more access to cheaper inputs
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Yarn-forwarding rule in NAFTA
• Increased use of American yarn in the
region
• Increased investment
textile industries
into
Mexican
• Decreased use of cheap Asian yarn
• Decreased
clothing
import
of
cheap
Asian
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Cumulation
• Inputs originating in other countries
which are members of the regional
association are regarded as domestic
input and not as foreign input
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Diagonal cumulation
EC
A
B
Products shall be considered as originating in A, if
such products are obtained there, incorporating
materials originating in EC or B, provided that the
processing carried out in A goes beyond the minimum
operations.
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CONSOLIDATED TEXT
(G/RO/W/111/Rev.6)
• HWP has not been completed.
• Text contained origin rules endorsed by the
CRO and CRO Chair’s proposal.
• Text reflects the collective efforts of origin
experts from all over the World.
• The most comprehensive and least-restrictive
rules of origin. (Examples: Textiles and
Agricultural Products
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Silk-worm cocoons
(HS 50.01)
Where the cocoons are obtained in
their natural or unprocessed state
Raw silk
(HS 50.02)
CTH
Silk yarn
(HS 50.04)
CTH, except from HS 50.06
Silk yarn, put up for retail sale
(HS 50.06)
CTH, except from HS 50.04
or 50.07
Silk fabrics
(HS 50.07)
CTH
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Silk yarn
(Chs. 50.04)
Silk yarn (other than yarn spun
from silk waste) not put up for
retail sale, single or multiplied or
cabled or covered yarns: printed,
dyed (including dyed white)
(ex 50.04 (a))
CTH
CTH; or change by permanent
dyeing or permanent printing
from unbleached or prebleached
yarn with at least two
preparatory or finishing
operations
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Woven fabrics
(Chs. 50-55)
Parts of garments,
cut to shape
(ex. Ch. 62(F))
CTH
Origin of the fabrics
Garments assembled from parts Where assembled in a single
country
(ex Ch. 62(a))
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Wheat
(HS 10.01)
The goods are obtained in their
natural or unprocessed state
Wheat flour
(HS 11.01)
CC
Pasta
(HS 19.02)
Cooked pizza base
(HS ex 1905.90(b))
Pizzas
(HS ex 1905.90(a))
Food preparations of flour
(HS 1901.90)
Preparations for infant use,
put up for retail sale
(HS 1901.10)
CTH
CTH
CTSHS
CTH
CTSH, except when the change
results only from putting up
for retail sale
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What is the WTO?
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What is the WTO?
• World Trade Organization
• Intergovernmental organisation:
governments
• Established in 1995
• General Agreement on Tariffs and Trade
(GATT)
• Deals with the rules of trade between
nations at a global level
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 Location: Geneva
 Staff: approx. 700
 Director General: Pascal Lamy
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What are its objectives?
• Economic growth and increase in living standards
and ensure full employment
• expand the production of and trade in, goods and
services
• How? Allowing trade to flow as freely as possible:
gradual liberalisation of trade (removal of barriers)
• i.e. create conditions so that exporters, and
importers conduct their business, while allowing
governments to meet social and environmental
objectives
• Integrate developing countries to global trade
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What does the WTO do?
– 5 main functions:
1) It is a forum for discussions and
negotiations
2) It administers WTO trade agreements
3) It handles trade disputes
4) It monitors national trade policies
5) It provides technical assistance and
training
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1. A forum to negotiate
• The
WTO is a forum for Member
governments to negotiate the rules of
international trade
• It is a table:
people sit round
the table
and negotiate!
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2. Administering rules
• Set of rules concluded as a result of
negotiations
• WTO Agreements
• Rules have binding effects on Members
• Facilitate the implementation,
administration and operation of rules
• They cover: trade in goods, trade in services
and,trade-related aspects of intellectual property rights
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Coverage of rules
•
•
•
•
•
•
•
Customs Valuation
Import Licensing Procedures
Non-preferential rules of origin
Anti-dumping and countervailing duties
Agriculture: subsidies
Trade-related investment measures
Etc.
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3. A place to settle disputes
• Members may have conflicting interests,
• Agreements may need interpretation
• Neutral procedure based on an agreed
legal foundation
• Panels
• Appeals
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4. Monitoring of national trade
policies
• Transparency help build predictability and
respect of mutually agreed norms
• Regular review of Member’s national trade
policy
• Trade Policy Review (TPR) Mechanism
• Frequency depends on Members’ share of
international trade
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5. Technical assistance
• support domestic efforts for mainstreaming trade:
 national plans for economic development and
 strategies for poverty reduction
• assist developing, least-developed and low-income
countries in transition to
– adjust to WTO rules and disciplines,
– implement obligations
– exercise the rights of membership, including by
fully benefiting of an open, rule-based multilateral
trading system
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How does it function?
•
•
•
•
Member driven
“Negative” consensus
Regular work
Successive “Rounds”
of trade negotiations
• Mutual advantageous
basis
• “Single undertaking”
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Members
• All major trading nations: 154
• Developed countries, developing countries (selfdesignation), least-developed countries (UN criteria)
• Hong Kong, Macau, EU,
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Basic principles
• Non Discrimination:
 Most Favoured Nation
 National Treatment
• Transparency and predictability: binding
commitments
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Basic Principles: MFN
Most Favoured Nation (GATT Article I)
• any advantage, favour, privilege or immunity
• granted by a Member
• to any product
• of any other country
• shall be accorded
• immediately and unconditionally
• to the like product
• of all other WTO Members
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Basic Principles: NT
National Treatment (GATT Article III)
• internal taxes, laws, regulations and requirements
• affecting the internal sale, purchase, transportation, etc.
• should not be used to protect domestic products
• from like imported products
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Basic Principles: bindings
Tariff bindings (GATT Article II)
• Parties shall accord to each other
• treatment no less favourable
• than that provided for in the Schedule
• subject to the terms, conditions or
qualifications set forth in that Schedule
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Thank you!
Eki KIM
[email protected]
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