Peter Draper, Director, Tutwa Consulting, and
Senior Fellow, ECIPE
① Background
② Which mega-regionals matter most, and why?
③ The regulatory agenda: A brief review
④ Outcome scenarios
⑤ Strategic implications for outsiders, especially developing countries
① Growth of regionalism in inverse proportion to relative stasis in WTO
② Opportunities for advancing rules are higher in smaller, like-minded
groups
③ Western leadership of the global trading system in play given the
rise of China and other emerging markets
④ Combination of regulatory demand and geopolitical drive explains
TPP and TTIP
⑤ Whether successful or not they present serious strategic challenges
to outsiders, especially developing countries
① Focus on the most systemically significant
② Our definition (ECIPE report):
a.
3 or more countries
b.
25% or more of world trade
c.
WTO plus, or deep regulatory agenda
③ Only TTIP, TPP, and RCEP meet conditions 1 and 2
④ Only TTIP and TPP meet all three
⑤ Quite a number of other RTAs that are significant but not considered
(eg Japan-EU; Canada-EU)
① Review of impact studies
a.
Tariff liberalization impacts on negotiating parties predicted to be
modest, since tariffs are generally not high to begin with
b.
Varies between TTIP, TPP states, and by sector
c.
Trade diversion effects on non-parties similarly predicted to be relatively
small
d.
I.
Again varying according to sector and negotiation
II.
Owing to high trade complementarities between ACP states and US/EU
Some studies predict that trade creation (the GVC effect) may lead to
net gains for outsiders
① Regulatory impacts predicted to be substantial
② Overall effects very difficult to predict, and any attempt to do so
probably shouldn’t be believed
③ But the regulatory agenda is very much part of the RTA landscape
and won’t go away
④
Effects could be of two types:
a.
Ratcheting up of standards through harmonization, leading to lock-out
effect
b.
Reduction of market access costs through mutual
recognition/equivalence
How mutual recognition could be beneficial to outsiders (WEF Report)
① Sequencing is key to understanding: TPP leads; TTIP follows
② Both aim for a ‘high standard agreement’
③ The US is central to both, therefore focus on US negotiating
templates
④ TPP covers 29 chapters under a single undertaking
⑤ Our focus (ECIPE Report):
a.
Areas not covered by multilateral disciplines incorporating all members
of the WTO
b.
Areas already covered by the WTO bearing closer scrutiny
① Select WTO plus issues:
a.
Regulatory coherence – oversight councils/bodies and role of business
groups
b.
SOEs – trade distorting practices or ‘competitive neutrality’; linkage to
competition policy
c.
Government procurement – incorporation of GPA by reference (2011
text)
d.
Competition – exclusions; dispute settlement
e.
Investment – dispute settlement; capital controls, non-conforming
measures
f.
E-commerce – freedom of access and competition; data privacy
g.
Environment – incorporation of MEAs; dispute settlement (enforceability)
h.
Labour – enforceability through DSM
② Other issues expected to push the status quo:
a.
Goods market access – construction of tariff offers; rules of origin;
entrenched lobbies especially in agriculture (eg Japanese rice)
b.
SPS – ‘science-based’ risk assessments; dispute settlement
c.
Services – negative vs positive lists
d.
IPR – US vs the rest on patents; US vs EU on GIs
① Definition of success? Ours (ECIPE report):
a.
Globally systemic view (not rooted in particular country interests)
b.
Agreement that all negotiating states are happy with
c.
Major liberalizing outcomes
d.
Key blockages in the international trading system addressed
① Full success
a.
Utopian scenario
b.
Not likely since many compromises entailed in both negotiations
② Partial success
a.
Most likely
b.
Messier than US bilateral FTAs, but substantial liberalization and
harmonization that developing country parties can live with
③ Failure
a.
Least likely
b.
Hinges on US trade politics, especially TPA
① Calibrate to the outcome scenarios
② ‘Full success’ = ‘competitive liberalization’
a.
Watch China’s posture in particular (TPP; TISA; RCEP)
b.
Entails great pressure on ACP countries to sign up – bilaterally and in
the WTO
c.
More pressure for reciprocity
③ ‘Partial success’
a.
More wriggle room for ACP, but
b.
Failure of major western powers to decisively assert leadership of the
trading system implies further WTO stasis
c.
Therefore more pressure on the bilateral front down the line, not least to
compete with rise of emerging markets – particularly China
d.
Reciprocity still very much on the table, if not imminent
④ ‘Failure’
a.
Western trade leadership foregone
b.
Acceleration of China’s potential leadership role
c.
Balancing option for ACP more pronounced
d.
But what does China want?
e.
Also, developed countries likely to intensify search for reciprocity with
attendant implications for preferences
① Policy options
a.
‘Do nothing’ – always an option but it seems there is nowhere to hide
b.
Sequenced embrace of liberalization and regulatory reform, tailored to
domestic capacities (ideal-type depiction)
I.
Unilateral reforms, driven by careful review of regulatory agenda contained in
mega-regionals
II.
Regionally, through RTAs with neighbours and using appropriately designed
models
III.
Regionally, with small developed economies that are not so threatening
IV.
Regionally, with the major powers
c.
WTO
I.
Proactive, positive discussion of regulatory agenda
II.
Engage positively with the idea of plurilaterals on the basis of deliberations on
the regulatory agenda
III.
Forge a consensus on how plurilaterals could proceed without harming own
interests (eg: ‘plurilaterals code of conduct’)
① They could
a.
Ensure that standards convergence does not lead to ‘lock-out’ by
extending recognition of conformity assessments
b.
Direct more aid for trade funding towards standardssetting/implementation agencies in African LDCs
c.
Remove arbitrary distortions that inhibit African participation in GVCs
•
Eg: Different rules of origin for LDCs versus non-LDCs
peter.draper@tutwaconsulting.com