L. Price - Overview Of Trade Agreements

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L. Price - Overview Of Trade Agreements

  1. 1. TRADE AGREEMENTS 101 www.crnm.org Lincoln Price
  2. 2. 2 Strategic Business Considerations in Trade Agreements Strategic Business Considerations in Trade Agreements
  3. 3. What are trade agreements? 3 Legal contracts to facilitate trade. Agreements can be government to government or business to business (or also tt t b i t b i ( l business to government). This presentation focuses on Government FTAs. These agreements usually commit to eliminating/reducing customs duties on products of interest of the parties and to dispute settlement if there are breaches Modern trade agreements cover trade in services, as well as investment, and commit to no exclusive special treatment (Most Favored Nation‐MFN and National Treatment‐NT) Strategic Business Considerations in Trade Agreements
  4. 4. 4 WTO trade Report 2009
  5. 5. 5 WTO trade Report 2009
  6. 6. 6 WTO trade Report 2009
  7. 7. Why are trade agreements 7 important for business? i t tf b i ? Trade agreements can reduce the cost of doing international g g business, eg duties, licences (via eliminating quotas), transparency and market access for services providers Trade agreements can make your product more attractive to overseas distributors via preferences FTAs can provide you with a first mover advantage into major p y g j markets FTAs also allow more competition on your home soil Strategic Business Considerations in Trade Agreements
  8. 8. Why are trade agreements 8 important for business? i t tf b i ? The volume of trade is so large and dynamic, that tariffs (even “nuisance ones” < 5%) have large impact on profits Firms are operating on a more global scale imported raw materials i t d t i l Imported capital/technology Imported human resources (staff/consultants) Exported final and intermediate products in a value chain Strategic Business Considerations in Trade Agreements
  9. 9. Why are trade agreements 9 important for business? i t tf b i ? taste/preferences more global so more international /p g business opportunities Even SMEs are becoming more trade oriented as they depend on external markets for inputs/markets Even though trade duties are being reduced globally globally, there are many regions, including LATAM that still have high tariffs. So FTAs are important to target regions with high tariffs. Strategic Business Considerations in Trade Agreements
  10. 10. Why are trade agreements 10 important for business? i t tf b i ? Trade agreements can eliminate tariffs escalation, i.e. h i where value added products, such as cigars l dd d d h i and cigarettes, are charged high tariffs, and raw/unmanufactured tobacco duty free. (other examples include green coffee beans vs l i l d ff b roasted/ground coffee) Do you have other examples? Trade agreements allow countries that have received unilateral preferences to convert those to WTO compliant trade agreements and preserve market access for exporters Strategic Business Considerations in Trade Agreements
  11. 11. Why are trade agreements 11 important for business? i t tf b i ? FTAs assist in attracting efficiency seeking FDI as Multilateral firms seek countries that have the best FTA coverage TNCs export from the countries with the most favorable trade regimes. In these times, TNCs are consolidating in countries with best market access Strategic Business Considerations in Trade Agreements
  12. 12. Structure of a modern trade 12 agreement g t Market Access for goods Agriculture Manufacturing Rules of origin Services Market access Trade Facilitation (customs procedures) ( p ) Investment Protection/Promotion Technical Barriers/SPS Competition policy Dispute settlement Strategic Business Considerations in Trade Agreements
  13. 13. Structure of a modern trade 13 agreement g t Government Procurement Electronic Commerce Development Cooperation Intellectual property rights (IPR)/innovation (IPR)/i ti Personal Date Protection Labour L b Environmental protection (climate change now considered) Strategic Business Considerations in Trade Agreements
  14. 14. How are trade agreements negotiated? 14 1) ↑ sales FTA text 2) Improved balance b l Regional sheet positions 3) ↑ long term Consultation profitability fit bilit TWGs, COTED, etc OTN(CRNM) Government Consensus Private farmer services sector positions manufacturer Strategic Business Considerations in Trade Agreements
  15. 15. Pyramid of existing trade agreements 15 CSME Regional agreement: e.g. CARICOM-DR Unilateral preferences: Caribcan WTO Strategic Business Considerations in Trade Agreements
  16. 16. Timing of trade negotiations g g 16 Green Light: (negotiate now) Canada Negotiations WTO negotiations Yellow: (lets wait a little) USA Mercosur Andean Red: (No mandate to negotiate) Central America Chile Turkey Do you agree with this lineup? Strategic Business Considerations in Trade Agreements
  17. 17. WTO 17 Legally binding trade agreement established g y g g amongst 153 member countries in 1995 CARICOM (exc the Bahamas) are WTO members (most export markets are also WTO members) Established to prevent global protectionism which has had severe consequences on q business development Strategic Business Considerations in Trade Agreements
  18. 18. WTO 18 Commitments include: MFN (no preferences) National treatment (treat foreign as local) Binding “capping” tariffs Eliminating quotas periodically Listing services sectors which will be opened to foreign participation Progressively liberalizing trade through future “rounds” of negotiations Strategic Business Considerations in Trade Agreements
  19. 19. WTO 19 Doha Round seeks to: Further reduce tariffs Eliminate t d Eli i t trade subsidies b idi Further reduce obstacles to trade in services SDT: Allows Special products which are exempt from tariff reductions d ti The round is deadlocked in issues including industrial tariffs and g subsidies (the same issues which Strategic Businessstalled the Trade Agreements Considerations in FTAA)
  20. 20. CBTPA-CBI 20 Unilateral trade preference granted by USA to most Caribbean and Central American countries (WTO illegal without waiver) i ) E.g. E g Cigarettes and other tobacco products duty free in USA under CBTPA. MFN duties, 1.89/kg+4.7% US FTA negotiations on hold until after Canada FTA Strategic Business Considerations in Trade Agreements
  21. 21. CBTPA 21 launched 1983 l h d Expanded in 2000 through the US‐ Caribbean Basin Trade Partnership Act (CBTPA). (CBTPA) However, under US legislation the termination of the effect of CBTPA was scheduled 30 September 2008. 2008 Strategic Business Considerations in Trade Agreements
  22. 22. CBTPA 22 WTO approved waiver request from d i tf the US on the CBERA. The approval of the waiver which will remain valid until 2014, 2014 provides the legal authorization for CARICOM to export goods covered under CBERA to the US duty‐free. Strategic Business Considerations in Trade Agreements
  23. 23. CARIBCAN 23 non‐reciprocal non reciprocal preferential trade arrangement that grants unilateral duty free access to eligible goods from beneficiary countries in the English‐speaking Caribbean up to 2011 (WTO illegal without waiver); Caribcan covers almost all our trade with Canada (except dairy, poultry etc) E.g. Ci E Cigarettes and other tobacco products duty d h b d d free in Canada under Caribcan or GSP. MFN duties, 8% Strategic Business Considerations in Trade Agreements
  24. 24. CARIBCAN 24 FTA with Canada to cover: Market access (goods and services) Investment protection p Trade facilitation Trade Remedies (i.e. safeguards, AD/CVD) No agreement on side agreements on Labour Environment first round was in Nov 9‐12, 2009 in Barbados. Next round for Q1 2010 Strategic Business Considerations in Trade Agreements
  25. 25. Economic Partnership 25 Agreement (EPA) Ag t Trade and Development Cooperation deal between p p CF and the EU Deal provides DFQF access to EU for all originating products (e.g. tobacco pays no duties into EU. ROW pays 26%, other developing countries pay 9.1%) Jamaica will begin reducing duties on select g g products from Europe by 2011 Strategic Business Considerations in Trade Agreements
  26. 26. EPA 26 Prior to the EPA, there were five EPA agreements Lome 1‐4 and the Cotonou agreement, all temporary and needing WTO waivers EPA, now a more permanent arrangement Europe is the worlds largest trade area Strategic Business Considerations in Trade Agreements
  27. 27. LATAM is negotiating FTAs: 27 Central American C t lA i CACM‐ Customs Union: members include Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua l d d CACM‐Chile CACM‐DR‐USA CACM‐ Panama Mexico‐Nicaragua Guatemala Mexico Guatemala‐Mexico Honduras‐Mexico El Salvador‐Mexico Costa Ri M i C t Rica‐Mexico Costa Rica‐Canada El Salvador, Guatemala, Honduras and Nicaragua negotiating with Canada Strategic Business Considerations in Trade Agreements
  28. 28. LATAM is negotiating FTAs: 28 Dominican Rep D i i R DR CARICOM DR‐CARICOM DR‐CACM DR CACM EPA (E (European Union) U i ) Canada‐Underway Strategic Business Considerations in Trade Agreements
  29. 29. How do I understand FTAs? 29 1. Know your products tariff code 2. Know the tariff lib li ti schedule and K th t iff liberalization h d l d whether your company's product is liberalized or not (in trade most favored nation (MFN) means no special tariff treatment) 3. Know the rules of origin These are the production/harvesting h h d i /h i techniques/procedures that must be followed for the product to be considered as originating (“made in”) in the country that is supposed to be getting the duty concessions i Strategic Business Considerations in Trade Agreements
  30. 30. Tariff Codes: E.g. Cigarettes 30 NB: More digits means more details
  31. 31. Rules of Origin g 31 Wholly produced Tariff jump Value added Product specific Cumulation Strategic Business Considerations in Trade Agreements
  32. 32. Caricom Venezuela Caricom-Venezuela FTA 32 Provides d t P id duty concessions for select i f l t Jamaican/CARICOM exports to Venezuela from date 1993 E.g. Caricom Cigarettes made from Virginia tobacco (240220) duty free. ROW pays 20% Strategic Business Considerations in Trade Agreements
  33. 33. Tariff liberalization 33 Strategic Business Considerations in Trade Agreements
  34. 34. Reading tariff schedules in FTAs g 34 Health certificate required
  35. 35. Rules of Origin 35 e.g. Cigarettes must be made from CARICOM or Venezuela tobacco Strategic Business Considerations in Trade Agreements
  36. 36. CARICOM-DR FTA 36 Provides duty concessions for select Jamaican/CARICOM products with the DR / p effective 2001 Cigars imports duty free for the world to the DR. cigarettes not included in duty free treatment so i i l d di d f Caricom and ROW pays 20%. Also, imports of cigarettes into JA pay 30%. Strategic Business Considerations in Trade Agreements
  37. 37. Tariff liberalization 37
  38. 38. Reading tariff schedules in FTAs g 38 Strategic Business Considerations in Trade Agreements
  39. 39. CARICOM-Colombia FTA 39 Provides duty concessions for select id d i f l Jamaican/CARICOM products with Colombia effective 1998 Unmanufactured tobacco allowed duty free into Ja Tobacco products not duty free into T b d d f i Colombia Strategic Business Considerations in Trade Agreements
  40. 40. CARICOM-Cuba FTA 40 When ratified will provide duty p y concessions for select Jamaican/CARICOM products with Cuba Raw Tobacco liberalized in this agreement t Cigarettes/cigars etc not liberalized, so Ci tt / i t t lib li d products still dutiable. Strategic Business Considerations in Trade Agreements
  41. 41. CARICOM-Costa Rica FTA 41 When ratified Provides duty concessions for select Jamaican/CARICOM exports to Venezuela Cigarettes not liberalized by either party. Cigars only lib li d in Suriname and Ci l liberalized i S i d Trinidad prospective cigarette exports are liable for 40% duties in CR and 30% in JA Strategic Business Considerations in Trade Agreements
  42. 42. Tariff liberalization 42
  43. 43. Reading tariff schedules in FTAs 43
  44. 44. Rules of Origin g 44 Strategic Business Considerations in Trade Agreements
  45. 45. Sources of trade information 45 www.crnm.org www.caricom.org www.wto.org www.intracen.org www.oas.org g Strategic Business Considerations in Trade Agreements
  46. 46. Thank You 46 Please visit our Website: http://www.crnm.org http://www crnm org Contact: C t t Mr. Lincoln Price Private Sector Liaison lincoln.price@crnm.org Tel: +1876 908 3922 Fax: +1876 754 2998 Strategic Business Considerations in Trade Agreements

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