Attractiveness of bilateral agreements for expansion of trade
Saturday, 20 November 2010
Regional agreements, the 'pepper' in the multilateral 'curry'-Lamy: The world faces the prospect of 400 preferential trade agreements by 2010. In my view, there are several reasons for the attractiveness of bilateral agreements as compared to multilateral negotiations Director-General Pascal Lamy told the Confederation of Indian Industries in Bangalore on January 17, 2007.
First, they seem quicker to conclude. Fewer parties mean that preferential trade agreements can be wrapped-up within a shorter period of time. This is usually very attractive to both politicians and business communities who are looking for quick results.
Secondly, they can enter into new territories. Because of similarities in interests and often more common values, bilateral trade agreements can go into new areas such as investment, competition, technical standards, labour standards or environment provisions, where there is no consensus among WTO members.
Thirdly, bilateral trade agreements are also useful for negotiators to learn how to negotiate, thus contributing to reinforcing a country's trade institutions. Many regional trade agreements have been the bedrock for peace and greater political stability.
Finally, they are often used as instruments for domestic reform in areas where the multilateral system offers a weaker leverage.
Bilateral free trade agreement provides a structured framework under which various issues such as rules of origin, harmonisation of HS Codes and technical standards, Customs procedures and negative lists can be addressed with much higher degree of flexibility for the mutual benefit of the contracting countries. The time before completion of DDA should be most prudently utilised.
Why BFTA? Trade in Goods: Bangladesh and other Asian LDCs are in the state of duel-dilemma. The prospect of multilateral duty and quota-free market access for LDCs under WTO is becoming increasingly redundant because of proliferation of RTAs, EPAs, BFTAs and CEPA in all strategic combinations. On the other hand, marginalisation of LDCs in the wake of preference erosion under NAMA is also threatening the competitiveness of LDC products. The LDCs, specially Bangladesh and other Asian LDCs, have market access in EU and other OECD countries, but they are denied DFQFMA in the US, the prime importer of the world. These products provide more duties to US than USAID.
Bangladesh and other Asian LDCs have market access in EU and other OECD countries under GSPs, but they are denied DFQFMA in the US. In the SAARC region SAFTA is also relevant only for Bangladesh, being the lone country, which trades under SAFTA regulations. Bangladesh, the only country with no bilateral free trade partners anywhere, has therefore no other option but to enter into BFTA with its principal trading partners like US, Malaysia, Russia, CIS, South Africa and India to protect, safeguard and enhance its vital trade interests in goods and services sectors, including public procurement.
Services and Investment: Service sectors and Investment regime in Bangladesh are already open on MFN basis under its domestic regulations. Bangladesh has a unilateral, very liberal services and investment policy regime. We have a very large amount of Indian, US, EU, Japan, Korea, China, Malaysia and Australian investments in Bangladesh spreading over almost all sectors, including public procurement.
Bangladesh has unilateral, very liberal services and investment policy regime open on mfn basis under its domestic regulations. Bangladesh should therefore, take the credit and claim on reciprocal basis Modes 3 and 4 access from the BFTA partner, specially from US, EU, middle east countries, Malaysia, Korea, Japan, Russia and South Africa. WE and India should provide DFQFMA to all products exported from Bangladesh against its fully liberalised service sectors and investment regime. The terms of investment should be without prejudice to the rights and obligations under the WTO Agreements and SDT provisions, including GATS LDC Modalities.
Potential Partners for FTAs: Bangladesh should enter into BFTA with countries where it is currently exporting under peak-tariffs on mfn basis like the US. Bangladesh should take the credit and claim on reciprocal basis Modes 1, 3 and 4 access from the BFTA partner, specially from US, EU, middle east countries, Malaysia, Singapore, Korea, Japan, Russia and South Africa against its unilateral and fully liberalised service sectors and investment regime.
Japan China and Korea have already extended substantial DFQFMA to Bangladesh. These countries along with Malaysia and Singapore may be approached bilaterally to extend the market access regime to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of APTA-BIMSTEC plus market access schemes.
In South America, Brazil, Argentina, Chile and Peru, with their steadily growing economic strength are emerging as potential destinations for goods and services. These countries may be approached bilaterally to extend DFQFMA to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of gradually liberalised preferential market access schemes.
In Africa, South Africa, Egypt, Kenya, Nigeria etc are developing fast with increasing domestic demand and imports. Besides, many countries of Africa are important sources of commodities, cotton and basic raw materials. These countries along with other African countries may be approached bilaterally to extend DFQFMA to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of gradually liberalised preferential market access schemes. Bangladesh should offer unilateral DFQFMA to African LDCs.
Terms of FTA with Bangladesh:
1. Tariff Reductions: Products originating from Bangladesh should be exempted from all Customs and other charges and duties with effect from the date of commencement of such FTA with at least [10 years for developed and 6 for developing countries] transition period and greater flexibility and special and differential treatment for Bangladesh.
2. Sensitive/Negative List: Products, originating from Bangladesh, should exclude from the sensitive list under the proposed FTA with longer transition period for Bangladesh [10 years for developed and 6 for developing countries.]
3. Rules of Origin should be based on value addition criteria (summation of FOB value of exports - summation of CIF value of imports >or = 30 per cent) to match their industrial capabilities with derogation of 20 per cent value addition for RMG and other such labour incentive exports products.
4. Technical Regulations and Standards: The FTA should ensure harmonisation of TBT and SPS measures and signing of MRA to streamline flow of traded goods.
5. Mutual Recognition of Testing Laboratories: Certificates on Technical Regulations & Standards issued by the respective designated national bodies should be accepted. In order to ensure quality of traded commodities, including Cement, Ceramics, Pharmaceuticals, Foods, Jute and Leather products, Cosmetics & Toiletries and other priorities, there should be plans to set up Bangladesh-India joint venture accredited testing labs in Bangladesh.
6. Accreditation bodies/agencies of US/EU/India may set up Accreditation Centers in collaboration with Designated National Agency of Bangladesh on BOOT basis to facilitate mutual cooperation with necessary capacity building technical and financial assistance.
7. Non-acceptability of conformity assessment certificates of any particular product, if and when arise, should be resolved by mutual cooperation programmes without restricting its trade. Technical and financial assistance must be ensured for capacity building in this regard.
8. It is recommended that institutional arrangements are made:
l For expeditious action on conclusion of agreements on mutual recognition of standards, testing and measurements with a view to facilitating mutual trade.
l For organising on regular basis training & workshop for enhancement of skills in the area of accreditation and quality management.
l To organise awareness and capacity building activities on regular basis for officials, Board members, Assessors & other professionals, CEOs, including infrastructure, management and capacity development of laboratories, CBs and other quality management bodies.
9. To ensure level playing field for fair and competitive transaction of goods NTBs are required to be addressed as follows:
l Value of imported products should be assessed only on the basis of WTO CVA.
l Test certificates issued by the designated national institutions should be accepted.
10. Trade Facilitation: The following Trade Facilitation measures should be implemented to ensure enabling trade policy and governance for smooth and speedy movement of goods.
l Harmonisation of trade regulations and documents.
l Harmonised Tariff Nomenclature at 8-digit level should be created based on the Harmonised Commodity Description and Coding Systems (HS) of the World Customs Organisation.
l Online publication of relevant trade regulations and procedures, including fees and charges, in the local language and in English.
l Simplification of Customs procedures aimed at cutting the time taken and cost of transactions at each Customs point.
11. Rational treatment should be accorded in respect of charges and fees for imported products at the rate applicable for like/similar domestic products and fees levied must be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or for fiscal purposes.
12. Import Licencing: The FTA parties shall adopt and notify non-restrictive, locally administered, automatic and transparent import licencing procedures. For India, instead of Kolkata handling import licencing for Tripura licencing office should be opened in Agartala. Import and export of any product through sea, land and railway ports must not be restricted.
13. IPR: The FTA shall recognise that effective protection and enforcement of intellectual property rights encourage technological innovation, transfer of technology and investment under the respective terms and obligations of the WTO Agreements.
14. Labour Standards: The FTA should affirm ILO core labour standards as adopted in the Doha Declaration and WTO Ministerial Conferences and recognise the importance of providing adequate and effective protection and enforcement of worker rights in accordance with each Participant's obligations and domestic labour laws.
15. Environment Concerns: The FTA shall affirm commitments made in the Doha Declaration that expansion of trade and investment and the promotion of sustainable development and protection of the environment can and must be mutually supportive.
16. Joint Council: The FTA Parties shall establish Joint Council on Trade and Investment. The Joint Council shall be comprised of representatives of both Parties. All meetings of the Joint Council shall be jointly chaired by the designated Ministers of both the Governments. The Joint Council may establish ad hoc working groups that may meet concurrently or separately to facilitate its work.
l The Joint Council shall meet at least once a year and at such times to be mutually agreed upon, for the purpose of: Overseeing the implementation of the Free Trade Agreement.
l Reviewing the bilateral trade and investment relationship and identify opportunities to expand and liberalise trade and investment.
l Implementing the work programme in the areas of mutual interests and periodic reviews of progress in the work programme.
l Organising consultations on specific trade or investment issues, and
l Resolving amicably any issues that might arise from implementing the provisions of the Free Trade Agreement.
Areas of the Work Programme:
l Facilitation and liberalisation of trade and investment, including non-tariff barriers.
l Promotion and protection of investment.
l Regulatory issues affecting trade and investment policies.
l Cooperation in promotion of bilateral trade.
l Trade in services, including Modes 1, 3and 4.
l Information and communications technology.
l Biotechnology.
l Tourism.
l Trade-related capacity building and technical cooperation.
l Enhancing the participation of SMEs in trade and investment, and
l Other areas of economic cooperation to be mutually agreed upon.
17. FTA Formulation and Negotiation: The draft FTAs a. Should be prepared by a National FTA Committee headed by the chairman of Bangladesh Tariff Commission. The National FTA Committee should include private sector stakeholders, think tank, line ministries and NBR. b. The draft FTAs would be finalised in the inter-ministerial meeting with the participation of private sector representatives and National FTA Committee members. c. After the formulation of the final draft FTA in the inter-ministerial meeting the proposal for FTA would be sent to the Cabinet Committee on Economic Affairs for its decision.
Upon approval of the Cabinet Committee on Economic Affairs, the Ministry of Commerce along with private sector experts may precede FTA negotiations with the country concerned.
The writer is Chairman, Fair Trade Advocacy Centre, FBCCI Standing Committee on WTO and RTAs e-mail: mahmed019@hotmail.com
First, they seem quicker to conclude. Fewer parties mean that preferential trade agreements can be wrapped-up within a shorter period of time. This is usually very attractive to both politicians and business communities who are looking for quick results.
Secondly, they can enter into new territories. Because of similarities in interests and often more common values, bilateral trade agreements can go into new areas such as investment, competition, technical standards, labour standards or environment provisions, where there is no consensus among WTO members.
Thirdly, bilateral trade agreements are also useful for negotiators to learn how to negotiate, thus contributing to reinforcing a country's trade institutions. Many regional trade agreements have been the bedrock for peace and greater political stability.
Finally, they are often used as instruments for domestic reform in areas where the multilateral system offers a weaker leverage.
Bilateral free trade agreement provides a structured framework under which various issues such as rules of origin, harmonisation of HS Codes and technical standards, Customs procedures and negative lists can be addressed with much higher degree of flexibility for the mutual benefit of the contracting countries. The time before completion of DDA should be most prudently utilised.
Why BFTA? Trade in Goods: Bangladesh and other Asian LDCs are in the state of duel-dilemma. The prospect of multilateral duty and quota-free market access for LDCs under WTO is becoming increasingly redundant because of proliferation of RTAs, EPAs, BFTAs and CEPA in all strategic combinations. On the other hand, marginalisation of LDCs in the wake of preference erosion under NAMA is also threatening the competitiveness of LDC products. The LDCs, specially Bangladesh and other Asian LDCs, have market access in EU and other OECD countries, but they are denied DFQFMA in the US, the prime importer of the world. These products provide more duties to US than USAID.
Bangladesh and other Asian LDCs have market access in EU and other OECD countries under GSPs, but they are denied DFQFMA in the US. In the SAARC region SAFTA is also relevant only for Bangladesh, being the lone country, which trades under SAFTA regulations. Bangladesh, the only country with no bilateral free trade partners anywhere, has therefore no other option but to enter into BFTA with its principal trading partners like US, Malaysia, Russia, CIS, South Africa and India to protect, safeguard and enhance its vital trade interests in goods and services sectors, including public procurement.
Services and Investment: Service sectors and Investment regime in Bangladesh are already open on MFN basis under its domestic regulations. Bangladesh has a unilateral, very liberal services and investment policy regime. We have a very large amount of Indian, US, EU, Japan, Korea, China, Malaysia and Australian investments in Bangladesh spreading over almost all sectors, including public procurement.
Bangladesh has unilateral, very liberal services and investment policy regime open on mfn basis under its domestic regulations. Bangladesh should therefore, take the credit and claim on reciprocal basis Modes 3 and 4 access from the BFTA partner, specially from US, EU, middle east countries, Malaysia, Korea, Japan, Russia and South Africa. WE and India should provide DFQFMA to all products exported from Bangladesh against its fully liberalised service sectors and investment regime. The terms of investment should be without prejudice to the rights and obligations under the WTO Agreements and SDT provisions, including GATS LDC Modalities.
Potential Partners for FTAs: Bangladesh should enter into BFTA with countries where it is currently exporting under peak-tariffs on mfn basis like the US. Bangladesh should take the credit and claim on reciprocal basis Modes 1, 3 and 4 access from the BFTA partner, specially from US, EU, middle east countries, Malaysia, Singapore, Korea, Japan, Russia and South Africa against its unilateral and fully liberalised service sectors and investment regime.
Japan China and Korea have already extended substantial DFQFMA to Bangladesh. These countries along with Malaysia and Singapore may be approached bilaterally to extend the market access regime to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of APTA-BIMSTEC plus market access schemes.
In South America, Brazil, Argentina, Chile and Peru, with their steadily growing economic strength are emerging as potential destinations for goods and services. These countries may be approached bilaterally to extend DFQFMA to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of gradually liberalised preferential market access schemes.
In Africa, South Africa, Egypt, Kenya, Nigeria etc are developing fast with increasing domestic demand and imports. Besides, many countries of Africa are important sources of commodities, cotton and basic raw materials. These countries along with other African countries may be approached bilaterally to extend DFQFMA to all products and services Modes 3 and 4 against our unilateral liberalised service sectors and investment regime plus offer of gradually liberalised preferential market access schemes. Bangladesh should offer unilateral DFQFMA to African LDCs.
Terms of FTA with Bangladesh:
1. Tariff Reductions: Products originating from Bangladesh should be exempted from all Customs and other charges and duties with effect from the date of commencement of such FTA with at least [10 years for developed and 6 for developing countries] transition period and greater flexibility and special and differential treatment for Bangladesh.
2. Sensitive/Negative List: Products, originating from Bangladesh, should exclude from the sensitive list under the proposed FTA with longer transition period for Bangladesh [10 years for developed and 6 for developing countries.]
3. Rules of Origin should be based on value addition criteria (summation of FOB value of exports - summation of CIF value of imports >or = 30 per cent) to match their industrial capabilities with derogation of 20 per cent value addition for RMG and other such labour incentive exports products.
4. Technical Regulations and Standards: The FTA should ensure harmonisation of TBT and SPS measures and signing of MRA to streamline flow of traded goods.
5. Mutual Recognition of Testing Laboratories: Certificates on Technical Regulations & Standards issued by the respective designated national bodies should be accepted. In order to ensure quality of traded commodities, including Cement, Ceramics, Pharmaceuticals, Foods, Jute and Leather products, Cosmetics & Toiletries and other priorities, there should be plans to set up Bangladesh-India joint venture accredited testing labs in Bangladesh.
6. Accreditation bodies/agencies of US/EU/India may set up Accreditation Centers in collaboration with Designated National Agency of Bangladesh on BOOT basis to facilitate mutual cooperation with necessary capacity building technical and financial assistance.
7. Non-acceptability of conformity assessment certificates of any particular product, if and when arise, should be resolved by mutual cooperation programmes without restricting its trade. Technical and financial assistance must be ensured for capacity building in this regard.
8. It is recommended that institutional arrangements are made:
l For expeditious action on conclusion of agreements on mutual recognition of standards, testing and measurements with a view to facilitating mutual trade.
l For organising on regular basis training & workshop for enhancement of skills in the area of accreditation and quality management.
l To organise awareness and capacity building activities on regular basis for officials, Board members, Assessors & other professionals, CEOs, including infrastructure, management and capacity development of laboratories, CBs and other quality management bodies.
9. To ensure level playing field for fair and competitive transaction of goods NTBs are required to be addressed as follows:
l Value of imported products should be assessed only on the basis of WTO CVA.
l Test certificates issued by the designated national institutions should be accepted.
10. Trade Facilitation: The following Trade Facilitation measures should be implemented to ensure enabling trade policy and governance for smooth and speedy movement of goods.
l Harmonisation of trade regulations and documents.
l Harmonised Tariff Nomenclature at 8-digit level should be created based on the Harmonised Commodity Description and Coding Systems (HS) of the World Customs Organisation.
l Online publication of relevant trade regulations and procedures, including fees and charges, in the local language and in English.
l Simplification of Customs procedures aimed at cutting the time taken and cost of transactions at each Customs point.
11. Rational treatment should be accorded in respect of charges and fees for imported products at the rate applicable for like/similar domestic products and fees levied must be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or for fiscal purposes.
12. Import Licencing: The FTA parties shall adopt and notify non-restrictive, locally administered, automatic and transparent import licencing procedures. For India, instead of Kolkata handling import licencing for Tripura licencing office should be opened in Agartala. Import and export of any product through sea, land and railway ports must not be restricted.
13. IPR: The FTA shall recognise that effective protection and enforcement of intellectual property rights encourage technological innovation, transfer of technology and investment under the respective terms and obligations of the WTO Agreements.
14. Labour Standards: The FTA should affirm ILO core labour standards as adopted in the Doha Declaration and WTO Ministerial Conferences and recognise the importance of providing adequate and effective protection and enforcement of worker rights in accordance with each Participant's obligations and domestic labour laws.
15. Environment Concerns: The FTA shall affirm commitments made in the Doha Declaration that expansion of trade and investment and the promotion of sustainable development and protection of the environment can and must be mutually supportive.
16. Joint Council: The FTA Parties shall establish Joint Council on Trade and Investment. The Joint Council shall be comprised of representatives of both Parties. All meetings of the Joint Council shall be jointly chaired by the designated Ministers of both the Governments. The Joint Council may establish ad hoc working groups that may meet concurrently or separately to facilitate its work.
l The Joint Council shall meet at least once a year and at such times to be mutually agreed upon, for the purpose of: Overseeing the implementation of the Free Trade Agreement.
l Reviewing the bilateral trade and investment relationship and identify opportunities to expand and liberalise trade and investment.
l Implementing the work programme in the areas of mutual interests and periodic reviews of progress in the work programme.
l Organising consultations on specific trade or investment issues, and
l Resolving amicably any issues that might arise from implementing the provisions of the Free Trade Agreement.
Areas of the Work Programme:
l Facilitation and liberalisation of trade and investment, including non-tariff barriers.
l Promotion and protection of investment.
l Regulatory issues affecting trade and investment policies.
l Cooperation in promotion of bilateral trade.
l Trade in services, including Modes 1, 3and 4.
l Information and communications technology.
l Biotechnology.
l Tourism.
l Trade-related capacity building and technical cooperation.
l Enhancing the participation of SMEs in trade and investment, and
l Other areas of economic cooperation to be mutually agreed upon.
17. FTA Formulation and Negotiation: The draft FTAs a. Should be prepared by a National FTA Committee headed by the chairman of Bangladesh Tariff Commission. The National FTA Committee should include private sector stakeholders, think tank, line ministries and NBR. b. The draft FTAs would be finalised in the inter-ministerial meeting with the participation of private sector representatives and National FTA Committee members. c. After the formulation of the final draft FTA in the inter-ministerial meeting the proposal for FTA would be sent to the Cabinet Committee on Economic Affairs for its decision.
Upon approval of the Cabinet Committee on Economic Affairs, the Ministry of Commerce along with private sector experts may precede FTA negotiations with the country concerned.
The writer is Chairman, Fair Trade Advocacy Centre, FBCCI Standing Committee on WTO and RTAs e-mail: mahmed019@hotmail.com