RTAs

FTAs and customs unions

Some definitions
RTAs (Regional trade agreements): from 50 in 1990 to over
300 RTAs now). Cover half of international trade. Most are
also FTAs, but not all of them.
FTAs (free trade area) : trade barriers among members are
generally eliminated to free trade of goods and services (to a
very large extent) among themselves. When it comes to
dealing with non-members, the trade policies of each member
still take effect.
Customs unions : trade barriers abolished among members,
common external tariffs and rules for trade with non
members.
Bilateral agreements : between two members.
Largest FTAs
The EU (is also a political union and a customs union)
USMCA, formerly NAFTA (since 1994) : Canada, the US and
Mexico.
Southern Common Market (MERCOSUR). Signed in 1985.
Brazil, Argentina, Paraguay, Uruguay, Venezuela. Is also a
customs union.
Association of Southeast Asian Nations Free Trade Area (AFTA
or ASEAN FTA) (since 1992). Original members were Brunei,
Indonesia, Malaysia, Philippines, Singapore and Thailand. Four
countries subsequently joined: Vietnam, Laos, Myanmar and
Cambodia. 600 million people. 2.3 trillion dollars in trade.
Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) signed in 2018: 11 countries: Australia,
Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore and Vietnam. 13% of global GDP.
Regional Comprehensive Economic Partnership (RCEP)
signed on November 15, 2020 (to be implemented over 20
years); builds upon existing ASEAN+1 free trade
agreements. 15 members including high-income economies
(Australia, Brunei, Japan, Korea, New Zealand, and
Singapore), upper middle-income economies (Indonesia,
Malaysia and Thailand), lower middle-income economies
(Cambodia, Laos, Myanmar, the Philippines, and Vietnam),
and the second largest economy in the world (China). India
withdrew its membership in November 2019. Will account for
30% of global GDP and one third of the world’s population.
https://www.youtube.com/watch?v=weyA6-aqqfo
Common Market of Eastern and Southern Africa (COMESA).
Formed in December 1994. 19 member states, 80 million
dollars in trade.
Advantages and drawbacks of FTAs.
As WTO stalled, the number of FTAs
rose.
Increase liberalisation of trade
Lower prices of consumer goods
Provide a better climate for investment
Open markets
Increase employment in export sectors
Jobs : increase outsourcing of jobs to low
cost countries.
Services sector may not be part of the deal
Deficit in trade in goods for developed
economies
Local agriculture may suffer from
competition.
Environmental and labour legislation
(Pros/cons).
Multinational companies’ dominance (ex
Chapter 11)
Case study : difficulties in negotiating TTIP
(Transatlantic Trade and Investment Partnership)
Negotiations started in 2013, halted in 2018 (Trump)
and in 2019 (the EU).
3 components :
market access (tariffs)
import-export rules (include creation of dispute
resolution mechanism)
regulatory convergence
Europeans : concerned about access to public services
(healthcare), consumer protection (food standards),
labour conditions.
US : European companies’ access to public
procurement contracts.
Case study : from TPP to CPTPP
2008 : start of negotiations
2015 : agreement signed between 12 countries (US, Canada,
Mexico, Chili, Peru, Japan, Malaysia, Vietnam, Singapore,
Brunei, Australia and New Zealand)
2017 : US withdrew
2018 : renamed CPTPP and signed by 11 countries. Less
comprehensive than TPP.
Controversies : patents for biotechnology drugs, dairy market
(Canada, US, Japan), auto parts (US)
Standards for labour rights and clause against animal trafficking
CPTPP finally acknowledged standard ILO labour rights,
including freedom of labour associations and abolition of child
and forced labour. Clause against animal trafficking was
watered down.
Why did the US withdraw from TPP in
2017?
Pdt Trump’s arguments : trade deficit, supranational
commission undermines sovereignty, cheap imports
Potential benefits for US :
was meant to counter Chinese influence
boost exports of machinery, electrical goods, autos,
plastics and agricultural products.
Add 223 bn dollars a year to incomes in all countries,
with 77 billion dollars in the US.
Most of the gains would go to people earning more than
88,000 dollars a year.
Removed 18,000 tariffs on US exports.