Free Trade Area Agreement Research Articles

African Continental Free Trade Area Agreement: The Euphoria, Pitfalls and Prospects

The ratification of African Continental Free Trade Agreement (AfCFTA) climaxes African Union effort to foster intra-African Trade. AfCFTA is expected to foster socio-economic development and industrial competitiveness in Africa. AfCFTA will engender massive liberalization of intra-African trade in goods and services, making it easier for business to trade across borders and reduce the costs of trade. But there are fears that a successful implementation of the agreement in a continent that lacks capacity, industrial competitiveness and infrastructure will be fraught with challenges. The article examines the dynamics, and contends that the success of AfCFTA will be significantly dependent on a number of factors, namely the level of commitment exhibited by the Member States, availability of technical capacity and infrastructure, transparency and accountability of processes, and the manner infractions and complaints are addressed or redressed.

Continental agreement, country implementation: Making the AfCFTA a reality

The African Continental Free Trade Area (AfCFTA) Agreement was negotiated at the continental level. However, much of its implementation and gains will be at country level. Trading under the deal is set to begin 1 July 2020 with the first installment of tariff dismantlement. Now the real test is how quickly and effectively the agreement’s state parties (as the signatories that have ratified the Agreement are known) can implement it.

Reimagining the Framework for Resolving Intra-African Commercial Disputes in the Context of the African Continental Free Trade Area Agreement

AbstractThis article examines the effectiveness of the framework for the resolution of intra-African cross-border commercial disputes, arising from the projected increase in intra-African trade in goods, services, and investments under the African Continental Free Trade Area. It examines the peculiar nature of intra-African trade and of the participating entities to provide the context to discuss the three major processes adopted in commercial dispute resolution (litigation, mediation, and arbitration) in Africa. It then argues for the promotion of arbitration as the dispute resolution process of choice for such disputes. It reimagined the framework for arbitration at the continental level and made two proposals targeted at the greater efficiency of the process: the designation of Regional Arbitration Centres across the African Union's eight recognized Regional Economic Communities, to administer such references; and the establishment of an African Commercial Court as a one-stop court for the enforcement or annulment of the final award.

High Expectations as the African Continental Free Trade Area (AFCFTA) Agreement Enters into Force

The entry into force of the African Continental Free Trade Area (AfCFTA) Agreement is certainly an important step towards the longstanding goal of African economic integration. However, much remains to be done before trade in goods and services under the AfCFTA can begin. Negotiations are yet to be finalized on outstanding matters, i.e. tariff schedule, rules of origin and sector commitments for priority services. Then, Phase II of negotiations will focus on investment, competition and intellectual property rights.

The African Continental Free Trade Agreement

In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications—comprising both perfect competition and monopolistic competition—are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.

Relative export competitiveness of agricultural commodities and its determinants: Some evidence from India

In this paper, we derive time-varying relative export competitiveness (REC) of India’s top agricultural exports (rice, wheat, cotton and sugar) against India’s share of world agricultural exports (REC_WA) and world exports (REC_WE) from 1961 to 2012. We reveal that India’s exports of all four commodities became relatively competitive over time but these were not as competitive as the top, or selected emerging, exporters of the four commodities. We also examine the determinants of REC in these four commodities focusing on factors including crop-specific and aggregate factor endowments, domestic price, export prices, and GDP per capital, preferential trade agreements, export restrictions and bans, and India’s Green Revolution. The regression analysis was mainly confined to the 1981–2012, due to data constraints. We find that the time series regression results are similar in sign and significance for REC_WE and REC_WA. Our key findings suggest the REC in wheat, rice, and cotton deteriorated as a result of export restrictions. Capital had negative effects on cotton REC. Labor and farm size did not influence the REC in the commodities. The Green Revolution improved the REC in rice and cotton (in Phase 3). The WTO had a positive effect on the REC in rice. The South Asian Free Trade Area (SAFTA) Agreement adversely affected the REC in wheat and rice but strengthened the REC in cotton and sugar. Higher domestic price reduced the REC in cotton. Higher per capita income strengthens the REC in wheat with a lag. We explain these results and suggest policy implications.

Canada’s progressive trade agenda: engaging with Africa to support inclusive gains under the African continental free trade area

ABSTRACTScepticism towards trade liberalisation, and regional and global trade integration has been observed in recent years, driven by concerns that the benefits of globalisation have not been fairly distributed. In this context, Canada has introduced it's “Progressive Trade Agenda” (PTA) to enhance Canadians’ understanding of the benefits that trade can bring, and to ensure that these benefits accrue to all Canadians. Although there exist challenges with the way Canada's PTA is currently understood, particularly beyond Canadian borders, the central argument of this article is that the concept can provide important insights from an African perspective. The article provides insights on how Canada can engage with Africa to support monitoring the implementation of the recently signed African Continental Free Trade Area (AfCFTA) agreement, with a view to ensuring inclusive gains, in addition to highlighting opportunities for Canada in a rapidly expanding and integrated African market.

ПРЕФЕРЕНЦІЙНІ ТОРГОВЕЛЬНІ УГОДИ ЯК СКЛАДОВІ НОВОГО СВІТОВОГО ПОРЯДКУ

The article is devoted to the analysis of features of regional agreements on preferential terms. Such agreements have become a popular instrument in international trade in the 21st century. Free trade area agreements between countries are found to be the most common in the world and account for almost 60% of the total number of preferential trade agreements. The term “preferential trade agreement” has been suggested, the subject of which is the granting of preferences in trade between the participant states, both unilaterally and on a reciprocal basis. Benefits of preferential trade agreements in both trade and economic spheres have been analyzed. It is determined that the signing of such an agreement can be a tool to protect both the already functioning production networks and an impetus and condition for the further development of trade relations of the partner countries. On the other hand, facilitating access to a more favorable institutional environment or to higher quality services, whose role in the production process increases, will lead to relocation of production, thereby altering the routes of value added and reducing the export of value added from that country (which is included) to the integration group. It is proven that the main goal of the mega-regional preferential partnerships is to reach new standards in the field of trade in goods and services, investments, environment, working conditions, intellectual property, fight against corruption, competition. On the other hand, it is an attempt to create institutionally compatible legal and regulatory environments for global preferential trade (an instrument of preserving and enhancing the competitiveness of states in the context of a new world order). The results obtained indicate that the spread of preferential trade agreements in the 21st century is an institutional response to the problems and needs of trade related to outsourcing of production. It is justified that further multilateral liberalization in WTO format at a deeper level than in preferential trade agreements is a more promising direction for the development of international trade, since preferential liberalization is not completely without its disadvantages, compared to multilateral regulation.

The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model

In March 2018, representatives of member countries of the African Union signed the African Continental Free Trade Area (AfCFTA) agreement. This agreement provides a framework for trade liberalization in goods and services and is expected to eventually cover all African countries. Using a multi-country, multi-sector general equilibrium model based on Costinot and Rodriguez-Clare (2014), we estimate the welfare effects of the AfCFTA for 45 countries in Africa. Three different model specifications-comprising both perfect competition and monopolistic competition-are used. Simulations include full elimination of import tariffs and partial but substantial reduction in non-tariff barriers (NTBs). Results reveal significant potential welfare gains from trade liberalization in Africa. As intra-regional import tariffs in the continent are already low, the bulk of these gains come from lowering NTBs. Overall gains for the continent are broadly similar under the three model specifications used, with considerable variation of potential welfare gains across countries in all model structures.

Dispute Settlement Under the African Continental Free Trade Area Agreement: A Preliminary Assessment

The African Continental Free Trade Area Agreement (AfCFTA) will add a new dispute settlement system to the plethora of judicial mechanisms designed to resolve trade disputes in Africa. Against the discontent of Member States and limited impact the existing highly legalized trade dispute settlement mechanisms have had on regional economic integration in Africa, this paper undertakes a preliminary assessment of the AfCFTA Dispute Settlement Mechanism (DSM). In particular, the paper situates the AfCFTA-DSM in the overall discontent and unsupportive practices of African States with highly legalized dispute settlement systems and similar WTO-Styled DSMs among other shortcomings. Notwithstanding the transplantation of the WTO-Styled DSM, the paper argues that the Consultation Phase, offers the AfCFTA Member States a realistic chance of engaging with the DSM. In addition, the paper highlights other factors such as private sector involvement, strategic operationalisation of the DSM, geopolitical and power dynamics as critical to the success of the dispute settlement system.

Problematic aspects of euro integration process of Ukraine's agro-industrial complex

The purpose of the article is to identify the main advantages and risks for domestic agricultural producers in the process of integration into European space and to assess their impact on the development of the domestic agricultural sector. The proposed article analyzes the prospects and risks of integration of domestic agricultural enterprises into world economy. Special attention is focused on the export and import of agricultural products and the achievement of Ukraine in the field of agro-industrial complex. An estimation of foreign economic activity of agrarian enterprises of Ukraine is conducted. The implications of the implementation of the Association Agreement between Ukraine and the EU for various sectors of the economy of Ukraine, and most especially for the agrarian sector, are assessed and analyzed. The potential benefits of signing the Comprehensive Free Trade Area Agreement for the development of the agrarian sector have been explored. Perspectives are considered and risks of European integration for agrarian enterprises and development of rural territories are analyzed. It is established that European integration for Ukraine is a way to modernize the domestic agricultural production, attract foreign investments and new technologies, increase the competitiveness of products, obtain financial resources for the development of the economy. Conclusions. Thus, the Ukrainian agro-industrial complex has a serious economic potential which allows it to be in a positive dynamics and has good prospects of integration into the European space. At the same time, this process should fit into the overall context of reforms and sectoral changes in Ukraine's economy. Alongside with it, the state plays an important role in the regulatory processes of managing the economy in general and the agrarian sector in particular.

ASEAN-CHINA FTA AND THE IMPACT ON INDONESIAN MANUFACTURING INDUSTRY

In November 2002, ASEAN and China signed a Free Trade Area (FTA) agreement. Before 2002, there was an estimation that both regions would gain from FTA deals. However, the rapid growth of China since the early 1990s had caused trade and investment diversions to ASEAN. The strong competition between the regions in the international commodity market and productive foreign capital has produced a great deal of stress within ASEAN economies. The economic stress is largely attributed to the structure and similarity of production and exports of ASEAN and China. Theoretically only countries that have the lowest cost of production will gain in trading. Today, nearly 14 years after the agreement was signed, the picture of competitiveness in the commodity market should show a new trend of competitiveness. With respect to Indonesia, the Business Chamber of Commerce Indonesia (KADIN) and industrialists, had complained that the ACFTA actually caused losses to local manufacturers and businesses, in particular consumer goods products such as textile and clothing, and electrical and electronics sectors. This paper investigates the impacts of the ACFTA on the Indonesian manufacturing sector. For the investigation this paper employs various trade performances indices such as revealed comparative advantage, intra-industry trade, and the Hillman index.Keywords: ASEAN, China, Indonesia, FTA, RCA, Hillman index, intra-industry trade

Brexit, Ireland and the World Trade Organization: possible policy options for a future UK–Australia agri-food trade agreement

ABSTRACTPrior to the UK’s accession to the then European Economic Community in 1973, Australia was a significant supplier of Britain’s food. Membership of the European Union (EU) resulted in trade diversion, closing the British market to Australian sugar, for example. This article questions whether the UK’s exit from the EU (‘Brexit’) might usher in a new agri-food trade regime, restoring Australian farmers’ access to the British market, or whether other opposing political economy considerations might prevail. Would the UK unilaterally adopt free trade? Can a comprehensive free trade area agreement between Australia and the UK, including agri-food products, be negotiated? Any new relationship will need to reflect the UK government’s stated preference for a frictionless border with EU 27 (particularly on the island of Ireland), the World Trade Organization’s rule book, and the interests of the UK’s farm lobbies, as well as the UK’s quest for ‘free trade’ with the wider international community.

Czy Porozumienie Tripartite Free Trade Area (TFTA) może stać się przełomowe w procesie integracji regionalnej na kontynencie afrykańskim?

Zawarte w 2015 roku trójstronne porozumienie o wolnym handlu Tripartite Free Trade Area (TFTA) między trzema regionalnymi porozumieniami handlowymi w Afryce (COMESA, SADC, EAC) jest pierwszym krokiem w kierunku utworzenia kontynentalnej, afrykańskiej strefy wolnego handlu Continental Free Trade Area (CAFTA), planowanej na 2017 rok. Celem artykułu jest próba oceny znaczenia zawartego porozumienia TFTA dla procesu regionalnej integracji w Afryce. W artykule zastosowano metodę analityczno‑opisową z wykorzystaniem krajowych i zagranicznych źródeł literaturowych oraz danych statystycznych Konferencji Narodów Zjednoczonych ds. Handlu i Rozwoju (United Nations Conference on Trade and Development – UNCTAD). Przeprowadzone zostały również badania empiryczne z wykorzystaniem wskaźnika wewnętrznej orientacji handlu (RTII). Dokonana analiza prowadzi do wniosku, że zarówno szeroki zakres przedmiotowy, jak i podmiotowy porozumienia Tripartite wskazuje, że może być ono ważnym krokiem w kierunku nowej strategii rozwoju integracji regionalnej w Afryce. Natomiast wyniki badań własnych sugerują, że nie zmieni się pozycja porozumienia w handlu światowym.

Do regional trade agreements stimulate FDI? Evidence for the Agadir, MERCOSUR and AFTA regions

AbstractThe integration of emerging markets into the global economy is heavily promoted by foreign direct investment (FDI) inflows. Among the factors explaining the location of FDI, regional trade agreements (RTAs) can be relevant for emerging markets, as they can promote economic integration and increase the attractiveness of the region for foreign investors. This paper investigates the impact of South–South trade agreements on the FDI decision of multinationals, where the Agadir, mercado comun del sur (MERCOSUR), and ASEAN free trade area (AFTA) agreements are considered. Three panels of countries are defined, where the members joined a specific agreement or not. Non‐Gulf Arab states are compared to better performing regions in Latin America and Southern and Eastern Asia. The analysis provides evidence that openness to foreign trade and financial markets are among the main catalysts to attract FDI, provided that business‐friendly institutions exist in the host country. Other variables, like the size of the industrial sector, urbanization rates, and external debt appear to be important in some cases. The integration of China into the world economy is a specific trigger for FDI to Asian destinations. Since RTAs influence the market size by reducing barriers to trade, their impact operates via GDP growth and openness. Gains from the agreement are striking for Latin America and Asia, but not for Arab states. To attract more FDI, business‐friendly institutional reforms and mechanisms to support new firm foundation should be implemented in this region.

Ivan Franko National University of Lviv

The structure of Ukraine’s exports to the EU is estimated and the problems and opportunities for domestic exporters under the impact of the Free Trade Area Agreement between Ukraine and the EU are defined. It is indicated that trade liberalization does not allow free access to the EU market for Ukrainian exporters; Ukraine must adopt the EU legislation in the field of technical standarts . The reasons for increasing the intensity of Ukraine-EU trade, including the elimination of customs duties, the reorientation of trade flows from the Russian Federation to the EU, the growth in the purchasing power in the EU and decline in it as a result of the economic crisis in Ukraine, were determined. Particular emphasis was placed on the progress in meeting EU technical and environmental regulations. Ukraine has the lowest position of eco-innovative efficiency in comparison with the EU members. Therefore, taking into account the negative structure of domestic exports and EU technical standarts and norms, an urgent transition to a deep eco-innovative development of export industries is highly required . The implementation of eco-innovative projects and technologies by Ukrainian producers of different sizes (small, medium, large) is analyzed. The study shows that eco-innovative activities of Ukrainian enterprises is directly related to their size: the large enterprises have large funds, produce more products, are more interested in entering the EU market, and therefore have more opportunities and needs to meet EU technical (ecological) requirements. It is concluded that the FTA Agreement should become an additional stimulus for the eco-innovative activities of Ukrainian expoters due to the need of their meeting the European standards of quality and criteria of eco-production. The major barriers to the development of the enterprises’ eco-innovative activity have been identified as the lack of capital, lack of motivation, lack of knowledge and experience, lack of technical knowledge, lack of cooperation between the research institutions and enterprises, unfavorable political, informational and social environment, corruption. Key words: eco-innovative activities; exporters; eco-innovations; Ukraine-EU association agreement; Free Trade Area Agreement between Ukraine and the EU.

The Impact Of ASEAN Free Trade Area On Intra-Asean Manufacturing Trade

This study investigates the effects of ASEAN Free Trade Area (AFTA) agreement on the bilateral manufacturing trade between the 10 member countries of ASEAN and 39 of their trading partners. The period ofstudy covers 1995 to 2014. Results obtained from panel data analysis of the gravity model with random effectsshow that the economic sizes, populations, relative endowments, common language and geographical factors like distance, island, landlocked and neighbour are significant determinants of the bilateral manufacturing trade for ASEAN member countries. Moreover, results obtained from the fixed effects model in this study suggests that AFTA has generatedpure trade creation effects in terms of exports. Ontop of that, AFTA has resulted in larger magnitude of trade creation effects in imports than import diversion effects. Overall, AFTA promotes trades among ASEAN member countries through the elimination of tariff and non-tariff barriers, for bringing aboutpure trade creation effects in terms of exports as well as imports and also trade diversion effects in terms of imports. In sum, this study with more recent data set covering more ASEAN trading partners shows empirical evidence to justify the success of AFTA arrangement.

Business dimensions of EU’s new FTAs

Recent Free Trade Area (FTA) agreements of the EU are ‘deep and comprehensive’. This can be explained by the various and complex ‘trading costs’ that business encounters when accessing a foreign market and which business is keen to reduce as much as possible. The paper examines what ‘deep and comprehensive’ means more precisely in four EU FTAs: CETA and EU/Korea, and two FTAs that have not yet been completed (TTIP and EU/Japan). It provides a tentative explanation of the nature of these four modern EU FTAs by taking a closer look at the business dimension, in particular transnational value chains in some prominent sectors, the growing importance of services and inter-sectoral linkages.

Mutual Trade and Cross-Border Economic Interaction of Ukraine and Slovak Republic

The Slovak-Ukrainian border, as well as mutual economic interaction has been changing in the course of the following periods: a) 1993-2004: the bilateral intergovernmental regime of the border; b) 2004-2016: the community regime of the border between the EU and Ukraine, and c) the new border regime after the signing and subsequent implementation of the Association Agreement between the EU and Ukraine, including the Deep and Comprehensive Free Trade Area Agreement (DCFTA) as well as an agreement on visa-free regime between the EU and Ukraine. Within the outlined context the paper seeks to explore the history and dynamics of Slovak-Ukrainian mutual economic interaction, as well as the recent conditions in the CBC area, understanding of which may contribute to building capacities of CBC actors to make best use of opportunities brought by AA/DCFTA and thus consequently to boost economic development of the Slovak-Ukrainian borderland regions.

Brexit, Trade Agreements and CAP Reform

SummaryAlthough a number of reforms have significantly changed the Common Agricultural Policy (CAP) over the past two decades, a defining characteristic of the policy is its prohibitively high import tariffs on a number of key commodities as tariff cuts have not formed part of CAP reform. These high tariffs, whilst protecting EU producers, complicate the EU's attempts to negotiate Free Trade Area (FTA) agreements around the world, and will likewise be problematic for agri‐food trade with a post‐Brexit UK, particularly over the politically sensitive border between the EU‐27 and the UK on the island of Ireland. An open border could be more easily secured if the UK's tariff barriers on CAP products matched those of the EU‐27. This, however, implies either that the UK will have to abandon its plans to pursue ‘free‐trade’ policies with other countries around the world, or that the EU‐27 needs to complete its reform of the CAP by unilaterally reducing its tariff barriers. It seems highly unlikely that the challenges posed by Brexit would prompt the EU to unilaterally reduce its excessively high CAP tariffs.