Preferential Agreements Research Articles

Are preferential agreements beneficial to EU trade? New evidence from the EU–South Korea treaty

AbstractThis paper empirically investigates the effect of the EU–South Korea free trade agreement (FTA) on manufacturing trade flows. By applying a state‐of‐the‐art structural gravity model with intra‐national (i.e. domestic) trade and using disaggregated data, we quantify both the trade impact and the observed heterogeneity in the FTA estimates. In line with literature, we find that the EU–South Korea FTA exerted asymmetric effects in bilateral exports across directions of trade. Compared to previous studies, our findings suggest a different explanation for the poor performances of Korean exports to the EU in the post‐FTA period, namely offshoring patterns in electronics and a broad‐based decline in the shipbuilding industry. When we drop these two export categories from the analysis, we show that the FTA exerted a large effect on trade in both directions, increasing bilateral exports by about 30%. We then investigate the substantial observed heterogeneity in pair‐industry‐specific estimates of the FTA. The main source of variation is represented by asymmetries in ex‐ante trade barriers across sectors, with a prominent role for non‐tariff instruments. Stronger pre‐FTA regulatory intensity is associated to a high liberalisation potential, favouring larger FTA estimates. Tariffs instead do not explain the heterogeneity in the trade effects.

The No Drawback Rule in EU Preferential Agreements

Drawback is a tool available to countries to promote their exports but also a measure that harms trade liberalization. This article argues that the no drawback rule in European Union preferential agreements does not apply when the exemption or reduction of duties derives from an EUR.1 or an origin declaration in application of that agreement. On the other hand, this reasoning cannot always be extended when the exemption of duties derives from the application of an inward processing regime. Therefore, an operator in the European Union will find more convenient and smoother to establish trade relations with operators located in countries with which the European Union has concluded preferential trade agreements. no drawback, origin, inward processing regime, preferential treatment, Approved Exporter, EUR.1

Соглашения о зоне свободной торговли между ЕАЭС и Ираном: тенденции, проблемы и перспективы развития

The purpose of this article is to review and analyze domestic and foreign studies on the effectiveness of the application of preferential trade regimes. The main objective of the article is to summarize the theoretical and practical experience of using preferential trade instruments and to develop recommendations for improving the efficiency of the EAEU tariff preferences system. The modern normality of international economic relations is the growth of regional trade agreements, which are used not only as instruments of economic cooperation, but also as agents of the political will of individual states. One of the manifestations of such a policy is the strengthening of foreign policy confrontation between the United States and the countries of the Middle East, which is practically reflected in the growth of economic and administrative barriers to mutual trade. Having foreign policy disagreements with Western powers served as prerequisites for strengthening the foreign economic rapprochement of these states and the EAEU member states. The optimal format for the implementation of such initiatives is the economic integration of countries through preferential agreements. The first practical step towards the implementation of this process was the signing of the agreement on a free trade zone between the Islamic Republic of Iran and the EAEU. In such a situation, improving the effectiveness of national preferential trade schemes is a priority.

Drafting e-commerce regulations for a sustainable economic recovery: Lesson from DEPA analysis

The current international pandemic situation caused by the COVID-19 outbreak has disrupted economic activity and development worldwide. However, digital enabled activities have proven a relative stronger resilience, and, worldwide, most economic sectors have shifted to digital platforms to continue operating. In this context, the drafting of digital economy regulations has become a relevant policy issue for governments across the Asia Pacific region. Nevertheless, the absence of multilateral regulations in this area has become an obstacle for achieving common regulatory frameworks to deal with digital economy issues, for which regional and bilateral agreements have begun to draft regulations. The proliferation of digital economy provisions in preferential agreements may lead to the so called “spaghetti bowl”. From here, the objective of this paper is to contribute to the governance of digital economy among APEC economies, through the characterization of free trade agreements signed between APEC and Latin American economies. This selection was made due to the diversity of agreements that can be found within this subregion. In this context, the Digital Economy Partnership Agreement (DEPA), led by Chile, New Zealand, and Singapore has become a reference point that could serve as a stepping stone towards common regulatory frameworks in this matter. The paper concludes that DEPA may be used as a benchmark for the development of regulations that will help boost cross border e-commerce in APEC economies for a post pandemic sustainable recovery.

The multilateral trade policy of the Arab league countries: An empirical investigation

AbstractOur paper examines the effects of various features of the Arab League's trade policy (different preferential trade agreements, presence of tariff water, and market power) on the multilateral tariffs applied by its member countries. To carry out our study, we collected product‐level data from 1998 to 2015 with information on applied most‐favoured nations (MFN) tariffs, preferential tariffs, bound tariffs, import trade values, and market power for eleven members of the Arab League countries. Overall, our results suggest that preferential agreements have a building block effect on multilateral tariffs because Arab League members tend to lower their applied MFN tariffs as they grant enhanced preferential access to their partners. Moreover, we find that forming a customs union (CU) among Arab League members led to a lower degree of external trade liberalisation than forming a free trade area (FTA). Importantly, we find that a high degree of importer market power strengthens the building block effect of forming preferential trade agreements.

Comparative Advantage of Tanzanian Coffee Sector under “Everything but Arms” Export Trading Regime

This paper assesses the comparative advantage of the Tanzanian coffee sector in the European Union (EU) before and during the Everything but Arms (EBA) trading regime. Coffee’s comparative advantage at the EU level was compared to other commercial crops’ comparative advantage namely; sisal, tobacco, cashew nuts, tea and cotton. To get a clear effect of the regime, Balassa Revealed Comparative Advantage (RCA) index has been employed to analyze exports values from 1995 to 2000 before EBA and from 2001 to 2019 during EBA as two separate periods. Findings from this study indicate that before EBA, coffee was a third product to be exported but during EBA it become a less specialized product. Therefore, EBA has promoted less the export of coffee to the EU market than expected that it will increase as the regime released transaction costs which were restricting the trade. To benefit from EBA preferential agreements, policymakers and sectorial stakeholders have to revisit EBA terms and conditions especially that of “Rule of Origin” which is reported as a major obstacle for most countries to utilize trade preferences agreements merely when they bump into low production within the country of origin. Keywords: RCA, EAC, EBA, EU Market, Balassa Index DOI: 10.7176/JESD/13-4-02 Publication date: February 28 th 2022

KEUTAMAAN WORLD TRADE ORGANIZATION ATAS REGIONAL TRADE AGREEMENTS DALAM PERDAGANGAN INTERNASIONAL

The economic and political needs of countries in the world have provided a strong basis for the birth of the World Trade Organization (WTO). This need has also prompted many countries to form preferential agreements such as the Regional Trade Agreement (RTA). A clash between the two international trading systems is inevitable, there is the ambiguity of the relationship and inconsistency of views held, such as in discriminatory and non-discriminatory approaches. Doctrinal research was conducted to find out which agreement should take precedence over the two legal regimes. This paper concludes that international legal provisions favor the WTO Agreement over preferential agreements such as the RTA. Thus, an RTA that does not conform to the WTO legal regime should be considered contradictory.

Negotiating exclusion: Regulatory barriers in preferential trade agreements

AbstractTrade negotiations now center on regulations. This paper argues that these negotiations can raise uncertainty over fixed costs. We develop a simple model of exporter competition to show how uncertainty generated by negotiations redistributes profits across firms. We show that regulatory uncertainty reduces competition by deterring entry on the part of less productive firms and shifting market share toward top producers. Empirically, we show that this negotiation‐driven uncertainty can help explain the economically concentrating effects of preferential agreements. Preferential trade agreements combine tariff concessions with regulatory changes that ensure the benefits of the agreement are limited to member states. Using novel data covering firm‐level export activity and public investment decisions in the automotive and automotive parts sectors during NAFTA, we find that negotiation‐driven uncertainty deterred non‐North American producers while benefiting the top American auto manufacturers.

UK-Turkey Relationship in Light of Brexit

The 2016 UK EU membership referendum has been a catalyst for a stronger political dialogue between Turkey and Britain. The countries have taken a firm line of strategic partnership which meets the interests of both parties to strengthen their international positions. In late December 2020, the parties managed to forge a trade agreement envisaging most of the previously established rules. At the same time, a full-scale trade agreement is hampered by Ankara’s obligations within the EU Customs Union and Preferential agreements. Turkey occupies an important place in the new foreign strategy of the UK. London considers Ankara, which is pursuing an increasingly tough policy in the Eastern Mediterranean, the Middle East and the Black Sea region, as a situational ally in strengthening its international positions weakened by Brexit. The author notes that the declared strategic partnership in the political sphere has a number of limitations associated with the conflict potential of relations between Turkey and the European Union, as well as the growing importance of the values factor in British foreign policy. The UK actually needs to find a balance between other international players in the Brussels-London-Ankara triangle for its own geopolitical and economic goals. The nature of British-Turkish relations is of considerable interest to Russia.

Towards a New Treaty on Digital Trade

Digital trade is one of the very few areas of trade law, where one can observe a willingness shared by the international community to move forward and actively engage in new rule-making. The article contextualizes and explores this development by looking at the relevant e-commerce provisions in preferential agreements, in particularly by highlighting the legal innovation in the most advanced templates of the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) and the United States Mexico Canada Agreement (USMCA), as well as in dedicated digital trade agreements, such as the ones between the United States and Japan and between Chile, New Zealand and Singapore. The article then looks at the WTO negotiations and tries to identify points of convergence and divergence reflected in the latest negotiation proposals tabled by WTO members. It is the article’s objective to test these proposals, as to their potential to permit the adoption of a new treaty on digital trade and to their ability to adequately address the practical reality of the data-driven economy. digital trade, electronic commerce, World Trade Organization, preferential trade agreements, data and data flows, CPTPP, USMCA, DEPA

Особенности стратегии ЕАЭС по формированию сети ЗСТ

The number of free trade agreements (FTA) in international trade is rapidly growingand it makes them the main tool for countries’ trade liberalization. Created in the 2015, the Eurasian economic union (EAEU), that has the competence of the customs union, also started actively building a network of FTAs. To date, four such preferential agreements and one non-preferential trade agreement are in force, and at least three other agreements are expected to be signed in 2021-2025.Some specific features can be attributed to the emerging network that will impact the economic development of the EAEU Member States and will allow its partners to adapt their foreign trade policies accordingly. The geography of the EAEU agreements demonstrates the intention to create a wide network of FTA covering primarily the Eastern hemisphere, with the potential to extend it to all major regions. The EAEU partners are generally small States and notthe strongest economies, and the content of FTA agreements is not yet as broad and deep as, for example, concluded by the EU. It is noteworthy that the system almost does not contain WTO-extra provisions. However, the EAEU is only at the beginning of building an FTA network that may change the EAEU position in the international trade system.The main goal of the article is to track the distinct features of this new EAEU trade policy and to identify specifics and prospects for the emerging FTA network, based on the already concluded agreements and the coming ones.

New in US-Canadian Relations and Ratification of the USMCA Agreement

Abstract: The article reviews through chronological analysis key issues in US-Canadian relations in the context of new trade agreement USMCA replacing NAFTA during Trump's presidency. It identifies a new model of relations between the closest North American partners in the context of a new paradigm which is called “America First”. This model leads to a crisis the US-Canadian relations, which is aggravated by the increased partisan rivalry in light of the upcoming US presidential elections, the impeachment process initiated in the House of Representatives.The article comes to the following conclusions. The evolutionary development of the free trade agreement (NAFTA), its rejection and acceptance of the USMCA preferential agreement is a gradual and consistent process of protecting North American countries from global market, which started during the presidency of George W. Bush and continued by the subsequent American presidents. This is also connected with the trade war between the United States and China, that was repeatedly emphasized both in the US Administration and in the Congress during D. Trump's presidency. The United States-Canadian relations have worsened significantly, although the countries' leaders do not recognize it publicly during the agreement's preparation and its ratification, for almost three years. The USMCA agreement is not a final version, subject to further ratification. It took more than a year for the parties to find compromise solutions on the USMCA with the protocols' preparation to the agreement and its submission to the national parliaments. Moreover, in the agreed version, the USMCA agreement meets primarily the interests of the United States. The US pressure on Canada was unprecedented. As a result, we should expect the continued growth of political and trade contradictions between the United States and Canada, as well as the revision and addition of new additional agreements in the USMCA agreement.

The political economy of inclusion and exclusion: state, labour and the costs of supply chain integration in the Eastern Caribbean

The dual emphasis on the benefits of global supply chain integration and private governance to address its ethical gaps have given prominence to an inclusive vision of chains which, this paper argues, drawing on the case of St. Vincent and the Grenadines (SVG), has been greatly exaggerated. In the post-war era, SVG built a successful banana industry under a preferential agreement with the EU. When the agreement collapsed under free trade reforms, the burden of finding new forms of reintegration fell on the state and laboring classes. The paper argues that conventional supply chain approaches have adopted a static understanding of the relationship between inclusion and exclusion, overlooking the exclusionary nature of supply chains and placing too much emphasis on assessing the possibilities for private supply chain initiatives to address their negative social and environmental impacts. The effect has been to obscure the centrality of the state and laboring classes in continuing, out of necessity, to confront, manage, and address the many costs that corporations are not willing to pay. It is their centrality to managing the uneven and unpredictable nature of supply chain integration/reintegration, that is often the most hidden of all.

The Trade Effect of the EU’s Preference Margins and Non-Tariff Barriers

Nowadays, trade negotiations afford both liberalism- and protectionism-oriented policies. Indeed, in recent decades, the developed countries have been actively engaged in negotiating many preferential agreements to integrate developing countries (DCs) into world trade and encourage their economic growth, but many of these schemes contrast with the complex rules, often imposed on international markets, that still are an obstacle for exporters. Their presence and related costs reduce the importance of preferential trade agreements (PTAs) in increasing trade flows. This article attempts to assess the impact of preferential trade policies on trade flows controlling for different non-tariff barriers (NTBs), using a structural gravity model. The analysis uses disaggregated data, registered in the year 2017, on EU imports (defined at level HS-6 digit) from a large number of exporters (187 developed and developing countries) and also includes the intra-EU trade. Our results show robust and positive estimates for the impact of preferences on bilateral trade flows, however, higher non-tariff barriers are likely to play a role in reducing both the extensive margins of trade, and so tariff preferences alone are not sufficient to access international markets. The impact of NTBs on the intensive margin of trade is ambiguous; some measures may act as catalysts and therefore increase trade, and others may act as an additional cost of trade and thus hinder trade.

Post Conflict Normalization through Trade Preferential Agreements: Egypt, Israel and the Qualified Industrial Zones

Abstract Trade and economic cooperation are often promoted through policy to facilitate post-conflict normalization. The Qualified Industrial Zone (QIZ) model of duty and quota-free industrial regions is a policy tool initiated by the United States as a brokerage in promoting peace between Israel and its Arab neighbors. Indeed, a vast literature aims to evaluate the economic and political potential of trade liberalization. Yet the mechanisms of trade policy implementation in a post-conflict environment, its timing and underlying political motives, are critical but rather neglected factors, which design the prospects of trade incentives. We therefore question the effectiveness of the QIZ as a tool addressing post-conflict dynamics and ask whether its impact on Israel–Egyptian relations reflects the value of this policy or the circumstances of its implementation. Using mixed methods, this study presents and evaluates the implementation of the QIZ in Egypt since 2004 and its results, both economic and political, fine tuning the broader debate to focus on circumstances of implementation. This case study demonstrates the results of trade opportunity implementation as a reaction to threat rather than mobilization to realize post-conflict rapprochement or even to reap economic opportunity. Notwithstanding the forces of globalization, Egypt’s pre and post-revolutionary internal political economy and delicate relations with Israel serve as the context for understanding the QIZ. This context facilitates contradicting political interpretations, with the QIZ simultaneously celebrated as an economic success, criticized as an Egyptian escape route from structural reforms, and accused as embodying a U.S.–Egyptian elite conspiracy, to coerce Egyptian economic normalization with Israel.

China’s trade policy towards Latin America: an analysis of free trade agreements policy

PurposeThe emergence of China in the international trading system has shifted its gravity center, as the country has become one of the mayor actors in international economic relations. Through the subscription of preferential agreements, China is building a network of strategic partnerships worldwide, including Latin America. The purpose of this paper is to answer the questions: Do free trade agreements (FTAs) between China and Latin American countries contribute to expand trade flows and enhance products diversification?Design/methodology/approachThree countries have an FTA with China, Chile (2005), Peru (2009) and Costa Rica (2010). Through an econometric estimation based on a gravity model, the authors expect to determine the impact of these agreements over both trade flows and products.FindingsThe study shows that FTAs have a positive impact on both bilateral trade flows and on the number of exchanged products. Nevertheless, this impact is positive but diminishes in time. The authors confirm that these agreements allowed for a substantive expansion of trade between Latin American economies and China, becoming relevant for policymakers regarding the bi-regional relation.Originality/valueThe study contributes to the understanding of the bilateral trade relations between China and Latin American countries, giving evidence of the magnitude of the impact of FTAs. Through new data, at a six-digit level of detail, this study improves current knowledge regarding bilateral economic relations.

Ренессанс внешнеторговой политики протекционизма: теоретические и прикладные аспекты

Introduction. Changes in the balance of power in the global economy, the increasing role of the Asia-Pacific countries in international trade, the consequences of the global crisis of 2008–2009 led to a revision of foreign trade policy by both developed and developing countries, to an increased application of protective measures of national economy. Theoretical analysis. State economic policy aimed at protecting and realizing the interests of the national economy is protectionism in a broad sense. In a narrow sense, protectionism is considered as a foreign trade policy. The use of historical and logical methods in the study of the foreign trade policy of protectionism made it possible to identify the main stages of its development and the characteristics of each stage. Empirical analysis. The study analyzes the dynamics of the current and financial accounts of the balance of payments of Russia and the largest participants in international trade, shows the degree of their dependence on international trade and their vulnerability to the strengthening of protectionist measures. The article substantiates the need for Russia to pursue a policy of neo-protectionism, stimulate the generation of its own value chains and join regional chains, and actively participate in regional and preferential trade agreements. Results. At the new stage of the foreign trade policy of protectionism, its measures became more hidden, and the role of customs duties faded into the background. The desire to reduce non-tariff barriers, protect intellectual property rights, remove restrictions associated with manipulating the exchange rate, encourage regional integration, the conclusion of preferential trade agreements. In the future, having fulfilled a progressive role, regional and preferential agreements can be transformed into multilateral ones. The creation of a mechanism for such a transformation may become a new function of the reformed WTO.

Free trade zone EAEU-Singapore is a new preferential partnership for Russia

The article discusses the preferential agreement on the EAEU˗Singapore free trade zone, concluded in October 2019. The creation of such economic partnerships is a manifestation of the new EAEU strategy for inclusion in the global economy. The potential benefits to Russia and other EAEU states in terms of solving the problems of their structural and technological modernization, attracting investments, gaining best practices in managing and organizing businesses, and winning new markets in Southeast Asia are noted.

The Rise of Preferential Agreements in Global Economic Governance

We are experiencing a tumultuous period in global politics, with international economic governance facing a period of great uncertainty. Meanwhile, since the de facto collapse of the WTO’s Doha Round, a plethora of preferential agreements has begun to supplant the WTO’s rule-making function and to regulate the previously separate fields of international trade law and international investment law. This Special Issue has two objectives: to contribute to a greater understanding of the dynamics of preferential agreements as a source of new norms of global governance and their impact on the existing international trade and investment regimes, and to identify the implications that these developments have for States in their capacity as treaty negotiators and domestic regulators.

Time Series Dynamics of Sugar Export Earnings in Fiji with Multiple Endogenous Structural Breaks: Implications for EU Sugar and Industry Reforms

The sugar industry has been the backbone of the Fijian economy since the late 1950s. Owing to its poor performance over the recent years, and especially the expiry of preferential agreements with the European markets after September 2017, the long term sustainability of the industry has come under the scrutiny. In light of this scrutiny, this paper investigates the response of Fiji’s sugar export earnings to domestic and external shocks using a suite of unit root tests that allows for endogenous multiple structural breaks. Our analysis reveals that sugar export earnings is a non-stationary process, implying that shocks to sugar export earnings will have a permanent impact. The empirical results suggest that the impact of adverse shocks (for e.g. expiry of preferential agreement with the European Union and natural disasters) will not only be restricted to sugar export earnings but will also be transmitted to other related variables and sectors of the Fijian economy. Moreover, the results also suggest that temporary (short-term) measures to increase sugar export earnings will mostly be ineffective, as the export earnings will not revert back to its equilibrium path. Our finding underscores the necessity of policy intervention through permanent policy changes to minimise fluctuations in the sugar export earnings, and shelter the industry from adverse external and domestic shocks.