EU-US Transatlantic Trade Negotiations

Last month, President of the US Barack Obama, European Commission President José Manuel Barroso and European Council President Herman Van Rompuy announced they were each starting the internal procedures necessary to launch negotiations on the much awaited trade agreement between the EU and the US. The negotiations will be based on the work of the EU-US High Level Working Group on Jobs and Growth co-chaired by Commissioner De Gucht and United States Trade Representative Ron Kirk.

Background

The EU and the US make up 40% of global economic output and their bilateral economic relationship is already the world’s largest. The aim of the high-standard Transatlantic Trade and Investment Partnership is to liberalise trade and investment between the two blocs. According to a report released today by the European Commission (Reducing Transatlantic Barriers to Trade and Investment), the final agreement could see EU exports to the US rise by 28%, earning its exporters of goods and services an extra €187bn every year. Consumers will benefit too: on average, the agreement will offer an extra €545 in disposable income each year for a family of four living in the EU.

The European Union and the United States will have their eyes on more than just removing tariffs. Tariffs between them are already low (on average only 4%) so the main hurdles to trade lie 'behind the border' in regulations, non-tariff barriers and red tape. Estimates show that 80% of the overall potential wealth gains of a trade deal will come from cutting costs imposed by bureaucracy and regulations, as well as from liberalising trade in services and public procurement.

That's why the two trading giants will reinforce their regulatory cooperation, so to create similar regulations rather than have to try to adapt them at a later stage. The aim is to build a more integrated transatlantic marketplace, while respecting each side's right to regulate in a way that ensures the protection of health, safety and the environment at a level it considers appropriate. Both sides hope that by aligning their domestic standards, they will be able to set the benchmark for developing global rules. Such a move would be clearly beneficial to both EU and US exporters, but it would also strengthen the multilateral trading system.

Additional Information can be obtained here:

Independent Study Outlines Benefits of EU-US Trade Agreement

BRICS- SA's Role

Interesting analysis below from the business day. Should note that SA's BRICS membership also adds another dimension to the tripartite  FTA consisting of COMESA-EAC-SADC Member States.

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There is wide consensus that SA’s place in the emerging-market bloc that groups Brazil, Russia, India and China together, is only justified by SA’s strategic importance on the continent.

That means the country needs to tread a careful path between touting its own interests and facilitating links to the rest of Africa.

"It would be in SA’s interest to see this as a bargaining opportunity for the continent rather than just being expedient," said Standard Bank ’s group chief economist, Goolam Ballim. "Otherwise this could be harmful in the longer term for inter- African relationships."

It is a delicate task as SA does not have a mandate at this point to speak for any other African country. Jim O’Neill, the banker from Goldman Sachs who invented the acronym for the first four Bric countries, has said that Nigeria is in a better position to join the grouping.

SA’s economy is only a quarter the size of Russia’s, the next-smallest Brics member, and its share of world trade has been stagnant at 0,5% over the past decade. Its pace of growth also lags well behind the bloc’s other members.

But SA has a lot to offer the group, which analysts say could evolve into a political force rivalling the Group of Seven developed nations, campaigning for the interests of emerging economies. SA has one of the strongest financial sectors in the world, and receives about 95% of Africa’s portfolio inflows — foreign buying of local shares and bonds.

It could provide capital for companies looking to expand into the continent and is rated as the easiest place to open a business among all the other BRICS countries.

That would make it the logical choice for firms to establish their headquarters in SA.

The country is already the services hub for the continent and has significant corporate clout in the global arena.

Where it falls short is on transport infrastructure, both within the country and linked to its African neighbours.

Nonetheless, SA’s place on the continent is seen as key to its debut in the Brics club this week at the meeting at a Chinese resort.

"We are not individually important enough but if we can fill the role of an entry point to Africa, it will be an enormous opportunity," says Absa Capital economist Jeff Gable.

Sub-Saharan Africa has become the second-fastest growing region in the world after Asia and has been more resilient to the global financial crisis then Asia, Latin America and Eastern Europe. It offers an untapped market of hundreds of millions of people.

Standard Chartered’s regional research head for Africa, Razia Khan, thinks that the summit is unlikely to come up with concrete measures that will immediately affect the Brics economies.

But some analysts are expecting preferential trade agreements and developmental finance deals, given the participation of state-owned financial institutions.

Iraj Abedian, chief economist for Pan African Capital Holdings, hopes that the Brics summit will establish a "credible institution" to underpin its political clout. If that does not happen, it will remain a political multilateral rather than an economic leadership forum, he says.

For another piece on BRICS see here.

Tripartite FTA COMESA-EAC-SADC

The Second Tripartite Summit of Heads of State and Government (COMESA-EAC-SADC) took place on 12 June, 2011, in Johannesburg, South Africa. A major achievement of the summit includes the official launch of negotiations on the Tripartite Free Trade Area (FTA). Agreement was reached on the negotiating principles, processes, scope and institutional framework. A roadmap and timelines for establishing the FTA were also agreed.

Negotiations will be open to all the 26 countries of the COMESA-EAC-SADC Tripartite. It was agreed that the first phase of negotiations will address tariff liberalisation, rules of origin, customs cooperation and customs related matters, non-tariff barriers, sanitary and phytosanitary measures, technical barriers to tade and dispute settlement. The second phase will focus on negotiation trade in services and trade related issues, including intellectual property rights competition policy and trade development and competitiveness, . Facilitating movement of business persons within the region will be negotiated in parallel with the first phase as a separate track..

A timeline of 36 months has been set for completion of negotiations for the first phase and the movement of business person which will run concurrently. No timeframe has, however, been indicted for the second and final phase of FTA negotiations. .

Once in place, the Tripartite FTA will establish a larger market for Eastern and Southern Africa - leading to improved trade performance and competitiveness for the region.

Resource materials can be accessed here.

The negotiations were concluded, see related materials here.

Tripartite FTA and East and Southern African States Participating in EPAs

The Tripartite FTA (see text of the agreement) between COMESA, EAC and SADC which was finally signed and s expected to facilitate the largest Free Trade Area in Africa by creating a more liberal regime between the Members of the three RECs COMESA< SADC and EAC. However some Members of the three RECs have various other trade agreements (e.g. Mauritius-Pakistan) and notably the Economic Partnership Agreements with the EC (ie EAC-EPA, SADC-EPA, ESA- EPA, TDCA and EC-Egypt FTA). The Grand FTA will require the free circulation of goods among the three RECs however its not clear how this will be feasible in the short to medium term in light of the 11 different schedules of liberalisation with the EC.

It is not practical to erect a barrier between cross border States that join and those that do not join an EPA. In practical terms therefore, little is achieved by staying outside of an interim EPA (which applies only to goods) when one is in FTA with neighbouring States that have signed, however one could assert that the cost of implementation and reciprocity is not borne since the principal reason to remain outside a goods EPA is to avoid reciprocity. However this goal would be undermined by cross-border trade if the outsider also participated in an effective FTA or customs union with countries that were also EPA members. Therefore the question arises whether countries that are currently not in trading regime with the EC, namely Angola, DRC, Djibouti, Ethiopia, Eritrea, Sudan and Malawi, would join a grand FTA with countries that are in an EPA. The problems of incompatible trade policy arise for countries that are not liberalizing on any product and those that are- hence a potential barrier to regionalism has been created between signatories of EPAs and other agreements that are different from those of their regional partners.

In any case the Tripartite agreement is now signed and the MFN clause applies. Article 7 says:

Nothing in this Agreement shall prevent a Tripartite Member/Partner State from maintaining or entering into new preferential trade agreements with third countries provided that any advantage, concession, privilege or favour granted to a third country under such agreements are offered to the other Tripartite Member/Partner States on a reciprocal basis.