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Trade Policy Dialogue on the Multiple Dimensions of Market Access and Development

Trade Policy Dialogue on the Multiple Dimensions of Market Access and Development

Session IV Regional Trade Liberalizations as a

Complement of Multilateral Liberalization?

Mario MatusAmbassador of Chile to WTO

México, October 24, 2006

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PresentationPresentation

Why FTAs/RTAs?

Chilean experience

Looking for complementary to WTO?

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FTAs/RTAsFTAs/RTAs Scope for Regional Trade Arrangements:Scope for Regional Trade Arrangements:

LimitedLimited Comprehensive Comprehensive

ProblemsProblems Exception to MFNException to MFN Discrimination. Exclusion of other members. Discrimination. Exclusion of other members. Trade deviationTrade deviation Complexity for business community Complexity for business community Different level of negotiating leverageDifferent level of negotiating leverage Do not address all issues (i.e. DS, Export Subs)Do not address all issues (i.e. DS, Export Subs) Erosion of multilateral system if they do not go Erosion of multilateral system if they do not go

beyond & under WTO rules & principlesbeyond & under WTO rules & principles

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Why FTAs/RTAsWhy FTAs/RTAs Market access (goods)Market access (goods) Easier to negotiate (bilateral fine tuning)Easier to negotiate (bilateral fine tuning) Political reasons:Political reasons:

International (i.e. US-Chile; US-Jordan, etc)International (i.e. US-Chile; US-Jordan, etc) Domestic (i.e. push for internal changes)Domestic (i.e. push for internal changes)

To be paid for liberalizationTo be paid for liberalization Not to be kept behindNot to be kept behind To minimize trade deviation (further negotiations)To minimize trade deviation (further negotiations) WTO slowness for honest free traders WTO slowness for honest free traders

Real free trade (0% tariff)Real free trade (0% tariff) Develop more and stricter rules (i.e. TR, Compt, etc)Develop more and stricter rules (i.e. TR, Compt, etc) Protection of foreign investmentProtection of foreign investment

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Chilean reasonsChilean reasons Foreign trade policy Foreign trade policy

Open economy (Open economy (free flows goods, S & Ifree flows goods, S & I)) Dependent on international trade (Dependent on international trade (more trademore trade)) Small country (Small country (disciplinesdisciplines)) Transparent/legalistic/non corrupted (Transparent/legalistic/non corrupted (disciplinesdisciplines))

Certainty. Rules and disciplinesCertainty. Rules and disciplines Dispute settlementDispute settlement Reduce external economic vulnerabilityReduce external economic vulnerability Attraction of FDIAttraction of FDI Differentiation in international economic contextDifferentiation in international economic context

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What do we are looking for?What do we are looking for? CommercialCommercial

Trade creation & reduction of trade diversionTrade creation & reduction of trade diversion Elimination tariff peaksElimination tariff peaks Promote exportsPromote exports Induce more competitionInduce more competition

EconomicEconomic Rules and disciplinesRules and disciplines Reduce external economic vulnerabilityReduce external economic vulnerability Attract FDIAttract FDI

PoliticalPolitical Dispute settlementDispute settlement Differentiation in context of international Differentiation in context of international

economic turbulence economic turbulence

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Chile's bilateralism Chile's bilateralism Comprehensive FTAsComprehensive FTAs

Canada 1997 Mexico 1999 Central America (5) 2002 European Union (25) 2003 USA 2004 South Korea 2004 EFTA (4) 2004 Singapore 2005 New Zealand 2005 Brunei 2005 China 2005 Panama 2006 Japan 20062006

Limited Trade Agreements:

Mexico 1991

Venezuela 1993

Colombia 1994

Ecuador 1995

Mercosur (4) 1996

Peru

1998

India

200554 +54 +

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Chilean Trade I

0

10

20

30

40

50

60

70

80

90

94 95 96 97 98 99 0 1 2 3 4

Year

% o

f gro

wth

W Agreements

W/O Agreements

Total trade

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0

50

100

150

200

250

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

% o

f g

row

th

Mexico

Canada

US

UE

Korea

Chilean Trade II

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Chile : Merchandise ExportsChile : Merchandise Exports

4,2 5,27,0 8,1 8,4 8,9 10,0 9,2

11,6

16,0 15,417,9

16,3 17,219,2 18,3 18,2

21,5

32,0

40,6

0

5

10

15

20

25

30

35

40

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Years

Source : Central Bank of Chile

Billion dollars

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Gross Domestic Product Gross Domestic Product

100 104 109117 125

138 143155

174186

197218

234258 256

267 276282

293311

331

250

0

50

100

150

200

250

300

350

400

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source : Central Bank of Chile

Annual average GDP growth rate 84-05: 5.9 %

(1984 = 100)

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Growth, trade and poverty (1990-2000)

Growth, trade and poverty (1990-2000)

Evolución del Producto, Intercambio Comercial y Pobreza

0

4 000

8 000

12 000

16 000

20 000

24 000

28 000

32 000

36 000

40 000

1990 1992 1994 1996 1998 2000

años

miles d

e m

illo

nes d

e C

h$ d

e 1

996

20

22

24

26

28

30

32

34

36

38

40

% d

e la

pob

lació

n to

tal

Intercambio (X+M) GDPGDP # of # of

poorspoors

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Institutional Institutional TransparencyTransparency Objectives, exceptions, Objectives, exceptions,

final provisions, etc.final provisions, etc. DSMDSM

““Non trade issues”Non trade issues” Intellectual Property RightsIntellectual Property Rights LaborLabor EnvironmentEnvironment CooperationCooperation Political commitmentsPolitical commitments

ComprehensivenessComprehensiveness GoodsGoods

Tariffs (no exceptions)Tariffs (no exceptions) NTM (prohibition)NTM (prohibition) Customs (proced & standards)Customs (proced & standards)

Rules of originRules of origin (simple) (simple) DisciplinesDisciplines

Safeguards (Bilat-Global) Safeguards (Bilat-Global) TBT/SPSTBT/SPS Competition / ADCompetition / AD

Services (negative list)Services (negative list) Investment (pre-post)Investment (pre-post) Temporary entryTemporary entry

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Bilateralism vs MultilateralismBilateralism vs Multilateralism

ComprehensivenessComprehensiveness All topics includesAll topics includes GATT Art. XXIVGATT Art. XXIV GATS Art VGATS Art V Enabling clauseEnabling clause Minimum exceptions in MA (goods & services) Minimum exceptions in MA (goods & services)

Future workFuture work Common rules of originCommon rules of origin Precision on Arts. XXIV & VPrecision on Arts. XXIV & V Common definition of “going beyond WTO”Common definition of “going beyond WTO” Best practices in APEC, OECD?Best practices in APEC, OECD? Develop model for FTAs/RTAs?Develop model for FTAs/RTAs?

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Spaghetti bowlSpaghetti bowl