On 21-22 November, ICTSD in partnership with the Inter-American Development Bank (IDB) organised a dialogue on inclusive rules of origin (RoO). The meeting represents the first in a series of RTA Exchange dialogues set to take place over the course of 2016 and 2017 to systematically explore possibilities for coherence and best practice between trade agreements at the the regional and global level, with the aim of ultimately contributing to a more inclusive global trade system that delivers sustainable development for all. RTAs have been a driving force behind recent trade liberalisation efforts and the formation of many global value chains (GVCs). However, RTAs also create limitations for both countries inside and outside a trading block due to their rules of origin. The complexity and variety of RoO that exist today represents a challenge for many firms seeking to participate in production networks across various trade agreements. Empirical evidence suggests that strict rules of origin often result in the sub-optimal functioning of value chains by disincentivising the use of cheaper parts and materials from third countries. Complex and diverse sets of RoO have also affected the ability of developing countries including least developed countries (LDCs) to fully benefit from the enhanced market access granted through preferential schemes or negotiated under their RTAs.
On 28 March, the International Centre for Trade and Sustainable Development (ICTSD) and the Inter-American Development Bank (IDB) organised a dialogue on “Regulatory Coherence and the Multilateral Trade System: Lessons from RTAs and Options to Promote Convergence” as part of the RTA Exchange dialogue series aimed at systematically exploring possibilities for convergence and coherence-building between regional trade agreements (RTAs) and the multilateral trade system. With the importance of tariffs declining because of autonomous liberalisation of RTA commitments, the policies that inhibit international trade flows are increasingly of a regulatory nature. Differences in objectives, implementation and enforcement in regulatory regimes may imply additional costs for foreign firms, particularly those from developing countries, desiring to enter global markets as they will need to satisfy regulatory norms in each country they operate in.
While the WTO includes some disciplines regarding regulatory policies, most notably in the area of mandatory product standards (SPS/TBT), most of the rules and mechanisms that determine how to collaborate on regulatory policies takes place outside the ambit of trade frameworks. In recent years however, innovative provisions and mechanisms to cooperate are increasingly integrated into modern deep integration agreements. While such cooperation might foster common standards or conformity assessment procedures that reduce transaction costs, some fear that the development of new standards in the context of such cooperation schemes might discriminate against third countries and non-parties and set the bar too high for poorer countries.
Taking into consideration this context, the objective of this dialogue is to analyse the role of trade agreements (particularly modern RTAs) in facilitating the various approaches to international regulatory cooperation and examine the tensions arising between RTAs and the multilateral trade system, and potentially amongst RTAs themselves.
On 29 March, ICTSD, with the support of the German Development Cooperation, organised a dialogue on “Ensuring Sustainability through Trade Agreements” under the RTA Exchange dialogue series aimed at systematically exploring possibilities for convergence and coherence-building between regional trade agreements (RTAs) and the multilateral trade system. Since the early 90’s and the negotiation of the North American Free Trade Agreement (NAFTA), several bilateral or regional trade agreements have incorporated explicit provisions related to sustainable development, ranging from specific conditionalities in unilateral preference schemes (e.g EU GSP +), to more comprehensive approaches in the context of reciprocal free trade agreements. Over time, as different models and practices emerged, such provisions have evolved and become more sophisticated in their scope and their approach. Today, RTAs include a wide variety of provisions going from innovative cooperation mechanisms; through provisions to address conflicts at the intersection of trade and sustainable development; to measures promoting compliance with international or domestic environmental and labour laws; or regulatory commitments to advance social or environmental objectives. In addition to providing enforceable disciplines that advanced sustainable development, these bilateral and regional agreements also acted as fertile ground for innovation and cooperation. Such developments contrast with the limited progress observed at the World Trade Organization (WTO) where most evolutions occurred through jurisprudence as opposed to new commitments or disciplines. As the international community moves towards the implementation of the newly agreed Sustainable Development Goals (SDGs), the treatment of sustainability concerns in bilateral and regional arrangements provides essential precedents and practical experiences from which lessons or best practices can be drawn to inform developments at the multilateral level, be it at the WTO or in other international arena.
The objective of this dialogue is to look at the experience of modern/deep integration RTAs in addressing sustainability concerns (e.g. through environmental and labor provisions) and what lessons can be drawn for the multilateral trade system, considering how different approaches could be multilateralised, or — more realistically — adapted to advance a multilateral discussion, highlighting opportunities and possible stumbling blocks. The dialogue opened with an overview of how sustainability concerns, including environmental and social concerns, have been addressed in modern RTAs, and reviewed the treatment of sustainability provisions under different approaches or families of agreements. The afternoon sessions considered the challenges and benefits resulting from the implementation of sustainability provisions in RTAs from a variety of sectoral perspectives, and explored prospects at the multilateral level to advance a constructive discussion on sustainability drawing from the experience of RTAs and suggesting possible ways forward.