Assessing Quality and Impacts of Major Free Trade Agreements

The presentation made in this session covered the issues noted below. The presentation verified and assessed the quality of free trade agreements (FTAs) from empirical and institutional approaches with a focus on liberalization of trade in services.

How can free trade agreements for trade in services be given a common structure and content in order to encourage non-members to join such agreements?

What happens when members of GATS make pledges in agreements that exceed what is contained in GATS?

What impact can the desirable agreement indicated here have on regional trade in services?

Professor Findlay addressed the subject of "Services in Free Trade Agreements" and made the following points.

In a wide-ranging approach, which contains provisions concerning commitment lists, adoption of classification schemes for individual sectors, sectoral and horizontal interaction of commitments, and treatment of investment, it is more difficult for the benefits to extend to non-members. The stage of liberalization is not frequently indicated in a GATS-type agreement, while it is indicated in NAFTA-type negative-list agreements.

Agreements that have adopted a NAFTA-type approach are more likely to take a liberal stance on trade in services. However, because agreements are affected by vertical or specific commitments, sectoral exclusions reduce the benefits, regardless of the type of agreement.

The features of agreements on liberalization of trade in services differ according to the countries involved. The level of liberalization is lowest in regional agreements among developing countries. It is interesting that the level of liberalization in agreements between developed and developing countries is relatively high, even in comparison to agreements among developed countries. However, because of relatively extensive sectoral exclusions, this does not always have an important impact on the agreement.

In general, the regional level of liberalization of trade in services is lower when the range of sectors included is narrow, or when some sectors are excluded.

Professor Kimura responded to the Findlay Presentation with the following comments.

Is liberalization in trade in services accelerated by straightforward FTA negotiations? The following points relating to the nature of bargaining require further analysis: different forms of asymmetry as compared to trade in goods; what country other than the United States has an offensive agenda in trade in services; and, the relation to domestic policies.

In evaluating FTAs, shouldn't the same kind of analysis of the discriminatory characteristics of trade in goods be applied to trade in services? Conversely, it is necessary to verify whether this is important for trade in services.

GATT does define nationality, but the definition is very ambiguous. However, GATS does not define what constitutes a foreigner. Conceptually, it appears that there is a difference between the concepts of nationality in FTAs and in GATS.

The following responses were given to the above comments.

It is necessary to carefully consider what is being negotiated in negotiations on trade in services. Asymmetries will arise depending on the interests of the counterparties.

In the liberalization of trade in services, domestic politics and the question of who wields influence are important. Protected industries will suffer, but overall, liberalization will create net benefits.

The following questions were received from the floor.

When rules of origin are created for services, will these be complicated and strict rules, or will they be uncomplicated and straightforward?

Is it necessary to create a new type of service trade regime? In the case of regional agreements, as opposed to bilateral agreements, will infrastructure investment promote greater regional integration and give rise to different types of services?

It was commented that developed countries have a stronger interest in liberalization of trade in services, while developing countries tend not to have a very strong interest. But wouldn't the results be different in the case of the mobility of persons under Mode 4?

The following responses were given to these questions.

Will rules of origin be liberalizing, or will they be complicating? The answer will differ from case to case. If the current investment diversion continues to grow, rules of origin may be used increasingly for strategic purposes. Conversely, strategic purposes will not be viable.

Developing countries also have strong offensive interests in liberalization of trade in services. However, these were not seen in the agreements studies. This point was not emphasized in the analysis, but may be important for a number of FTAs.