Assessing Quality and Impacts of Major Free Trade Agreements

The presentation made in this session covered the issues noted below. The presentation provided a comparative analysis of safeguard mechanisms in 12 bilateral and regional FTAs.

What are the salient characteristics and structures of safeguards under GATT and WTO?

What differences exist in the characteristics of international safeguards (GATT and WTO) and bilateral and regional safeguards (FTAs)?

In the 12 FTAs examined, which safeguards are protectionist and which are not protectionist.

Professor Kotera addressed the subject of "On the Comparison of Safeguard Mechanisms of Free Trade Agreements" and made the following points.

FTA safeguard mechanisms can be categorized as follows in descending order of liberalization: (1) FTAs with no safeguard provisions, (2) WTO type, (3) NAFTA type, (4) GATT type, (5) European type.

The Korea-Chile FTA has no safeguard provisions, but does have some extremely mild safeguards for agricultural products. Hence, the Korea-Chile FTA perhaps can be ranked between category (4) and (5).

Safeguard mechanisms function as a safety valve in liberalization. That is, moderate safeguards can facilitate greater liberalization of trade in goods. In this sense, to understand the true significance of safeguards, it may be necessary to quantify and to assign weights to all trade in goods.

When assigning weights, the problem is how to assign weights to safeguard ratios in the liberalization of trade in all goods. When examining this problem, two points have to be considered. First, re-balancing measures should be available. Second, the imposition of safeguard measures must be restricted to an interim period. The availability of re-balancing measures implies that safeguards will not be imposed, and the restriction of safeguard measures to an interim period implies that they must be temporary, no matter how mild. In other words, from the perspective of liberalization of trade in goods, this is a system that does not need to be considered too seriously.

Mr. Kobayashi responded to the Kotera Presentation with the following comments.

In bilateral safeguard negotiations, Japan has endeavored to institute imposition conditions and measures that are more rigorous and disciplined than the general WTO safeguard measures. For this reason, I agree with Professor Kotera's classification of placing Japan's EPAs under the WTO type.

In bilateral EPA safeguard negotiations, the Ministry of Economy, Trade and Industry prioritizes the inclusion of the following two points: (1) conditions for invoking bilateral safeguard measures should be based on the absolute increase in imports and other WTO-Plus rules; and, (2) domestic safeguards (unilateral raising of tariffs on products not subject to WTO safeguard measures due to non-concession) should be subject to bilateral EPA safeguard discipline.

More than five years have passed since the inception of the Japan-Singapore EPA, Japan's first EPA. We need to develop indicators for analyzing and re-evaluating the contents of the various EPAs that have been concluded. We eagerly look forward to the future results of Professor Kotera's research in the quantification of bilateral safeguard measures and comparative analysis.

The following comment was received in response to the above discussions.

It is very interesting that the government of Japan is currently focusing on domestic safeguards. This problem has hardly been discussed in the past. Domestic safeguards are an extremely important point in considering safeguard measures with developing countries.

The following questions were received from the floor.

When the United States imposes safeguard measures in NAFTA, it gives preferential treatment to its FTA partners by exempting them from these measures. While this may have an economic rationale, it is of dubious legal justification in the WTO framework.

The following response was given to the above question.

From an institutional perspective, WTO safeguards and FTA safeguards are different. In reality, there is a tendency to simultaneously impose both safeguards when faced with rapidly increasing imports. In such instances, the theoretical question is whether WTO safeguards can be imposed alone without invoking FTA safeguards. Where imports from FTA partners have been investigated in the investigative process for the imposition of safeguards but have been exempted from the actual imposition of safeguards, the WTO has judged that there has been a violation of the WTO treaty. Does the WTO treaty allow the imposition of just WTO safeguards where imports from FTA partners have been excluded from the investigative process? This is an interesting question to which I cannot give an immediate answer.