& International Trade

Transcription

1 International Trade Division Trade News Digest 25 th Issue Ministry of Foreign Affairs, Regional Integration & International Trade December 2014

2 What normalisation of trade relations between US and Cuba may imply for Mauritius? 30 December 2014 Trade Cuba is a predominantly service-led economy. Its main export earnings come from tourism (with 2.5 million tourists in 2010, nickel, (Cuba has the 4th largest global reserves), biotechnology and pharmaceuticals. Export of professional services, especially medical, has grown significantly in importance. Cuba s agricultural sector (accounting for around 5% of GDP) is particularly inefficient, and as a result up to 80% of food is imported. The sugar sector which constituted a major share in GDP has declined drastically over the past ten years. Production levels have slumped half. Cuba s dependence on imported food and oil leaves it vulnerable to rising world prices, fluctuations in commodity prices (particularly nickel) and the knock-on effects of economic downturns on tourism. Trade with Mauritius Trade with Cuba is negligible. Imports from Cuba experienced an increase of 43% from Products imported in Mauritius comprised only of cigars and other rum. Cuba shares some similarities with Mauritius, in terms of constraints faced by small island developing state. It is also considered as a net food importing country. It used to be a major sugar producing country. However due to unavailability of relevant technology and investment, the sugar sector has registered a substantial decline over the years. The Tourism sector is a key sector of the economy as is the case for Mauritius. Trade between USA and Cuba Cuba was a key supplier of sugar to the world prior to the trade embargo. Currently sugar production constitutes only 3% of total agricultural production. This is due to the poor infrastructure and lack of investment over the past years. Introduced in 1960, the US embargo of Cuba has hit the island economy hard over the decades. In its annual report to the United Nations on the subject Cuba in September estimated it lost $3.9bn in foreign trade in 2013 alone because of the embargo. But there is no doubt that a change in US policy would represent a huge economic opportunity for Cuba or that the potential looks alluring to plenty of businesses in the US. The possible opening of the Cuban economy could offer lucrative opportunities to further develop its sugar sector and exports to the US. 2

3 Effect of trade liberalization between US and Cuba on the Mauritius-US Trade Relations Current status of the Mauritius-US relations Mauritius exports to the US are dominated by textiles & apparel, sugar and tuna. Most of our preferences to the US are governed by the Africa Growth and Opportunity Act (AGOA) preferences. For sugar, there is a special arrangement under the World Trade Organization (WTO), whereby the US provides Tariff Rate Quotas for some 40 countries. Mauritius currently benefits from a quota of 12,600 tonnes on the US market. For the past two years, Mauritius exports to the US were around 5000 tonnes, amounting to USD 9 million. The aim of Mauritius is to capitalise on the quota and further expand exports on the US market, more so because our market share for sugar on the European Union is expected to decline with the abolition of the sugar quota in Obama s reviving diplomatic ties The move by US President Barack Obama and his Cuban counterpart, Raul Castro, to announce the tentative resumption of diplomatic relations is already prompting talk that the world s oldest trade embargo may be coming to an end. The trade embargo was enacted into law by Congress, and it can only be changed by Congress. Otherwise, the President is proposing lifting restrictions on (1) US citizens travel to Cuba, (2) financial transfers/banking with Cuba, and (3) certain categories of US exports to Cuba, but that does not affect US imports from Cuba, which are still banned. Therefore the diplomatic ties between the US and Cuba would not unleash a surge of imports and exports between the nations, given that Havana s restrictive policies still make it tough for foreign and national companies to do business in Cuba. Some components of the White House strategy will help U.S. agricultural producers, whose exports to Cuba are not covered by the embargo. Obama s changes lift restrictions on ships that travel between U.S. and Cuban ports and streamlines the process for exchanging money, allowing American exporters to more efficiently ship corn, soy, wheat, poultry and pork to Cuba. Sugar With the advent of the normalisation of diplomatic ties between the US and Cuba, there is the possibility that Cuba may increase its sugar exports on the US market. At present, it cannot be predicted when Congress will normalise trade relations with Cuba. However, the normalisation of diplomatic relations will increase the pressure to resolve the trade embargo as well. In essence it would imply that the US would most probably trade with Cuba on the same terms and conditions as it does with the rest of the world, i.e on 3

4 the basis of the Most Favoured Nation (MFN) principle of the WTO. There is a potential of USD 458, 641 thousand of Raw Sugar exports from Cuba to the US. The only duty-free access to the US market is via the WTO bound TRQ and FTAs. It would be permissible for the US to assign a share of the TRQ to Cuba in light of changed circumstances, but that would prompt a firestorm of opposition from the other quota holders. Another approach would be to establish a separate TRQ just for Cuba. Either way, more sugar entering the US market would depress the price of sugar and put additional stress on the US sugar program. The effect of a possible lifting of trade embargo on Mauritius-US ties It can be foreseen that an increase in supply of Cuban sugar to the US market in the aftermath of the lifting of the trade embargo may, in the long run, cause a decline in the price of sugar and affect Mauritius sugar proceeds from the US. Otherwise, Cuba s major export products are cigars and rum, which are not a threat as Mauritius exports a little rum to the US. On the other hand, it is likely that some sort of trade preference program will be created for Cuba once trade relations are normalized. Perhaps something like adding them to the Caribbean Basin Initiative (CBI) program is a possibility. In any case, apparel is always a candidate for development under such programs, so there is a risk of competition from Cuba in apparel. But on the other hand, Cuba would likely be at the lowest level of production, whereas Mauritius has succeeded in moving up market, so there may not be so much direct competition after all. So long as the US maintains its sugar policy to limit access for sugar to the 40 WTO member states, then the lifting of trade embargo will have a limited impact, if at all given that the volume of imports into the US would be restricted to the amount of the TRQ. However if as a positive gesture, the US decides to expand the TRQ to accommodate Cuba, then Mauritius may be negatively impacted. Source: ITD 4

5 WTO General Council approves Seychelles WTO membership, only ratification left 10 December 2014 WTO members adopted Seychelles WTO terms of entry at the General Council meeting on 10 December Seychelles will have until 1 June 2015 to ratify the deal to formally become a WTO member 30 days after it notifies the ratification to the WTO Director-General. The deal the Protocol on the Accession of the Republic of Seychelles was officially signed on the margins of the General Council by WTO Director-General Roberto Azevêdo and Seychelles Minister of Finance, Trade and Investment, Pierre Laporte, and is subject to domestic ratification by Seychelles Parliament. WTO members congratulated Seychelles while acknowledging that the accession process was long and challenging for a small island developing state like Seychelles. Seychelles accession to the WTO will strengthen the multilateral trading system and advance the WTO closer to the goal of trade universality, members stressed Seychelles originally applied for WTO membership in 1995 and the Working Party concluded the negotiations on 17 October The list of Seychelles commitments is available on the WTO s website. Source: WTO TRADE FACILITATION- Hong Kong, China first to ratify WTO s Trade Facilitation Agreement 10 December 2014 Hong Kong, China has become the first WTO member to formally ratify the WTO s new Trade Facilitation Agreement (TFA). Hong Kong officials informed the WTO s General Council on 10 December 2014 that the territory deposited its instrument of acceptance for the TFA Protocol with the WTO Secretariat on 8 December. 5

6 WTO Director-General Roberto Azevêdo congratulated Hong Kong, China for moving so quickly on ratification. "I hope that other members will gain inspiration from this and will soon be able to follow Hong Kong, China's lead," he added. WTO members concluded the TFA at their December 2013 ministerial conference in Bali, Indonesia. The Protocol of Amendment inserting the TFA into Annex 1A of the WTO Agreement was subsequently adopted by the General Council on 27 November. This in turn opened the door for Members to formally ratify the TFA through their domestic legislative procedures. The TFA will only enter into force once the Protocol has been ratified by two-thirds of the WTO's Membership. Mauritius is currently finalizing procedures to ratify the agreement. Source: WTO Initialling of EU Trade Agreement with Ecuador 12 December 2014 European Commissioner Cecilia Malmström and Minister for Foreign Trade of Ecuador Fransisco Rivadeneira met after the initialling of the protocol that will allow Ecuador to join its neighbours, Colombia and Peru, in a preferential trade relationship with the EU. "It's a great encouragement for me in my early days as EU Commissioner for trade to see this project coming to fruition. Ecuador has made economic progress over the last few years, reducing the poverty rate and making more and more European companies interested in investing in the country. I am convinced that our agreement will help Ecuador to consolidate and build on those achievements", said Commissioner Malmström, following the initialling of the Trade Agreement. The negotiators marked the completion of all the procedural steps as regards the protocol that will allow Ecuador enter into a privileged trade relationship with Europe. 6

7 "The negotiating process has been fast and smooth. The next challenge is to complete procedures such as ratification, and put this agreement in practice as soon as possible. I hope businesses will enjoy the results of this agreement already in 2016", Malmström said. At the meeting and at the press conference, Commissioner Malmström stressed that the new trade and investment framework needs to be complemented by solid and enforceable domestic policies, including on labour rights, human rights and environmental protection. Source: EUROPA TRADE WTO members discuss how to advance services negotiations for post-bali work programme 17 December 2014 WTO members discussed preliminary ideas on how to define a work programme by July 2015 for the services component of the Doha Round, in an informal meeting of the Council for Trade in Services on 17 December However, progress in this area will be determined by progress in agriculture and nonagricultural market access negotiations, members stressed. Negotiations on trade in services resumed on 17 December following the breakthrough achieved in the General Council on 27 November At this meeting, WTO members agreed to set July 2015 as the new deadline for agreeing a work programme for completing the Doha Round of negotiations as a whole. In his address to WTO members, Ambassador Duque of Colombia urged services negotiators to be "pragmatic" and to focus on what is "doable and realistic". He also requested that members refrain from repeating known positions. The purpose of this informal meeting was to hear WTO members' views on ways to advance the services negotiations in light of the decisions taken at the 2013 Bali Ministerial Conference and the General Council in November. 7

8 Delegations emphasized the importance of services in the post-bali work programme and expressed their commitment to engage in substantive discussions to meet the July 2015 deadline. Several delegations suggested an "outcome-based" approach to define the scope, goals and structure of the talks. This included a proposal to hold an informal debate to hear members' aspirations in the services negotiations. It was also suggested that work already undertaken on services could be used as a benchmark to resume negotiations. This work includes request and offer negotiations; the 2005 Recommendations of the Special Session of the Trade in Services Council (Annex C of the Hong Kong Ministerial Declaration); the 2008 Signalling Conference at which members indicated positive market access commitments across all major services sectors and modes of supply; the 2011 Chairman's report to the Trade Negotiations Committee. Several delegations repeated known positions, including the importance of: - achieving a balanced outcome with the other Doha Round negotiating pillars (agriculture and nonagricultural market access), with some members reiterating that agriculture should be treated primarily; - achieving balance within the services agenda, among sectors and modes as well as between market access and rule-making; - avoiding cherry-picking of issues and according equal treatment to all sectors and modes of supply; - placing the development dimension at the heart of the negotiations; - developing new approaches for members to submit their revised services market access offers; Some members reiterated their call for the services negotiations to take place at the multilateral level solely, in the context of the Services Council's special sessions. Chairperson Gabriel Duque will be consulting with WTO members in January A meeting of the Special Session of the Services Council could be held in February Source: WTO 8

9 EU-Japan FTA negotiations 08 December 2014 The 8th round of the EU-Japan FTA talks took place during the week of 8 December in Tokyo. The negotiators discussed, among others, tariffs, technical barriers to trade, access to public tenders, trade in services, rules on investment and protection of intellectual property, including geographical indications, animal and plant health and hygiene, regulatory cooperation, and transparency. Both sides advanced further in consolidating the negotiating texts. The EU presented its second list of non-tariff measures it wants Japan to tackle. The 9th round of negotiations will take place during the week of 23 February in Brussels. Source: EUROPA TRADE ******************************************************* 9