New institutions for transatlantic trade?

International Affairs

Volumn 75, Issue 1, 1999, Pages 45-60

  Hindley, Brian ^a  

^a NONE

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EID: 0040113141     PISSN: 00205850     EISSN: None     Source Type: Journal    
DOI: 10.1111/1468-2346.00059     Document Type: Review

References (11)

1. According to Douglas Hurd, in a speech to the Economic Club of Chicago on 18 May 1995 (when he was foreign secretary), a TAFTA was first proposed in October 1994, by Roy MacLaren, then Canadian trade minister. This Canadian heritage creates a linguistic problem: almost all succeeding discussion of TAFTA has focused on the EU and the US, not on NAFTA or Canada. I shall follow that practice here, but without taking any position on the relationship of Canada to any EU-US arrangement.
2. For example, in a speech reported in the Financial Times, 20 April 1995.
3. For example, in a speech reported in the Financial Times, 7 July 1995.
4. 'Effectively' because the French government did not veto the document itself, but rather vetoed its presence on the agenda of then forthcoming EU-US talks (18 May 1998).
5. Some ot the subjects proposed for discussion and possible action in the Draft Action Plan are multilateral in scope (for example: dispute settlement; implementation of WTO agreement; services; agriculture; industrial tarifts; technical barriers to trade; investment; competition; public procurement; trade and environment; electronic commerce; core labour standards - an item that might alarm developing countries; and corruption). Others are bilateral (for example, cooperation between EU and US regulatory authorities; mutual recognition agreements of various kinds; public procurement; intellectual property; food safety, plant and animal health and biotechnology; and competition law procedures).
6. Participants in either a customs union or an FTA remove tariffs on trade between themselves. Members of a customs union also harmonize their tariffs on imports from non-participants. Members of an FTA maintain their own tariffs on imports from outside the FTA. That members of an FTA have different tariffs makes 'rules of origin' a central issue in the negotiation of FTAs. The rules of origin determine whether goods crossing internal borders (e.g. from Canada to the US in NAFTA) are deemed to have origin in the partner country, and so to be entitled to duty-free entry; or to have origin outside the FTA and so to be subject to duty. Without rules of origin - and customs posts at internal borders to enforce them - goods will be imported into an FTA through the member with the lowest duty, and the FTA will become a de facto customs union, with tariffs harmonized at the lowest race charged among the partners. A country can be a member of several FTAs. The US, for example, has an FTA with Israel and is also a member of NAFTA, even though its NAFTA partners have no free trade agreement with Israel. Goods imported into the US duty-free under the rules of NAFTA will not typically meet the rules of origin applying in the US-Israel FTA. Goods having origin in Mexico or Canada, therefore, will not be able to enter Israel duty-free via the US. An individual member of a customs union, however, cannot belong to another customs union or FTA. Britain, for example, could not remain a member of the EU and also join NAFTA.
7. For example, by Sir Leon Brittan (28 April 1995), by Mats Hellström, the Swedish minister of trade (3 May 1995) and by Warren Christopher, the US Secretary of State (3 June 1995). Dates are Financial Times reports of speeches.
8. In spite of the fact that the meaning of 'substantially all' trade has been eroded over the years - in large part as a consequence of the preferential trading arrangements of the EU with neighbouring non-member countries, which, in the view of many observers, have not covered a fraction of trade that could reasonably be described as 'substantially all'. A Uruguay Round 'Understanding on the Interpretation of Article XXIV merely 'recognised' that 'the contribution to the expansion of world trade that may be made by closer economic integration . . . is increased if the elimination between the constituent territories of duties and other restrictive regulations ot commerce extends to all trade, and diminished if any major sector of trade is excluded.'
9. The importance of agriculture to the US is indicated by figures reported by Jeffrey Schott, who comments that 'The total elimination of tariffs on bilateral trade, after the full implementation of the Uruguay Round cuts, would increase US exports to the EU by 10.8 per cent, and EU exports to the US by 6.3 per cent. However, if agricultural commodities are excluded from the cuts, the trade growth slims to 4.1 per cent and 4.4 per cent respectively. In other words, increased agricultural exports represent about 65 per cent of the expected US export gains from the elimination of tariffs on transatlantic trade and 34 per cent of increased EU exports': Reflections on TAFTA (Washington DC: Institute for International Economics, 1995).
10. Baldwin and Francois have studied the effects of preferential trade liberalization by the North Atlantic economies.They conclude (a) that 'narrow' bilateral agreements would have little discernible impact on national incomes in the two regions; (b) that a 'deeper' bilateral trade agreement would generate modest increases in income and wages for both regions, but at the cost of welfare losses for North Africa and the Middle East; and (c) that the economic benefits arising from such bilateral preferential trade liberalizations would be swamped by the gains from comparable multilateral liberalizations. See R. E. Baldwin and J. F. Francois, Preferential trade liberalization in the North Atlantic, discussion paper no. 1611 (London: Centre for Economic Policy Research, March 1997).
11. See e.g. Jagdish Bhagwati, 'Regionalism and multilateralism: an overview', in Jaime de Melo and Arvind Panagariya, eds, New dimensions in regional integration (Cambridge: Cambridge University Press, 1993), pp. 22-51.