Economic and Social Council at its 2003 Substantive Session
(Geneva, 18 July 2003)
Statement by Mrs. Brigita Schmögnerová, Executive Secretary
(Regional Cooperation: Development Dimensions of Trade Negotiations -
a UNECE Perspective)
Mr. Chairman, Excellencies, Ladies and Gentlemen,
Regional cooperation in the field of trade in the UNECE region is very advanced. It encompasses the EU and, on the Atlantic side, NAFTA, which includes the USA and Canada, UNECE member States. These trade arrangements have increased the prosperity of member countries, as well as their integration within the world economy. Enlargement of the EU next year to 25 countries not only means further progress in regional trade whereby a single market in Europe will expand to 450 million people but is also an act of global strategic importance as it will increase prosperity and security in Europe.
Our discussion topic today is timely as multilateral trade negotiations are at the centre of the international debate in the light of the preparations for the forthcoming Fifth WTO Ministerial Meeting, and also as the non-EU accession countries are considering closer trade arrangements among themselves and with the European Union.
The process of WTO accession concerns many of the countries in the UNECE region. Our regional commission has a practical role to play in helping transition economies to make progress in transforming their economies and comply with the WTO accession requirements. Mr. Chairman, as you know, UNECE does not have a mandate in trade policies but has a recognized expertise in trade facilitation. Participants in the second International Forum on Trade Facilitation organized recently by UNECE in cooperation with other international organizations agreed that, whether or not a decision on modalities of negotiations in trade facilitation is taken in Cancun, transition and developing countries urgently need technical assistance and capacity building if the benefits of trade facilitation are to be spread more fairly. In some instances this is already happening, particularly through public/private partnerships.
Accession to the WTO is currently a major concern for several of our member States. Almost all the countries in South-East Europe are members of the WTO - except for Bosnia and Herzegovina, and Serbia and Montenegro, both of which are in the process of accession.
Among the countries of the former Soviet Union, Armenia, Georgia, Kyrgyzstan and the Republic of Moldova are members of the WTO. The larger countries - Kazakhstan, the Russian Federation and Ukraine - are in the process of accession, as are Azerbaijan, Belarus and Uzbekistan. Tajikistan has begun the process. Only Turkmenistan remains to take a decision about joining.
The accession process is demanding and time consuming. While in general the challenge for those countries seeking accession is to strengthen broad market-based institutions, there are pressing issues that are more specific to the countries in the UNECE region. I would like to mention three in particular:
Firstly: The formerly centrally planned economies had virtually no market for goods and services and the regulatory structure was underdeveloped. To modernize their economies and eventually join the WTO, these countries must strengthen competition and develop an efficient market infrastructure.
Secondly: None of the UNECE transition economies in the process of WTO accession has ever benefited from the status of developing country - despite the fact that some of them have a very low GDP per capita and a large proportion of their population live in poverty. This makes the process of their WTO accession politically more difficult as negative consequences might - in the short term - deteriorate their economic and social situation. The governments therefore primarily have to sell to the electorate the longer-term benefits of WTO accession, such as improved access to foreign markets, improved attractiveness to FDI, external pressure on domestic producers to improve their competitiveness, and benefits to consumers and importers arising from lower tariffs.
Thirdly: In general WTO accession is considered to be an engine for reforms and an accelerator of transformation. In order to mitigate short-term negative consequences of WTO accession, the Governments must adjust the speed of accession accordingly and negotiate transition periods. On the other side excessive concentration on concessions, including protection of the interests of a few business groups in less competitive sectors, is costly as benefits from accession are postponed or not shared by the major part of the population.
Making progress towards WTO accession is consistent with the development of bilateral Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs) in South-eastern Europe and particularly in the CIS. As already indicated, WTO accession drives the progress in reforms. Convergence in reforms is needed if bilateral FTAs and RTAs are to be effective. So far despite the fact that nearly all CIS countries have signed bilateral FTAs and many RTAs have been concluded among the CIS members, implementation of trade agreements is poor. It is marked by the introduction of new trade bans, export restrictions, and non-tariff measures. In addition, FTAs and RTAs often cover less than 60% of trade and import tariffs for the rest of the goods remain high. The process of WTO accession will speed up the process of concluding RTAs and the efficacy of RTAs through codifying import liberalization into the legislation of the applicant countries. One of the recent initiatives in the CIS region was towards creating a "joint economic space" among four countries: Russia, Ukraine, Belarus and Kazakhstan. The four countries intend to coordinate their economic policies and legislative environments and liberalize tariff and non-tariff barriers. As all the contracting parties wish to be WTO members, the RTA has to be compatible with WTO principles.
Divergence in WTO accession is often an additional barrier to the functioning of RTAs. When the Kyrgyz Republic recently, as a new WTO member, agreed to implement low tariff regulation, the other member of the Euro-Asian Union (EAU) - another RTA in the CIS region - immediately reacted by imposing protective measures on imports from Kyrgyzstan. Some cooperation among the WTO applicant countries in the CIS and particularly those which have concluded RTAs among themselves will increase the positive results of the agreements, to say nothing of the benefits in the negotiation process that include increased negotiating power of applicants. Nevertheless as in the case of FTAs there is no obligation to apply harmonised external tariffs that they can negotiate separately. So far the CIS countries have decided to negotiate membership independently so that there is no, or a very limited, coordinated approach in the WTO negotiations.
Mr. Chairman, in May 2004, ten more countries will join the Union: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Bulgaria and Romania are expected to join in 2007 and Turkey's situation will be reviewed at the end of next year.
Recently, Croatia applied for EU membership and some other countries, especially in South-eastern Europe, are also considering doing so. At the same time, the European Union has developed bilateral relations through Association Agreements with its Eastern European partners, Partnership and Cooperation Agreements (PCAs) with the CIS, and finally Stabilisation and Association Agreements with its partners in South-eastern Europe.
The implications of EU enlargement for those countries in the region which, for the present, will remain outside depends to a large extent on whether they benefit from a trade-creating effect or suffer from trade diversion. The general view is that if enlargement boosts economic performance in the EU as a whole, and especially if it increases the rate of economic growth in the acceding Eastern European countries, it will have an expansionary impact on imports from the non-acceding countries, and therefore on their gross domestic product. The extent of that impact will depend on the strength of the boost to European economic performance, the share of the non-acceding countries in total EU imports and on the ability of those countries to respond to increased demand.
Overall, the EU common external tariff is generally lower than the individual tariffs of the accession countries. Specifically, the average tariff levels in Poland and Hungary (the two largest economies to join the EU in 2004) will fall significantly. Tariffs on agricultural products will fall in Hungary from 31 per cent to 16.2 per cent and in Poland from 34 per cent also to 16.2 per cent. With regard to fisheries, most of the accession countries will have to raise their market access tariffs on joining the EU, although both Poland and Hungary will have to reduce them.
Existing bilateral preferential trade arrangements between acceding EU member States and non-acceding countries will have to be terminated. These include Ukraine's agreements with Estonia, Latvia and Lithuania, and Hungary's agreement with Serbia and Montenegro.
EU enlargement will in a number of cases also disrupt cross-border trade as a result of the introduction of the new EU visa regime, for example that between Poland and Ukraine, between the Kaliningrad province and Lithuania and Poland, between Belarus and Poland, as well as between Russia and Estonia, Latvia and Lithuania.
The above implications of EU enlargement should not have negative consequences for the non-acceding countries. Negotiations are continuing between the EU and Russia regarding the Common European Economic Space, the new model of cooperation between the EU enlarged and the Russian Federation. The EC recently defined its new neighbourhood policy in the project of a "Wider Europe" that includes new neighbours in Eastern Europe and the Mediterranean. Both approaches aim to avoid new divides in the UNECE region and may serve as a major instrument of further integration within the European region aimed at supporting stability and long-term economic growth for all the countries concerned.
To focus attention on the opportunities that enlargement brings, UNECE has launched a "wider Europe" programme consisting of sectoral workshops on energy, trade, transport and environment. Each workshop explores the future shape and direction of economic integration in the region over the next 10 years, providing an opportunity for member States, the business community, civil society and academic and research institutions to come together to look "beyond enlargement" and assess how economic cooperation could be strengthened in an enlarged Europe, Caucasus and Central Asia included.
Mr. Chairman, I have just outlined the implications of the most important ongoing trade negotiations on the development of the UNECE region. Before I conclude, I would like to share some thoughts on how important I believe it is to ensure that these different negotiations are well coordinated.
The simultaneous negotiation of trade agreements at the bilateral and plurilateral levels by countries with emerging market economies poses a number of challenges. As already highlighted it is important to ensure that commitments taken at different levels are mutually supportive, coherent and non-contradictory.
Secondly, more dynamic interaction is required between the private and the public sector in many emerging market economies in the UNECE region.
Third and perhaps more fundamental is capacity building. The simultaneous negotiation of different agreements has often meant that scarce human resources in the public service were spread even more thinly, sometimes preventing participating countries from securing their major interests.
To the extent that resources are available, UNECE will assist its member States in meeting these challenges and try to ensure that all the countries of the region enjoy the full benefits of integration within the international trading system.