REFLECTIONS ON ROMANIA'S TRADE WITH CANADA AS MEMBER OF NAFTA

Transcription

1 REFLECTIONS ON ROMANIA'S TRADE WITH CANADA AS MEMBER OF NAFTA PAUL BOGDAN ZAMFIR LECTURER Ph.D. CONSTANTIN BRÂNCUŞI UNIVERSITY OF TÂRGU-JIU, ROMANIA Abstract This paper argues that The Comprehensive Economic and Trade Agreement Canada - EU (CETA) is the element of maximum visibility for the current legal framework of bilateral trade relations between Romania and Canada. Among other things, the agreement seeks to bring about a better harmonization of trade regulations and rules a greater mobility of people, better access to the public procurement market and higher protection of intellectual property and foreign direct investment. This feature will be particularly valuable insofar as it reflects a new reality in international trade. More than ever, Canadian and European enterprises are developing economic collaborations in producing goods and services within the global supply chains. Also, there is an increasing demand for the business community to create an environment where companies can connect faster and more effective with their foreign partners. Overall, CETA allows faster and less costly to the Canadian and EU markets for exporting companies, by introducing of specific measures reducing technical barriers on trade and enhancing the cooperation in the field of regulatory. This aspect is reflected by cost savings and gains of efficiency for both parties of the CETA. On this background, it can be noticed that CETA brings new opportunities for enterprises established in the territory of each of the two Parties. In addition to these legal issues which are found in the scientific content of the paper it is evidenced from an economic perspective the overall evolution of Romania's trade relations with NAFTA and especially with Canada as a member state of this organization in the last ten years. Also in this context, it is suggested the idea that the intensification of the bilateral trade between Romania and Canada, can contribute substantially to the creation of mutual welfare thanks to liberalizing the exports and imports of industrial goods with high added value. Keywords: The Comprehensive Economic and Trade Agreement Canada - EU (CETA); North American Free Trade Agreement (NAFTA); bilateral trade; trade in goods; romanian exporters. Classification JEL: O24, F14, F19, F23, F31 1. Introduction In economic literature international trade is rightly appreciated as a major factor in the economic development of a country. In these conditions international trade relations is an essential vector in the field of economic cooperation between states who participate to the world economic circuit which consists in a permanent exchange of material and spiritual values. [4] Given these theoretical considerations expressed in the literature landscape there are a variety of factors that determines the general importance of Romania's international trade with Canada, among which: the quality member of NAFTA, status of developed country, as well as cultural, political valences. Relative to the regulatory framework of the Romanian-Canadian trade relations, it should be mentioned that it is mainly governed by the provisions of the CETA agreement. So, according to some recent economic studies representative for the analyzed issue, CETA is rightly considered as being the most ambitious free trade agreement and this for two economic reasons. [2] Thus, the first reason is given by its magnitude. From this perspective, the agreement provides for Romanian companies a privileged access to a market of over 36 million Canadian consumers, with high purchasing power. Romania as a member country of the EU benefits of preferential access to one of the most representative markets in North America. 90

2 The second argument refers to CETA quality, as a second-generation free trade agreement, which implies, in addition to reducing the direct barriers such as customs duties and quotas and the removal of indirect barriers that harm economic cooperation between the two regions. 2. CETA - key element in the legal framework of bilateral trade relations between Romania and Canada First of all, it is important to emphasize that CETA, entried into force at is an agreement by which the parties - Canada and the European Union - abolish over 97% of customs duties and non-tariff barriers to the bilateral trade.[10] Under these circumstances, this agreement creates new and far-reaching opportunities for both European states and Canada, opens new markets for exporters generates high quality jobs and strengthens economic relations between Canada and EU Member States. Therefore, Romania benefits from the elimination of tariffs for almost all of its exports, in particular: electrical equipment and machinery, ships and craft, furniture, grain, rubber and rubber products. Moreover, CETA improves and ensures access for Romanian companies to the Canadian service market. For example, in the professional services sector, Canada has eliminated a number of limitations on the conditions of citizenship and residence, in order that Romanian specialists to work in Canada, namely: lawyers, accountants, architects and engineers. [6] Thanks to CETA, Romanian companies will have access to Canada's large public procurement market. In these circumstances, Romanian companies have the opportunity to submit offers for the supply of goods and services, for public auctions at all administrative levels in Canada (federal, provincial and municipal). In another train of thoughts, the agreement brings the efficacy so much expected of the business community of the two countries acting in particular on the barriers so-called behind the borders. [3] These are some of the most common issues that companies raise, invoking differences of regulation justified by multiple reasons, but which are sources of real interventions in the trade in goods and services. In addition, among the most favored economic sectors by CETA are pharmaceutical, agri-food and automobile industries. Last but not least, through the protection regulation of intellectual property rights, conjugated to an almost complete elimination of trade barriers, will contribute significantly to growth of bilateral trade relations and mutual investment in the benefit of all EU participating States at CETA agreement, including Romania. [1] Finally, it can be said that in the case of Romania, as an EU member state in the field of economic relations with Canada the main advantages of applying the provisions of CETA, are focused on: the possibility of attracting much more consistent foreign investments, the opportunity to increase exports to Canada and the liberalization of employment and people movement by visa abolition. 3. Some consideration about Romania's trade in goods with NAFTA in the last ten years In this section, taking into account the quality of Canada as member state of North American Free Trade Agreement (NAFTA) are required some remarks about this free trade area from North America. Also, it is well known among specialists in international trade, that the NAFTA, is a trilateral trade bloc composed of USA, Mexico and Canada, which came into force in Further, after what was shown the structure of NAFTA that is the biggest and most representative economic actor, on the North American continent, becomes absolutely necessary to present in statistical terms in the following sequences which has been the overall evolution of Romania's international trade with this regional free trade area.thus, in the analyzed period , NAFTA was for Romania the most important trade partner from North America. Thus, the statistical data provided by the National Institute of Statistics (NIS) indicates that the total value 91

3 volume of Romanian foreign trade with NAFTA has registered 2340 million euros in 2008, reaching the maximum level of 2799 million euros in Also, for having an overview of the way in which it has unfolded Romania's international trade in goods with NAFTA, in the period, is presented further the evolution of export, import and trade balance. Moreover, it is obvious that the general evolution of bilateral trade between Romania and NAFTA countries in terms of value it has been preponderantly positive, excepting the period when it was slightly negative, as it can be seen in Table No.1. Table No. 1. Dynamics of trade in goods between Romania and NAFTA -million euros- Anii Total Export (FOB) Import (CIF) Sold The analysis of Romania's export to NAFTA from statistical data presented in Table No.1, allows highlighting certain significant aspects. In this context, it appears that value of Romanian exports to the NAFTA has generally known a positive trend during , so that in 2014 has reached at maximum level of 1621 million euros. Per a contrario, from analyzed period it is noted that the minimum value level of 511 million euros has been registered in Relative to Romanian imports from NAFTA states, it can be observed that in the reference period the trend is non-linear showing an uneven evolution. Thus, it is important to underline that the minimum level of imports was 817 million euros in [7] In addition, in the analyzed period can be noted that in 2008 when Romania's imports from NAFTA reached at maximum level of 1415 million euros, as it can be seen in the Figure No.1. Figure No.1. The evolution of trade in goods between Romania and NAFTA, - million euros - 92

4 In another order of ideas, it should be mentioned that the trade balance of Romania on relation with NAFTA was negative during with values between million euros in 2008, to -56 million euros in Per a contrario, the same indicator in the period was positive, the value level of exports being higher than Romanian imports from NAFTA. Even from this brief analysis of export, import and trade balance of Romania during in relation with NAFTA it follows that it is necessary to focus efforts and concerns in the direction of increasing Romanian exports on the market of NAFTA countries, so as to obtain a trade surplus on the medium and long term. In terms of maintaining the positive sold of Romanian trade balance in relation with NAFTA, it is necessary a significant change regarding the orientation of Romania's export production from area of goods with low level of processing to products with high added value. Therefore, in order to be competitive, Romanian exporters should be very well prepared in achieving high quality standards of products in order to face the fierce competition on NAFTA market. Also, Romanian exporters should continually improve the offer both in terms of quality and diversity. 4. An overview on the evolution of trade in goods between Romania and Canada It is a truism that in the analyzed period, Canada represented a very important market for Romanian exports and imports of goods from the North American region. On this background, it is necessary to emphasize that Canada is the second trade partner for Romania in the foreign trade in goods of Romania with the NAFTA States. [5] At the same time, it is obvious that the general evolution of Romania's total trade in goods with Canada has been oscillating with upsides and downsides variations over the analized period, as shown in Table No. 2. Tabel No. 2. Dynamics of trade in goods between Romania and Canada - million euros Total Export (FOB) Import (CIF) Sold In this regard the dynamics of international trade in goods of Romania with Canada it is a significant increase from 238 million euros in 2008, to 308 million euros, in 2017, an increase in absolute value of 70 million euros, respectively with approximate 29%. In addition, relative to exports, it can be observed a significant increase from 45 million euros in euro 2008, to 194 million euros in 2017, namely increased by 3.31 times compared to the level reached in 2008 or in percentage terms of 331%. Under the aspect of imports there is also a decrease during, from 193 million euros in 2008, to 114 million euros in 2017, respectively with 41%. Also, in the analyzed period, it is noticeable that in 2014 the level value of Romanian imports has known the largest decrease, when was reached of 57 million euros. Per a contrario, the highest level of Romanian imports from Canada was reported in 2008 in value expression of 193 million euros, compared with the volume value of 114 million euros, in For having an overview of 93

5 how was conducted Romania's foreign trade with Canada during, is presented the evolution of bilateral trade between Romania and Canada in terms of exports, imports and trade balance, in the figure below. Figure No. 2. The evolution of trade in goods of Romania with Canada -million euros- Moreover, it can be seen that in the reference period, the trade deficit of Romania in relation with Canada, calculated as the difference between exports (FOB) and imports (CIF), in general registered with significant variations in the analyzed time interval. In these circumstances, the deficit of trade balance in was known significant variations. Thus, in the first 3 years of the analyzed period starting from 2008 to 2010 the trade balance had negative values from -148 million in 2008 to -8 million in In contrast to the negative values recorded in the period it can be noted that in the time interval , the balance of Romania's trade with Canada was completely positive, with values between 28 million euros in 2011, respectively of EUR 80 million in 2017, as it can be seen in Figure No. 2. Another relevant element in the dynamics of the Romanian foreign trade with NAFTA in the analyzed period, respectively, is the share of Canada in total exports of Romania towards this economic area of North America which registered insignificant movements in the percentage share of around 10%. Meanwhile, it is worth mentioning that Romanian exports oriented in direction of Canadian market had a general tendency of increase from 4,9% in 2008 to 13,2% in In addition, it should be emphasized that the lowest level of 4,3% was in 2009, as it can be seen from Table No.3. Tabel No. 3. The share of Canada in Romania's foreign trade in goods with NAFTA % Total 10,2 7,8 13,2 11,2 7,4 9,5 7,9 6,3 8,6 11 Export 4,9 4, ,3 8,9 8,8 9,5 5,8 8,6 13,2 Import 13, ,3 10,4 5,9 10,6 5,3 7 8,7 8,6 94

6 Thus, regarding the share of Canada in total imports of Romania from NAFTA between 2008 and 2017 it is important to see that the percentage evolution is relatively similar to that registered in the total exports of goods, so as it can be noticed here a strong polarization around of 9%, with modest variations from year to year. Moreover, it is remarkable that the maximum share of 11,3% of the reference interval is reached in 2010, and the minimum 5,3% corresponding to the year 2011, as it results in the figure below. Figure No. 3. The share of Canada in Romania's international trade in goods with NAFTA, % Also, related to the share of Canada in total trade of Romania with NAFTA it can be observed, that in the analyzed period it was around 9,3 percentage points. Under the aspect of Canada share in the Romanian foreign trade with NAFTA states from the series of statistical data published by INSSE is unequivocally clear that in 2017 this north american country was the second trade partener after USA, who held the leading position. However, if we refer to Romanian exports to NAFTA, it can be seen that Canada is also the second trading partner, while USA is leading in this matter. Regarding Romanian import from NAFTA countries Canada is ranked on third place with a percentage of 8,6 as it results from Table No. 4. Tabel No. 4. The rank of Canada in Romania's trade in goods with NAFTA states in million euros- Total Export Import NAFTA USA Canada Mexic Thus, in terms of the structure of Romania's exports to Canada there is a broad range of goods, among which can be distinguished the following groups of products such as: textiles, footwear, metals and metal products, electric machinery and equipment vehicles, plastics, rubber (tire), various products (furniture), food, drinks (wines). [8] 95

7 Further, it must be pointed out that although at export is highlighted a trend of enhancement of products with high added value, however generally Romanian imports from Canada consists in goods with a higher degree of processing and a high-technology level who have a superior economic value compared to those exported by our country on Canada market. On the other hand, referring to the structure of Romanian imports from Canada, as it results from the statistical data provided by INSSE for the analyzed period respectively it is highlighted the following groups of products: boilers, turbines, engines, mechanical devices and devices and parts thereof, products of the chemical and related industries (mainly pharmaceutical products), electric machines, appliances and equipment, common metals and metallic articles, automobiles, tractors and other terrestrial vehicles, optical, photographic, cinematographic, medical and surgical instruments and similar apparatus, wool and woolen fabrics. 5. Conclusions Starting from the arguments formulated in the context of the analyzed theme it becomes obvious that Canada represents a prosperous, demanding and highly sophisticated market which offer significant opportunities for Romanian exporters. Therefore, given the fierce competition and the attractiveness of this market, Romanian exporters must provide performance and innovative products, or be able to remove the other existing competitors with more generouse offers in terms of design, quality, price or service. In these circumstances, it is vital for Romanian foreign trade operators to know the consumer trends in their products, to gain access to the market and maintain its competitive edge on long-term. Having a developed economy but with a population of about ten times lower than the US, the Canadian market is more affordable for new exporters, including Romanians who are trying to get into the North American market for the first time. On this background for exporting companies is preferable to place on this privileged set of coordinates, since commercial orders are generally lower, there are fewer and more focused sales markets. The experience gained on the Canadian market will be useful, especially if the exporter targets if the exporters aim the entire North American Free Trade Area which includes also the other member states, namely US and Mexico. Moreover, it is well known that the Canadian market is extremely competitive, so that exporters must be aware that when they didn't acomplish their own obligations, this will inevitably lead to redirect buyers to another vendors, which act in this economic space. Finally, should be added that it is necessary for Romanian exporters to participate actively at specialized fairs, exhibitions, and hypermarkets of Canada in order to familiarize with the consumption needs manifested on this market. 4. Bibliography [1] Borta, L., CETA - bilateral trade agreement between the EU and Canada, CES Working Papers Volume VI, Issue 1, Iași, 2014; [2] Kohler P, Storm S., CETA Without Blinders: How Cutting Trade Costs and More Will Cause Unemployment, Inequality and Welfare Losses, GDAE Working Paper No. 16/2016; [3] Rodrik, D., TTIP and the war of trade models. Social Europe May 6. Available at: [4] Pawlas I. M., The evaluation of trade relations between Poland and Germany from 2003 to 2012, Journal of International Scientific Publications, Volume 8,/2014; [5] Sută N., Sută-Selejan S., Comerț internațional și politici comerciale contemporane, vol. I, Ediția a-xii-a, Editura Economică, București, 2003; 96

8 [6] Comisia Europeană, Acordul economic și comercial cuprinzător UE-Canada (CETA). Deschiderea unei mulțimi de oportunități pentru cetățenii din România, 2017/ [7] *** INSSE, Anuarul de Comerț Internațional al României, Edițiile ; [8] *** [9] *** [10] *** 97