PERSONAL INTRODUCTION

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1 Forum: Economic and Social Council (ECOSOC) Topic: Assessing the consequences of Free Trade Agreements Student Officer: Aida Marinaki Position: President ATSMUN 2018 PERSONAL INTRODUCTION Dear Delegates, My name is Aida Marinaki and I am more than excited to be serving as the President of the Economic and Social Council in the 3 rd Arsakeia Tositseia Schools Model United Nations Conference. I took part in last year s Arsakeia Tositseia Schools MUN Conference as the President of the International Court of Justice and I feel honored that I am given the opportunity to serve as a Student Officer in this year s Conference as well. As an ardent MUNer who has participated in various MUN Conferences as a Student Officer and a Secretariat Officer, I view every time I coordinate the work of a Committee as a challenge and a privilege at the same time; as an opportunity to make the delegates of my assigned Committee understand the value of MUN Conferences and inspire them to continue participating in them. My role during the session will be to explain to you how the work in our Committee will be conducted, assist you, give you advice and guidelines and moderate the discussions that will take place to make sure that you all get involved and participate in them and the procedural rules are followed. Having chaired before I am confident that I will do my best to ensure that you will make the most out of your participation in the Conference. My advice to you is to do as much research as you can prior to the Conference. Preparation is the key for you to be able to contribute creatively and make the discussions fruitful, constructive and interesting. I hope that you find my study guide helpful. If you have any questions do not hesitate to contact me via . My address is ainta.marinaki@gmail.com I look forward to meeting you and cooperating with you! Regards, Aida Marinaki Page!1

2 TOPIC INTRODUCTION ATSMUN 2018 The purpose of a free-trade area is to cut down barriers to exchange so that commerce can develop as a consequence of specialization, division of labor and via comparative advantage. Inside an industrialized state there are commonly few if any important barriers to the effortless exchange of goods and services among parts of that country. There are normally no delays other than those that result from distance as goods are transmitted from one part of the country to another. This stems from the fact that trade within the country is facilitated since there usually are, for example, no trade tariffs or import quotas and no differences of regulation and taxation. On the other hand, numerous of these obstacles to the easy exchange of goods are often present between countries. It is commonplace for there to be import duties of one kind or another when goods are imported in a country and the levels of sales tax and regulation often diverge from country to country. States parties to a free trade area do not have a joint external tariff, which means that - unlike a customs union, which consists the third stage of economic integration - they have different customs taxes and quotas, as well as other policies with regard to non-members. To confront tariff evasion through re-exportation the states utilize the system of certification of origin most commonly known as rules of origin, where there is a requisite for the minimum extent of domestic transformations and local material placements increasing the value of the products. Goods that meet these minimum demands are eligible to the special treatment envisioned by the free trade area content. The relation between assorted FTAs as far as the rules of origin are concerned referred to as "cumulation". In some cases, different FTAs supplement each other, whereas sometimes other there is no crosscumulation between the FTAs. A free-trade area is an outcome t of a free-trade agreement between two or more states. Free-trade areas and agreements are interdependent and form the foundation for the establishment of further FTAs if some countries signatory to an agreements to form a free-trade area decide to negotiate together (either as a forum of individual members of their FTA or as a trade bloc) another free-trade agreement with another country (or countries), then the new FTA will be made up of the previous FTA with the addition of the new country or countries. DEFINITION OF KEY TERMS Free trade Free trade is the financial policy of not discriminating against imports from and exports to foreign jurisdictions - it is sometimes referred to as laissez-faire trade or trade liberalization.. It enables purchasers and sellers from distinct economies to trade voluntarily without the national government imposing tariffs, quotas, subsidies or prohibitions on their services and goods. Free trade is the opposite of economic isolationism or trade protectionism. Governments with free trade agreements (FTAs) do not necessarily abandon all control of taxation of imports and exports. Free trade agreements Page!2

3 ATSMUN 2018 A free trade agreement (FTA) is an agreement between two nations to cut custom tariffs down for import and export and increase commercial transactions between them. Examples of FTAs are the CETA, TTIP, the FTAA and the NAFTA. Such treaties among two or more countries establish a free trade area where trade of goods and services can be conducted across their common borders without tariffs or hindrances but (unlike as in a common market) capital or labor may not move freely. Member countries commonly introduce a uniform tariff, which is called common external tariff, on trade with non-member countries. Free trade area A group of states that have limited or no price regulations in the form of tariffs or quotas between one another is called a free trade area. Within the environment of a free trade area, the participating nations have the ability to concentrate on their comparative advantages and to produce the products at which they are comparatively more efficient and, therefore, the efficiency and profitability of each country are increased. In order to establish a free trade area agreeing nations must impose rules for how the new free trade area will function. Free trade areas are beneficial for consumers, who will see prices decrease as governments reduce or eliminate tariffs and have augmented access to less expensive and/or higher quality foreign products. Conversely, as production shifts to become more competent overall, workers in some countries and industries are likely to lose their jobs and producers may struggle due to the increased competition. Nonetheless, they may also acquire a greatly expanded market of potential customers. Free trade areas can promote financial progress in countries as a whole, benefiting everyone who resides there through increased living standards. The signing of the North American Free Trade Agreement (NAFTA) in January, 1994 created one of the most well-known and largest free trade areas. The states parties to it were Canada, the United States and Mexico and its purpose was to promote trade between these North American countries. The United States are signatory to 14 free trade areas with 20 countries as of the beginning of Comparative advantage According to the theory of comparative advantage, in an unrestricted marketplace each origin of manufacture will tend to specialize in that action where it has comparative rather than total advantage. The theory supports that the net consequence will be a growth of income and finally wealth and well-being for individuals in the free-trade area. The theory refers solely to aggregated wealth and does not address the distribution of wealth; in fact there may be significant financial losses, in particular among the lately secured industries with a comparative disadvantage. The general profit from trade can be used to counterbalance the effects of reduced trade barriers by appropriate inter-party transfers. BACKGROUND INFORMATION List of Operating Multilateral Free Trade Agreements Andean Community ASEAN Australia New Zealand Free Trade Area (AANZFTA) Page!3

4 ASEAN Free Trade Area (AFTA) ATSMUN 2018 Asia-Pacific Trade Agreement (APTA) Central American Integration System (SICA) Central European Free Trade Agreement (CEFTA) Commonwealth of Independent States Free Trade Area (CISFTA) Common Market for Eastern and Southern Africa (COMESA) G-3 Free Trade Agreement (G-3) Greater Arab Free Trade Area (GAFTA) Dominican Republic Central America Free Trade Agreement (DR-CAFTA) East African Community (EAC) European Economic Area (EEA; European Union Norway Iceland Liechtenstein) European Union Customs Union (EUCU; European Union Turkey Monaco San Marino Andorra) European Free Trade Association (EFTA) Gulf Cooperation Council (GCC) International Grains Agreement Comprising a Grains Trade Convention (GTC) and a Food Aid Convention (FAC) North American Free Trade Agreement (NAFTA) Pacific Alliance Free Trade Area (PAFTA) Regional Comprehensive Economic Partnership (RCEP) (ASEAN plus 6) South Asian Free Trade Area (SAFTA) Southern African Development Community Free Trade Area (SADCFTA) Southern Common Market (MERCOSUR) Trans-Pacific Partnership (TPP) Page!4

5 ! ATSMUN 2018 Stages of economic integration around the World (each country colored according to the most integrated form that it participates with): Dark Green: Economic and monetary union (CSME/EC$, EU/, Switzerland Liechtenstein/CHF) Light Green: Economic union (CSME, EU, EAEU, MERCOSUR, GCC, SICA) Light Blue: Customs and monetary union (CEMAC/XAF, UEMOA/XOF) Brown: Common market (EEA Switzerland, ASEAN) Orange: Customs union (CAN, EAC, EUCU, SACU) Red: Multilateral Free Trade Area (CEFTA, CISFTA, COMESA, EFTA, GAFTA, NAFTA, SAFTA, AANZFTA, PAFTA, SADCFTA) MAIN FREE TRADE AGREEMENTS European Union Customs Union (EUCU) The European Union Customs Union (EUCU) is a customs union which comprises all the member states of the European Union (EU), Monaco, and some territories of the United Kingdom which are not part of the EU (Akrotiri and Dhekelia, Bailiwick of Guernsey, Bailiwick of Jersey, and the Isle of Man). Due to their geographic circumstances, some territories within the EU do not participate in the customs union. The customs union is a major element of the European Economic Community, established in 1958, and now succeeded by the European Union. No customs duties are imposed on goods travelling within the customs union and - unlike a free trade area - members of the customs union levy a common external tariff on all goods imported in the union. A prerequisite of the customs union is that the European Commission negotiates for and representing the Union as a whole in international trade bodies such as the World Trade Organisation, rather than each member state negotiating individually. Apart from the EUCU, the EU is in customs unions with Andorra, San Marino and Turkey through separate agreements with the exceptions of certain products. European Free Trade Association (EFTA) Page!5

6 ATSMUN 2018 The European Free Trade Association (EFTA) is the intergovernmental organization of Iceland, Liechtenstein, Norway and Switzerland. It was created in 1960 by its then seven Member States for the promotion of economic integration and free trade between its members. The primary objective of the Association is to maintain and develop the EFTA Convention, which controls financial relations between the four EFTA States, manage the Agreement on the European Economic Area (EEA Agreement), which pools the Member States of the European Union and three of the EFTA States in a single market, also referred to as the Internal Market and develop EFTA s global network of free trade agreements. Trans-Pacific Partnership (TPP) The Trans-Pacific Partnership (TPP), currently retitled Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) following the withdrawal of the United States, is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement, initially signed on the 4 th of February 2016, is being renegotiated after the United States withdrew. The eleven remaining participants came to a partial agreement in November The TPP commenced as an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei Darussalam, Chile, New Zealand, and Singapore in After 2008, additional countries including Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States and Vietnam - took part in the negotiations for a more wide agreement, thus bringing the overall amount of countries participating in the negotiations to twelve. Since the United States withdrew from the agreement in 2017, the other 11 TPP signatories agreed in May 2017 to revive the deal without the participation of the US. The original TPP enclosed provisions to lower both non-tariff and tariff barriers to trade and establish an investor-state dispute settlement (ISDS) mechanism. It was concluded by the U.S. International Trade Commission, the Peterson Institute for International Economics, the World Bank and the Office of the Chief Economist at Global Affairs Canada that the final agreement would, if ratified, produce net positive economic consequences for all its members. In contrast, an analysis using an unorthodox model by two Tufts University economists found that the signatories would be adversely affected by the agreement. The Trans-Pacific Partnership has received criticism on the grounds that it favors currency manipulation, length and complexity of procedures and secrecy of negotiations while it also affects the influence of industry. Free Trade and the United States Although the US is signatory to FTAs, many US politicians are skeptical about free trade on the basis that certain areas, such as the U.S. industrial sector, may be adversely affected if allowed to compete with foreign producers. As a result, sellers that trade goods in the US face barriers to entry and tariffs on imports and must compete with subsidies for US exports. Movements that support the purchase of domestic products usually generate widespread support among consumers. In spite of the aforementioned regulations, the US government does encourage greater cross-border trade in financial markets, including financial services, and the US is a member of many organizations with the purpose of upholding and facilitating the financial cooperation of states, such as the World Trade Organization (WTO), the Basel Committee on Banking Supervision (BCBS), the International Organization of Securities Commission (IOSCO) and the Organisation for Economic Co-operation and Development (OECD). Increased access to foreign financial markets offers US investors a wider range of securities, currencies and other financial products. Page!6

7 ATSMUN 2018 Regional Comprehensive Economic Partnership (RCEP) The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten states parties to the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and the six states with which ASEAN has current free trade agreements (Australia, China, India, Japan, South Korea and New Zealand). RCEP negotiations officially began in November 2012 at the ASEAN Summit in Cambodia. The free trade agreement is arranged and expected to be signed in November 2018 during the ASEAN Summit and Related Summit in Singapore, after the first RCEP summit took place in November 2017 in Manila, Philippines. The RCEP is approached as a substitute of the Trans-Pacific Partnership (TPP), a proposed trade agreement which includes several Asian and American nations excluding, however, India and China. In 2017, the population of the prospective RCEP member states was calculated to be 3.4 billion people and the total value of the Gross Domestic Product of the countries was $49.5 trillion, approximately 39 percent of the world's GDP with the combined GDPs of China and India making up more than half that amount. It is the vastest trading bloc globally, covering nearly half of the global economy. POSSIBLE APPROACHES Advantages of Free Trade Agreements: Amplified fiscal development. For example, it was estimated by the US Trade Representative Office that the NAFTA increased US financial growth by 0.5 percent a year. Foreign direct investment (FDI). Investors commonly gather to countries that promote free trade. This adds capital to improve local businesses and broaden the activities of domestic industries. Limited government expenditures. Many governments subsidize local industry segments. After the trade agreement removes subsidies, those funds can be utilized in a different way. More dynamic entrepreneurship climate. Frequently, businesses were more secured prior to the agreement. These domestic industries risked becoming stagnant and non-competitive on the global market. With the protection removed, they have the motivation to become true global competitors. Expertise. International businesses have more expertise than local corporations to develop local resources. Free trade agreements allow the global firms access to business opportunities that were previously monopolized by the local firms. When the multi-nationals partner with local firms to develop the resources, they train them on the best methods. Hence, domestic companies are given access to these new practices. Technology transfer. Local companies are, additionally, provided with access to the latest technologies from their multinational partners. As local economies develop, so do job prospects. Multi-national companies offer vocational training to local employees. Potential disadvantages of Free Trade Agreements: Page!7

8 ATSMUN 2018 Increased job outsourcing. Lowering tariffs on imports allows companies to expand to other countries. As a result, goods imported from countries with a low cost of living accordingly cost less. It makes it hard for companies in those same sectors that are based in countries with a higher cost of living to compete, so they may reduce their workforce. Lower protection of intellectual property. Many developing countries don't have laws to protect new processes, patents and inventions or their relevant legislation is not strictly enforced. Domestic businesses may not be capable of competing at a multinational level. Many emerging markets are traditional economies that depend on farming. Small family farms cannot compete with subsidized agricultural companies in the developed countries. Consequently, such local businesses become unsustainable and unemployment is aggravated. Working conditions can be affected negatively, as emerging market countries have not always enacted adequate legislation with regard to labor protection. Reduced tax revenue. Countries may struggle to substitute profits lost from import tariffs and fees. Degradation of natural resources. Measures for the protection of the environment are sometimes not implemented in countries with emerging markets and, thus natural resources such as timber and minerals may be exhausted. Types of Trade Agreements Unilateral Trade Agreements A unilateral trade agreement is a commerce treaty that occurs when a state imposes trade restrictions without provoking the reciprocation of any other country. A country can also unilaterally loosen trade restrictions, but that occurs infrequently, as it would be likely to put the country at a competitive disadvantage. The latest practice is adopted by economically developed countries exclusively as a type of foreign aid to support emerging markets and help them strengthen certain industries, grow economically and create new markets for exporters. Bilateral Trade Agreements Bilateral trade agreements are singed by two nations at a time, giving them preferred commercial status with each other. Both countries agree to loosen trade restrictions and expand business opportunities between them. The purpose is to give them expanded access to each other's markets, and increase each country's financial growth. In most cases bilateral trade agreements concentrate on the sectors of automotive, oil or food production. Multilateral Trade Agreements Multilateral trade agreements are commerce treaties among three nations or more. They are the most challenging to negotiate since the greater the number of countries involved, the more difficult Page!8

9 ATSMUN 2018 the negotiations are. Moreover, they are more multifaceted, since each country seeks to promote different requests and needs. That same wide scope makes them more robust than other types of trade agreements once all parties sign. Bilateral agreements are easier to negotiate but these are only between two countries. These agreements cut down tariffs facilitating the import and export of gods by businesses. After being negotiated, multilateral agreements are very influential, since they enfold a broader geographic territory. A greater competitive advantage is conferred on the signatories. The largest multilateral agreement is the North American Free Trade Agreement (NAFTA). It has been agreed upon between the United States, Canada and Mexico. Their combined economic output is $20 trillion. NAFTA quadrupled trade to $1.14 trillion in The Trans-Pacific Partnership (TPP) would have replaced NAFTA as the world's largest multilateral trade agreement. Page!9

10 BIBLIOGRAPHY ATSMUN Website Title: BBC News Article Title: TPP: What is it and why does it matter? Publisher: BBC Electronically Published: January 23, Agreements-New-Approach-New-Insights Website Title: IMF Article Title: The Impact of Trade Agreements: New Approach, New Insights Author: Swarnali Ahmed Hannan Website Title: Taxation and customs union Article Title: Customs - Taxation and customs union - European Commission Website Title: IMF Article Title: The IMF and the World Trade Organization Website Title: The European Free Trade Association European Free Trade As[ ] Article Title: The European Free Trade Association Website Title: ASEAN ONE VISION ONE IDENTITY ONE COMMUNITY Article Title: Regional Comprehensive Economic Partnership (RCEP) Website Title: Investopedia Page!10

11 Article Title: Free Trade Area ATSMUN 2018 Electronically Published: March 11, 2014 Author: Investopedia Staff Website Title: BusinessDictionary.com Article Title: Free trade agreement - Read the full definition. Website Title: The Balance Article Title: 7 Pros and 7 Cons of Trade Agreements Author: Kimberly Amadeo Website Title: The Balance Article Title: 3 Types of Free Trade Agreements and How They Work Author: Kimberly Amadeo Website Title: Investopedia Article Title: Free Trade Electronically Published: September 04, 2015 Author: Investopedia Staff MULTIMEDIA RESOURCES European Commission - EU Trade Policy explained Page!11

12 ATSMUN 2018 BBC News - Trans-Pacific Partnership: What is it and what does it mean? World Trade Organization - Looking back at 20 years of multilateral trade Page!12