Sectoral Free-trade Area

Sectoral free-trade area in Global Commerce Policy

In this regard, sectoral free-trade area is: a free-trade area or a customs union covering some traded sectors only. This option is only available to developing countries under the Enabling Clause. Developed countries may conduct sectoral trade negotiations, but they must extend the benefits of sectoral trade liberalization on a most-favoured-nation basis. Sectoral trade negotiations: the idea of achieving efficiciencies in trade negotiations through tackling clusters of tariff items rather than through the item-by-item negotiations pursued in the early rounds of multilateral trade negotiations. The entries on trade policy are here. It was first attempted on a large scale during the Kennedy Round. The main sectors so treated were aluminium, chemicals, cotton textiles, iron and steel, and pulp and paper. Though the results varied greatly, one thoughtful assessment of the Round considered that enough progress had been made for free trade between selected industry sectors to become a possible future means of tariff reductions. Canada then advocated during the Tokyo Round the sectoral reduction or elimination of tariff and non-tariff barriers. Canada argued that in some sectors it would be possible in this way to go beyond the trade liberalization resulting from the accepted negotiating techniques. The entries on trade policy are here. In this way it would be feasible for all trade barriers from the raw-material stage to the finished product to be removed. Developing countries found this proposal attractive because it could have been adapted to the export products of main interest to them, and it might also have provided a solution to the problem of tariff escalation. However, resistance by others ensured that this proposal was not adopted. During the Uruguay Round sectoral trade negotiations took place at two levels. First, at a broad level, the negotiations on agriculture, textiles and services resulted, respectively, in the conclusion of the Agreement on Agriculture, the Agreement on Textiles and Clothing and the GATS. The entries on trade policy are here. All of these agreements achieved some trade liberalization, though not all that much in the case of services. Second, there were tariff negotiations in smaller sectoral groups. These eliminated among the main trading countries tariffs on pharmaceuticals, construction equipment, medical equipment, beer, farm machinery, wood and paper products, some fish products and toys. The United States and the European Community agreed in addition to reduce their tariffs on chemicals to about 3%. The entries on trade policy are here. An attempt to negotiate a Multilateral Steel Agreement was unsuccessful. Sectoral trade negotiations continued after the Uruguay Round in the financial services, telecommunications and maritime services. The entries on trade policy are here. An outstanding example of what can be achieved through sectoral trade negotiations is the Information Technology Agreement. The entries on trade policy are here. A main reason why this Agreement succeeded so well is that it was supported industry and government alike in all major producing and trading countries. The most recent example of trade negotiations in the WTO is the Doha Ministerial Conference mandate for negotiations on environmental goods and services. The entries on trade policy are here. APEC trade ministers decided in May 1997 to explore sectoral trade liberalization through the Early Voluntary Sectoral Liberalization initiative. Their intention was to identify sectors where all APEC economies could agree to reduce or eliminate tariffs and non-tariff barriers. This attempt was unsuccessful. Some see sector-by- sector negotiations as the best way to achieve trade liberalization. When they work, they achieve results efficiently. Their main drawback is that they put the burden of adjustment on a single industry which then sees itself as bearing all the costs. The entries on trade policy are here. If the degree of resistance is too great, governments may decide not to push ahead. This is despite the fact that all trade liberalization results in gains for the economy. The entries on trade policy are here. It is therefore likely that multilateral liberalization in agriculture, a sensitive sector in many countries, will for a long time only be possible in the setting of a round of multilateral trade negotiations. These rounds allow governments to strike a balance between sectors in that they see gains  here and losses  there. The entries on trade policy are here. Industries, too, can see that they have not been singled out for what they consider sacrifices . See also zero-for-zero tariff reductions.[1]

Sectoral free-trade areain the wold Encyclopedia

For an introductory overview on international trade policy, see this entry.

Resources

Notes and References

1. Dictionary of Trade Policy, “Sectoral free-trade area” entry (OAS)

See Also