North-South Preferential Trade Agreements
literature on PTAs tends to focus on the texts and the coverage of disciplines; little attention is given to monitoring and assessing implementation. The same is true of enforcement, about which not much is known even in the bestdocumented PTAs. These are areas in which the private sector can play a major role. Mechanisms to encourage greater participation by firms, nongovernmental organizations (NGOs), and consumer groups need to be designed and incorporated into PTAs. What matters to firms and consumer groups is whether market segmentation is being reduced. They have an interest in knowing about the removal of tariff and nontariff barriers and in having real-time information on what is happening at border crossings and how regulatory requirements are being enforced. Regular engagement between government and these groups— informed by an annual process through which information on the implementation of the PTA is generated (e.g., through a survey of exporters and importers)— would provide a valuable feedback loop and help increase ownership of the PTA. Binding commitments (on market access, for example) need to be enforced. Dispute settlement provisions vary widely across PTAs but tend to be weak in many cases. This weakness reduces the relevance of the PTA for firms. The U.S., NAFTA-type PTAs are by far the most extensive in their dispute settlement provisions—not surprisingly, in the sectors where there are strong lobbies in the United States. These are, first and foremost, IPRs and investment protection and also areas such as product standards and conformity assessment. The latter is actually rather asymmetric. In the Central American Free Trade Agreement, signatories are subject to disciplines to enhance the likelihood that U.S. certification of goods will be accepted as equivalent, but there is no similar language on U.S. acceptance of the partners’ certification. The seriousness of U.S. implementation is reflected not only with respect to formal, binding dispute settlement but also in terms of calling for, and setting up, bodies to monitor implementation. For example, the Web site of the Office of the U.S. Trade Representative contains documents on compliance by partners, and U.S. PTAs call for and have established performance benchmarks and contact points through which interested parties (citizens) can report perceived instances of noncompliance.12 Compared with the active caseload of the WTO, which has adjudicated more than 400 cases since 1995, for most North-South PTAs, there is very little evidence of enforcement action, even for U.S.-type PTAs (aside from NAFTA). Countries that are PTA members and could use
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the dispute resolution mechanisms of the PTA often choose to resort to the WTO instead. The U.S.–Mexico Telmex dispute is an example. Piérola and Horlick (2007) provide other instances in which countries went to the WTO because PTA rules were ambiguous or nonexistent; they conclude that case law under NAFTA and similar agreements has entailed “little or no jurisprudential development” (Piérola and Horlick 2007, 891). Bown and Hoekman (2005 and 2008) discuss at greater length how PTAs can be complemented by mechanisms through which firms can more easily (i.e., at lower cost) obtain information on potential violations of agreements and on the way institutions might be designed so that the behavior of government agencies can be contested directly by the private sector. The Proposed Approach and the Evolving Status Quo The need for policy flexibility and aid for trade will vary by country: priorities differ, capacity differs, and the politics (what is feasible and to what extent there is a need to use trade agreements to pursue or lock in reforms) differs. Thus, differentiation in the agreements is called for. In practice, it is already applied in the PTA context. The front-runner is arguably the EU; the European Commission has stressed that development is an explicit objective underpinning its pursuit of PTAs with developing countries. The economic partnership agreements (EPAs) have attracted by far the most attention, but to date most EPAs have not addressed behind-the-border policies. (An exception is the agreement with the Caribbean countries, which has yet to be implemented.) More informative are the approaches the EU is pursuing with neighboring countries that are not accession candidates and with which it already has reciprocal free trade agreements. Cooperation with a number of these countries is now under the umbrella of the 2004 European Neighborhood Policy (ENP). The ENP has a threefold goal: (a) to support the national development strategy of a partner country; (b) to integrate partners into some EU economic and social structures (a stake in the Internal Market); and (c) to implement existing and future PTAs and association agreements. Technical and financial assistance (development cooperation) will focus on the areas that are identified as priorities under country-specific ENP action plans (CEC 2004). A premise underlying the ENP is to pursue differentiated convergence with EU norms—competition policy, regulatory action for services liberalization, and so on. The