A checklist approach to preparing for an FTA

Preparations for FTA negotiations: a checklist approach

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Management & information

An FTA negotiation can be a lengthy and expensive 'whole of government' enterprise that needs careful planning and top-level management to succeed.

1.1

Appoint a senior official to take charge of preparations.

The senior official should report to the Prime Minister/Trade Minister/Cabinet. He or she should be someone who has the authority to call on several agencies for help and advice.

Decisions on trade agreements are distributive. They take protection / advantage away from someone and give it to someone else (in liberalization; from the protected industry and government revenue back to the consumer and taxpayer). Distributive changes have to be made at the 'top of the management tree' in the economy so that all of the possible consequences (good and bad) are taken into account. It is important to put coordination in the hands of an experienced official who can help to resolve conflicts between agencies at a senior level. Probably this person will be the 'senior negotiator' for the Agreement but probably not the negotiator on every item: they will delegate to other agencies wherever possible.

1.2

Develop trade analytical capacity in several agencies

The list of topics in a modern FTA is so broad that negotiations become a 'whole of government' enterprise involving many different agencies, having different regulatory responsibilities and 'client' groups in the economy. Trade policy 'capacity' (analytical approach, awareness, experience) will be needed in many different regulatory domains. An introduction to the complexity and breadth of modern FTAs is provided by the Asian Development Bank publication "How to Design, Negotiate, and Implement a Free Trade Agreement in Asia" available from www.adb.org—default.asp. It is based on a comprehensive manual produced by Australian Department of Foreign Affairs and Trade.

The list of chapter headings in recent Developed/Developing country FTAs includes: Goods, Agriculture, Rules of origin, Customs admin/facilitation, Sanitary/phytosanitary measures, Technical barriers to trade, Trade remedies, Services, Investment, Telecommunications, Financial services, Movement of natural persons, Competition, Government procurement, E-commerce, Intellectual property, Pharmaceuticals, Education, Labour, Environment, Transparency, Economic cooperation, Institutional arrangements, Dispute settlement, ICT, Science and technology, Human resource development, Trade and investment promotion, SMEs, Tourism, Energy, Political dialogue

Review economic and related regulation managed by many different agencies

(i)

FTAs reach behind the border even more than WTO so they tend to touch on areas of regulation that would not otherwise be encompassed by trade policy.

(ii)

Plan to continue inter-governmental cooperation after the negotiations. Many things that represent 'mutual advantage' for members of an FTA cannot be negotiated. They require cooperation instead. After the negotiations conclude, it may be most efficient to continue this cooperation on an agency-to-agency basis. So involve all responsible agencies from the outset. For example, almost all 'trade facilitation' comes from cooperative changes in regulation, standards, communications etc. that can be managed directly by the responsible agencies in each member country

(iii)

Build analytical capacity across a wide range of agencies. Doing so will aid the development of strategies and implementation of outcomes. It will also ensure 'backup' as officials leave the public service, change levels or agencies over the period of negotiations & implementation

Take advantage of training courses to train officials in several agencies. Training on the general principles of negotiation of FTAs is available from Regional Development Banks, World Bank and from some aid donors. Create training 'cohorts' from a variety of agencies rather than on an agency-by-agency basis. If you mix up the agencies attending any one course you can promote network opportunities with your own government services that will be helpful during the negotiations. For example, send officials from e.g. Commerce, Foreign Affairs, Finance (Policy), Customs, Health, Agriculture to the same course.

(i)

You should be aware that negotiations is one of those activities where training is no substitute for learning-on-the-job. There is no 'recipe' for an FTA or for preparation; skills in negotiating a successful FTA are learned 'by doing'. So try to hold onto people who have been successful negotiators.

1.3

Establish many sources for information

1.3

Governments often don't know what they don't know about the private interests of business and Non-state actors (NSAs), including individuals, in a trade negotiation. On the other hand, business and NSAs often fail to 'take on board' what government is telling them; possibly because the information does not appear relevant to them when they hear it. The use of multiple information channels is the answer. They can run concurrently but don't need to be worked on at the same time. For example, a publication program and a call for public submissions can be managed simultaneously on different schedules by the same small information group. They can address the same targets through different associations: e.g through an industry or trade group; through newspapers or radio; in taxpayer information; through business advisors such as accountants; through non-trade NSAs such as church groups, women's support groups etc

Go ahead an ask for information from businesses, NSAs. It is important not to rely on business/NSAs to volunteer information relevant to FTA negotiations. By asking for information you increase your chances of learning something, and you also create a channel to disseminate information.

Governments have to ask explicitly for information (for the same reason a seller should always ask for the sale). If you don’t ask, and follow-up, you may not get what you need (and you may not know that you haven’t got what you need).

Set up a formal private sector advisory group on trade. Create a single 'peak' group for Goods (agriculture, minerals, manufacturing) and Services industries. Overlapping sectoral interests among members of the advisory group is the best means of minimizing self-interested lobbying by appointees. A broad range of interests, each of whom will demand attention, will improve the chances of each member taking a ‘national’ rather than ‘sectoral’ view. Appointees in a mixed group will find it more difficult to ‘sway’ the Group's advice for private or even industry-specific gain. Use representatives from existing sector groups. For example, the Chamber of Commerce, the fishing industry association, the plantation owners’ association, the tourism association.

Few stakeholder groups are fully representative of their membership or likely to communicate fully with them. It is important, therefore, to try to have overlapping representation e.g. between Chambers of Commerce and sector/industry groups. Try to find representatives who have a leading role in more than one existing group. This will reduce the opportunity for representatives to 'corner' the Group's advice for private or even industry-specific gain. It's inevitable that Members of these groups will come with pre-conceived ideas and political 'baggage' picked up in other domains of public-private consultation. But using existing groups usually means lower 'threshold' costs when setting up the advisory structure at business level.

It's important, too, to supplement advisory group information with broad-based, bottom-up input. Try especially to reach individual business people via calls for public submissions e.g. via media advertisements. Use email surveys and advertised consultation events in different cities and towns.

1.4

Use your information input channels to disseminate information

1.4

There are many benefits of using the same channels for top-down (government to non-government) and bottom-up (non-government to government) communications.

Provide your advisory groups and public meetings, as well as the usual information media outlets with media-ready material on

(i)

The role of regional and extra-regional trade in economy.

Sources of information and data include IMF, UNCTAD, WTO, World Bank, some NGOs (use with care), consultants (ditto). Ask developed country trading partners for technical support to create media-ready material if necessary.

The material should cover imports as well as exports: it is essential to keep before the private sector and all agencies that much of the economic benefit will come from more competitive imports, especially of services. For example, lower input costs into local economic activity are a big source of the benefits of trade and investment liberalization.

It should also cover both goods and services including establishment by businesses to deliver a service such as banking, logistics or wholesaling. Lower-cost, higher-quality business inputs from imported and competitive local sources are very likely source of productivity gains & hence wealth

(ii)

Reasons for negotiating the FTA

Government must explicitly detail the reasons joining the negotiations. You should be explicit about government’s determination to make the FTA agreement work, or fear of competition and interminable debates about benefits and costs of the agreement at a micro-level will overwhelm preparations.

You should explain why closer integration of the regional economy provides new opportunities for economic growth, more secure jobs, some expansion of labor market, improved quality of commercial services, lower consumer prices. Make the most of 'hard data' on expected gains from modeling, if available. Keep it simple.

Consider not just trade and economic relations among the parties but also the impact on relations with other trading partners. Will the new preferential margins disadvantage important trading partners? Will the agreement complement or qualify existing obligations e.g. in WTO

(iii)

Changes that might follow an FTA

The main costs of adjustment arise from unplanned or unanticipated changes in relative prices. If changes are identified in advance, alternate uses can be found for resources (land, labor) to maintain their value. Businesses and households bear the cots of adjustment (because they own almost all of the resources in an economy). They must do their own planning using pertinent, timely information supplied by government. So it is very important that business and NSAs understand all of the ramifications: 'good' and 'bad' as far in advance as possible.

Changes will include lower tariffs on imports from trading partners, some expansion of exports, some more competition among suppliers of commercial services following market liberalization (not just in tourism but also in banking & transport but also communications? water supply? electricity supply?)

Greater freedom of movement of funds e.g. remittances? Greater freedom of movement of business people? Tourists? This is a potential benefit if there are Mode 4 (services) provisions in the Agreement

(iv)

Timing of the FTA

Businesses and NSAs should be reassured that in most cases the changes will be progressive from the date of the agreement, which may be at lest two years away if legislative ratification is required. But changes will occur within 5-8 years. That may be, for example, within the period of depreciation of capital equipment or a license that they may purchase (so within a planning horizon for them).

For example, when you start your information campaign it is likely that negotiations won't start for... (one year, two?). They will last... (one year, two?). Finally, it will take ten years to bring about changes (total of 14 years to full implementation?)/

Advise business explicitly about the timing of the agreement so that they can plan for changes

(i)

Tell them about the expected timetable and the fact that commitments are to be implemented progressively, after they are agreed.

(ii)

Tell them who to contact for more information. Most businesses already have various sources of advice. Business or trade media plays an important part. So do e.g. accountants, bank personnel, community leaders. If these groups are not likely to be well-informed then tell business explicitly where they can go for more information. Use the Advisory Group and existing chambers of commerce as much as possible for information dissemination

1.5

Inform Parliament and seek parliamentary input

1.5

Governments usually need Parliamentary approval for a treaty. Making explicit preparations in the Parliament is often a good way to draw public attention to the negotiations and to prepare the way for a positive, collaborative effort on ratification when the negotiations are complete.

Goods

Usually portrayed as the 'heart' of the FTA agreement, but often the easiest (because most familiar) chapter to negotiate

2.1

Create an inter-agency group to review the customs tariff

If not already using the Harmonized System, consider doing so because it will simplify negotiations of Rule of Origin (ROO) based on a Change of Tariff Heading (CTH). Conversion to the HS can be a big undertaking: determine time, technical requirements (with assistance from WCO). Alternately, create or up-date a concordance from existing BTN/sui-generis tariff nomenclature to the current HS version for those areas of the tariff that will be important for ROO (imports that compete with local production or are components of exports, exports).

The interagency-group should make sure the customs tariff schedule is up-to-date. Am FTA deals with the applied rate of duty in the most recent customs schedule (not the WTO 'schedule'). You don’t want to be searching for up-to-date information during negotiations

Create/verify entry information by industry. This is your basic source of information for goods negotiations.

(i)

First, stratify customs entry data e.g. value of entries by HS4 or HS6 groups; value and SITC classification of entries by duty levels (e.g. 0 - 5%, 6 - 15%, 16 - 30% etc). This is the best source of information on potential business and government revenue impacts of progressive liberalization. Strictly, an economic model should be used to asses impacts since import propensity will change according to overall macroeconomic growth impacts and product substitution effects. But a rough of impacts estimate based on expected price reductions and market knowledge may also be sufficient for business planning.

(ii)

Second, verify duty collections data to check the revenue implications of the planned reduction in duties. Estimate tariff revenue by origin of goods; by schedule (e.g. MFN, preferential), noting excise and other taxes/charges as well as Customs and other fees

2.2

Seek input from advisory sources

Once the potential Member governments of the agreement have decided on it's ambition ('free trade') and scope, take up the question of 'exceptions' to liberalization of trade barriers under the FTA with the advisory groups. This overall approach to scope/ambition should be covered in the preliminary agreement among governments on the 'scope' of the FTA (see 'Overall Approach' below).

(i)

You will be glad you appointed a mixed 'peak' group of advisors when this issue arises (it always does) with the advisory groups. A group comprising representatives from across goods and services industries will be reluctant to endorse any 'special' pleading on behalf of individual import competing sectors. It will be evident to most businesses that the danger of creating an exception for one import-competing sector is that trading partners might insist on their own exceptions in another sector of export interest to you.

Discuss tariffs (& possible tariff-rate quotas as an implementation step). The strategic question in most FTAs is not about the end-point for tariffs (which is zero or close-to-zero) but the means and rate of reaching zero.

(i)

A typical FTA schedule might look like this:

Duties < 5% go to zero on ratification (year 1)

Duties 5 - 15% reduced on an accelerated schedule (say 5 years)

Duties > 15% are cut by a similar (identical?) amount in each year of the 10 year implementation period

High tariffs/ 'sensitive' products may have a variable reduction schedule that may start with small cuts and accelerates the size of the cuts as the protection approaches zero ('back-ending'). Or, there may be a ‘down-payment’ of, say, 20% of the total protection followed by a schedule of identical smaller cuts over the implementation period. A ‘down-payment’ strategy is used to eliminate some of the ‘unused’ protection from highly-protective duties before the ‘real’ cuts (those that start to affect the local wholesale price of the product) begin.

Some schedules have 'TRQ' provisions that combine an initial liberalization of a proportion of imports with a slow rate of 'out of quota' tariff reduction and a 'big bang' in the final year(s). You could think of TRQs as a different form of ‘down-payment’. Problem: quotas tend to ‘stick’, business lobbies very hard to keep them because, unlike the tax of a tariff, quotas are often 'hidden' from the downstream consumer. Use them as a last resort.

Share you stratified tariff and duty-collection data with the private sector advisory group

(i)

Get their advice on the trade impact of moving to zero duties. Keep in mind that the advisory group will very likely overestimate the trade impact for particular goods, possibly ignoring the reality that the prices of substitutes/complements will change in response to the cuts (the changes are rarely confined to the price of the formerly protected good).

Seek advisory group input on importing state trading enterprises (where applicable).

(i)

Establish which STEs have merchandise import/export rights. Establish a list of import/export regulations concerning STEs (if any). Ask for advice on whether STEs (if any) should be protected from changes affecting other importers? Should existing regulatory powers be liberalized?

Seek advisory group input on import licensing where applicable.

(i)

What non-automatic import licenses exist? Can they be tariffied at an equivalent rate (the usual means of managing liberalization of licenses)?

Technical regulations and standards

Better management of Sanitary and Phyto-Sanitary (SPS) standards, especially, is likely to hold the key to improved regional export opportunities

3.1

Plan to agree on greater collaboration on standards rather than binding obligations on products.

SPS is typically too complex, situation-specific to be suitable for a schedule of binding commitments

Identify current national standards, Import Risk Assessments, other SPS procedures, regulations etc. Survey exporters' concerns with trading partners' standards and administration of SPS standard for e.g. Horticulture, livestock, fish, forestry, packaging (such as pallets, crates). Use the advisory groups to supplement information from individual exporters.

Consider potential for broader regional harmonization of standards, extending the collaboration from the FTA region to a broader region of non-FTA members will reduce regional trade barriers while increasing the security of the adopted standards

Consider agreements on 'early warning' & accelerated review of existing measures. Seek input from advisory groups on the utility of 'advance' warning or collaboration to avoid conflicts over exports/imports. SPS standards 'violations' such as disease are difficult to avoid altogether. These techniques can, however, greatly reduce the cost of managing any particular incident.

Develop negotiating requests based on improving the transparency of trading partners' regulations. For example, ask for assistance with inputs to IRA determinations or assistance with risk mitigation measures for products already covered by an IRA.

Developing countries should seek technical cooperation on product design for developed markets to avoid SPS problems. For example, assistance with design of appropriate production chain measures such as agricultural practices, livestock and fish husbandry, processing standards. They should also seek assistance with product design & packaging for export

3.2

Industrial standards: survey the advisory groups for examples of standards barriers

Customs administration

Collaboration on Customs administration is important for to the trade facilitation benefits that an FTA can bring to regional trade

4.1

Most FTAs contain provisions on customs-cooperation, especially to promote harmonization of processing procedures and documentation

Customs negotiations in a typical FTA are conducted on an agency-to-agency basis with limited interaction with the rest of the negotiations.

(i)

They are predominantly technical cooperation/harmonization discussions. Results may not be presented to the 'top' level negotiators until just before the final text is ready for legal 'scrubbing'. To avoid misunderstandings, therefore, it is important to have an early understanding between the 'top level' negotiators and the Customs negotiators on the scope of the Customs chapter and the key objectives and 'resistance' points (if any).

Standards of customs procedures embodied in e.g. WTO Agreement on Customs Valuation are often assumed before the negotiations start. Although the agreements often seek to go beyond the WTO provisions or to add additional specifications to the WTO provision, including possibly on border security issues

4.2

Typical provisions in a modern FTA include:

Customs valuation: States the basis for customs valuation to be used by the customs authorities (usually the WTO Agreement on Customs Valuation is the agreed standard)

Customs procedures and facilitation: Defines the approach to customs procedures by a party to preferential imports from the other party.

Express shipments: Sets out any special rules applying to international express shipments.

Advance rulings: Permits exporters and importers to seek advice on classification and preferential treatment of a good to be traded.

Treatment of goods entering under a Certificate of Origin: States how goods traded under a Certificate of Origin and qualifying for preferential treatment will be dealt with by the customs authorities.

Paperless trading and use of automated systems: Usually at least an undertaking to rely as much as possible on paperless trading and automated systems.

Risk management: Usually an undertaking that the parties will rely as much as possible on risk management to improve clearance times.

Review and appeal: Defines the conditions under which an exporter or importer may appeal against any decision by customs authorities against goods traded under the agreement.

Publication and enquiry points: Usually the parties agree to publish all relevant customs regulations and to establish enquiry points where exporters and importers may obtain information on the customs regime.

Customs cooperation: Sets out the framework for cooperation between the customs authorities to improve the flow of goods between the parties

Services

Most economies have a high potential to gain from improved export and import flows of services and associated investments

5.1

Create an inter-agency group to supervise

On account of the breadth of the services industries and their importance to production in all sectors of the economy it is a good idea to set up formal inter-agency collaboration from the outset. Private sector advisory groups will also be some help in assessing the needs and objectives of the services sector. But because of the complexity of the sector and the relative unfamiliarity of some services-trade concepts, a survey of services industries and regulations is likely to be most efficiently conducted by different regulatory agencies through their 'client' businesses and associations and aggregated at an inter-agency level. The WTO's list of services sectors (see: MTN.GNS/W/120 available from docsonline.wto.org) , drawn from the UN-CPC classification is a guide to the sectors that should be reviewed. A copy of this list is attached for ease of reference

The inter-agency group should start by identifying services that are supplied by government in the exercise of government authority. These are usually excluded from FTA negotiations (as they are in GATS) in the agreement on the Scope of the FTA (see 'Overall approach' below). For each service on the WTO classification list mentioned in previous item. As a rule of thumb, if the government agency suppling the service does so in competition with a commercial provider, then this is NOT a service supplied in the exercise of government authority but a 'commercial' service. Also, when identifying government services, consider the possibility that the mandate of some government business enterprises (GBEs) now supplying services may change in the future given the success of privatization of services GBEs in many countries

5.2

Conduct a survey of commercially supplied services to develop 'baseline' data

For each service on the WTO list that is available in the national territory or to nationals traveling abroad

(i)

Basic data: describe the sector including a list of known suppliers and estimated value of sales

(ii)

Market access/entrance barriers: List the laws/regulations that regulate the activities of the service suppliers or the supply of the service and decide whether any of these laws/regulations restrict entry in one of the ways specified in Article XVI of GATS. Article XVI is very important because it determines what a ‘barrier’ to services is, for the purposes of negotiation. An apparent impediment of some sort to a services exchange across a border is only a ‘barrier’ to be scheduled (or liberalized) in a services agreement if it falls into one of the Article XVI categories. Art. XVI barriers are mostly restrictions on the number or volume of services, service suppliers or investments for the purposes of delivering a service.

(iii)

National treatment: decide whether any of theses laws/regulations provide for the less favorable treatment of foreign services or services suppliers. Remember national treatment standard for services is different from standard for goods. GATS refers to treatment that is at least as favorable in practice, even if it is formally different

(iv)

Modes of supply: determine (estimate) what proportion of sales of that service in the national territory or to nationals that travel abroad are supplied by foreign-domiciled services suppliers (GATS Modes 1 & 2). Determine (estimate) what proportion of the sales of that service in the national territory are supplied by foreign-owned firms that are locally established (Mode 3). Determine the volume of services supplied by the temporary movement of personnel (foreign workers, Mode 4).

Prioritize market access and national treatment concerns

(i)

The services sector is pervasive in the economy; services businesses may be difficult to categorize, prioritize from an economic perspective. Those tradable services that are most crucial inputs to production of other services or goods deserve closer attention. For example: Finance, telecommunications, transport, traded infrastructure services (e.g. water reticulation), wholesale and retail services, logistics, professional services, movement of natural persons

5.3

Create a private sector advisory group on services trade

The advisory group should, if possible, comprise firms that provide national commercial services (banks, transport, telecommunications, travel, wholesale, professional). Engage them in the survey of legislation. With their help, publish a directory of services industries, with an overview of laws, regulations affecting each sector

Distribute the directory and seek comments/corrections from the private sector advisory groups and other information channels, drawing on the survey documentation

5.4

Assess services market access barriers against needs/opportunities

Evaluate the economic efficiency of protection for import replacement in the services sector.

(i)

Services industries are sometimes considered 'sensitive' or 'essential' and, consequently, to have special claims to trade protection. Many of them are 'employment' intensive (but many are also shedding jobs as delivery technologies improve). Many are essential to the operations of many other industries and to the achievement of social objectives. But neither of these considerations need imply trade protection. 'Imported' services that establish locally are likely to have the same employment profile as local providers. Cuts in protection that result in more competitive supply of input services are likely to benefit a large number of other services and goods industries

(ii)

Also consider non-economic criteria if relevant such as social preferences and cultural policies. Remember that liberalization is not necessarily a threat to cultural integrity. More open markets may provide more opportunities for the development and profitability of culturally-specific services

Assess the impact of removing 'national treatment' discrimination. On services suppliers, on investments for the purposes of supplying a service. If a foreign service or service supplier is permitted to access the market, does it make economic sense to reserve more favorable regulatory treatment (in practice) for domestic suppliers? Or should all market entrants to compete on a 'level playing field'?

(i)

Remember that in services trade negotiations, national treatment and market access are partly-independent concessions that should be separately evaluated. In a 'positive list' negotiation such as in GATS, 'national treatment' is a negotiated concession in any sector where a market access commitment has been made. If the FTA contains a positive-list services schedule then each party to the negotiations will have to determine whether it will grand national treatment in those sectors where it agrees to make a market access commitment. If the FTA contains a 'negative list' services schedule then there will be an opportunity to exclude ('list negatively') either national treatment, or market access, or both for nominated sectors.

Avoid confusing services liberalization with 'deregulation' or 'privatization'

(i)

Although the opening of a market to foreign access or granting national treatment to foreign services or service suppliers may involve some 'deregulation' of a sector (for example, relaxing the terms of licenses) the two decisions are distinct. Liberalization of services in WTO or an FTA means making commitments to reduce access barriers of the kind specified in Article XVI of GATS. It does not mean deregulation.

Concerns about 'loss of control' or 'reduction in quality' of services as a consequence of 'deregulation' should be addressed through appropriate regulation that could be consistent with full national treatment of imported services or service suppliers.

Concerns about 'privatization' usually arise because stakeholders fail to appreciate that the negotiations do not concern services supplied by government (unless by prior agreement of the parties in an FTA).

Continued regulation in the form e.g. of qualification requirements for professionals or compliance with prudential regulation in the case of financial service providers is fully consistent with market liberalization

Ensure that the assessment of needs/opportunities takes account of the 'technology spillover' impacts of services trade

(i)

Services trade, to a degree even greater than goods trade, is a source of 'know-how' and innovation in design, production, presentation etc. that meets new customer needs or meets old needs better/at lower cost. Much of this innovation is imitable without breach of IP rights. Imitation in turn leads to further innovation: that's what 'spillover' means. It is one of the most important sources of economic growth.

(ii)

More open services markets see more advantageous 'spillover' effects

Investment

Is it possible to reduce the cost of finance or to lift FDI contribution to growth through a regional investment agreement?

6.1

Focus on provisions for Mode 3 ('establishment') of the Services schedules

The services schedule is where most actual market opening commitments affecting investors are likely to be found, rather than the investment chapter. Many economies already have several bilateral treaties on provisions affecting general FDI access. FTAs usually avoid duplicating these treaties.

6.2

In preparation for agreement on an investment chapter, carefully examine existing laws, regulations concerning rights other than rights to make an investment

Pre-establishment rights: Do applicants for investment approval have rights to national treatment, transparent regulation, review of administrative decisions on their investment applications (if required)

Non-discrimination: Do all parties grant the same treatment on access, national treatment etc to all others

MFN: If an FTA member country grants a non-member country more favorable treatment for its investors in future than it grants to other members of the FTA, will that same treatment subsequently accrue to other FTA members

Dispute settlement: Will all parties to the FTA be willing to submit to the World Bank's ICSID procedures for settling disputes? Will private investors have the same rights in a dispute before the courts as the State members of the FTA

Minimum standards of treatment: Sometimes characterized as “treatment in accordance with customary international law, including fair and equitable treatment and full protection and security”. This is typically a guarantee that foreign investors, post-establishment, will have the same rights to legal protection, due process and security as domestic investors.

Performance requirements: Usually a decision to apply or extend the provisions of the WTO TRIMS agreement among the participating states

Transfers and payments: Every FTA investment chapter contains obligations permit all transfers relating to an investment covered by the agreement to be made freely and without delay. Transfers can include items such as capital, profits, dividends, royalties, proceeds from sales of investments, etc

Expropriation and compensation: International law recognises that governments may resort to the forcible acquisition of an investment belonging to a private investor, or measures having an effect equivalent to expropriation or nationalisation, but only if certain conditions are satisfied. Expropriation is a rare event. Nevertheless, the chapter on investment in a free-trade agreement usually contains a provision to this effect, and certainly in every case of an investment protection agreement

6.3

Review existing FDI legislation

In conjunction with the inter-agency group, and with the advice of the 'peak' private sector advisory group.

Determine whether any existing legislation or practices conflict with the above provisions. Consider whether any further liberalization may be warranted

'Offensive' market access brief

Preparations are not complete until you have an agreed list of 'requests'.

7.1

The list should reflect your ambitions for the agreement

No one gets every thing they could want in a negotiation. But that’s no reason not to ask for everything you want. Rather, it’s a reason not to make everything a ‘bottom line’. You don’t have to talk about your ‘bottom line’ or even decide what it is until well into the negotiations when you begin to get a good idea of what can be achieved and what the other side will ‘settle for’ from you. In other words, your initial request list should be credible within the agreed scope of the negotiations, and comprehensive. Later request lists will probably be a sub-set of your initial list; your final request list (with your ‘bottom line’ for these negotiations) must be decided at the top level of government.

7.2

Devise a public information campaign on broad objectives

Follow-up information dissemination with an open invitation to submit proposals, views, requests. Hold several public meetings with 'stakeholders'. Create a goods and services priority list, remembering that services and investment overlap and that national treatment is an optional concession in services negotiations

'Defensive' brief

Never sit down to negotiate anything if you don't have a good idea what the other side wants and where your own 'resistance' points are.

8.1

You don’t have to decide your ‘bottom line’ in the defensive brief until some way into the talks.

An important difference between the defensive and offensive briefs is that you should try hard to minimize your ‘defensive bottom line’ because, in a trade negotiation, what you are negotiating away are regulatory barriers whose reduction may be good for the growth of your economy in the long run (and perhaps in the short-run, too), even if it is costly to someone in the short run. A defensive ‘bottom line’ should be a ‘resistance point’; rarely (if ever) a ‘no’. Rather than say ‘no’, point out why it’s too costly for you to agree (there’s a possibility you could get a better offer in return).

8.2

In pre-negotiation meetings with other parties ask for briefings on requests. Do not rely on them to volunteer their requests

8.3

Most regional trade negotiations are launched with a statement of scope.

The scope can be considered part of your 'defense' against the negotiations running into areas you are not prepared for. 'Scope' is usually defined in a specific Ministerial decision that also contains practical details such as the timeframe and even locations of meetings.

(i)

Make sure that any broad product or sector exclusions are detailed and agreed in advance

(ii)

It is not usually necessary to decide at this stage on e.g. coverage of particular modes of traded services

(iii)

Most 'comprehensive' FTAs also specify a certain number of reservations concerning national security interests, immigration, aviation treaties, laws of a quasi-constitutional nature etc.

Collaboration

Somethings are not susceptible to 'negotiation'. Where there is no 'exchange' to be made, governments collaborate.

Economic data

'Computable general equilibrium' (CGE) modeling is the tool most commonly used to assess the scale and location of mutual gains

Overall approach

Procedures and 'strategies' for a successful negotiation

Workshop materials by Peter Gallagher are licensed under a Creative Commons Attribution-Share Alike 2.5 Australia License.