Category Archives: Executive Summary

Oil price drop, the potential impact on Republic of Congo and implications for Mongolia

Harry Li, MAAPPS // Feb 8, 2015

In 2014, Republic of Congo received $10.7 billion revenue from petroleum alone, equivalent to 74% of its total GDP. Petroleum export is the biggest resource export of the country, accounting for over 90% of all exports. With such heavy reliance on petro, the global oil price drop recently would potentially play a destructive force toward the national development of ROC.

Currently, ROC has $4.225 billion of growth external debt. Amadou Sy, the director of Africa Growth Initiative, argues that it will be more difficult to service debt as their oil revenues fall and the depreciation of their currencies makes U.S. dollar denominated debt more expensive.

According to the Financial Times, South Sudan is receiving the lowest oil price in the world at $20-$25 a barrel because of the combination of falling prices and unfavorable pipeline contracts. ROC’s government could face similar unpopularity. ROC’s government is currently running as an authoritarian regime controlling nation’s resources, suppressing the activeness of civil societies, such as Observatoire congolais des droits de l’Homme(OCDH). OCDH is the biggest Human Rights group in ROC and it constantly criticizes the government. However, ROC’s decreasing ranking in the Democracy Index, Human Development Index, Corruption Percentage Index and Economic Freedom Index would make its petroleum market less attractive for international investors, since more options are available. All of the impact above would result in national-budget cutting, thus negatively impacting the domestic economy.

In the aspect of export resources, Mongolia is similar to ROC. Although Mongolia is not oil major exporter, but mining export accounts for a large percentage of national’s GDP. Thus the price-drop scenario would apply if prices of coal, copper and gold (Mongolia’s top 3 major resource exports) drop significantly. Resource-export oriented countries like Mongolia is fragile to the fluctuation of global prices. That is why it is very important to find effective ways for sub-national reporting and engage civil society in the policy-making on the mining industries in Mongolia. If appropriate policies on mining are implemented, not only will Mongolia be better protected when the prices of coal, copper and gold suddenly decreases but also increase popularity among global investors.

Reference

Sy,Amadou. “Falling oil prices and the consequences for sub-haharan Africa.” The Brooking Institute, Dec.23, 2014.http://www.brookings.edu/blogs/africa-in-focus/posts/2014/12/23-oil-prices-exports-africa-sy

Trade in Services: Energy, Telecommunications and Transportation

Executive Summary

“Globalization and regional integration require effective regional infrastructure— transport, communications, and energy—to widen and integrate markets, achieve economies of scale, encourage participation of the private sector, and attract foreign direct investment and technology”. This research report will provide an overview of the relevant information regarding the energy, transportation and telecommunications sections in a prospective Canada-Japan Free Trade Agreement (FTA)/Economic Partnership Agreement (EPA). In referencing past trade agreements, this report aims to identity the perspective countries’ key negotiation objectives, as well as some of the areas where concessions can be achieved.

Energy is often referenced in terms of natural resources, but for the purposes of this report, energy regulatory services will refer specifically to the transportation, transmission or distribution, purchase or sale of energy. Telecommunications services will include the transmission and reception of signals by any electromagnetic means. And transportation services will be discussed in the context of maritime transport and air transport. Both Canada and Japan would like to encourage foreign investments, promote value-added services and increase market access for service providers in these sectors. While the two countries have made strides towards liberalizing these sectors, there still remain a few points of contention. For example, the Ontario Feed-In-Tariff program for renewable energy contains a local content requirement which gives generators incentives to purchase photovoltaic cells and other equipment originated in Ontario. Consequently, products exported by Japanese companies are becoming less favourable. According to Japan, the Ontario government is violating national treatment obligations under the WTO.

Canada and Japan share a natural synergy as trading partners: Canada has an abundance of natural resources, and Japan has capital and is a leader in technological research and development. Both countries support the liberalization of trade in the service sectors, recognize the importance of transparency, and emphasize the need to improve investment conditions. This dynamic creates a good opportunity for complementarities, especially in the arena of energy-efficient technologies (i.e. ‘greener’ energy).

Energy, telecommunications and transportation all fall within the trade in services category of the WTO, which is governed by the General Agreement of Trade in Services (GATS). The GATS treaty outlines some of the key disciplines and principles of the WTO, and it was created to extend the multilateral trading system approach to the service sectors. This report will consider the GATS treaty to be the basis of which the prospective Canada-Japan FTA/EPA will build upon, ensuring compliance to WTO trade regulations and standards.

This report is divided into four sections: party comparison, cross section comparison of texts, additional notes and information, and the appendix which will include relevant sections of past FTA/EPA signed by both Canada and Japan. The party comparison section will introduce the current situation of the energy, transportation and telecommunication sectors in Canada and Japan, compare the main objectives of both countries and propose areas of common interest and possible disputes. The additional notes and information section contains relevant portions of the Canada-Japan Economic Framework and Joint Study, and several of the GATS Annexes related to the three service sectors.

NOTE: Changes during the negotiation simulation:

– We collectively decided to put Energy under the Goods – Natural Resources sections.

– Due to time constraints, we excluded Transportation altogether.

Japan–Canada Intellectual Property Rights: An Overview

The following post provides an overview of the issues related to Japan–Canada Intellectual Property Rights (hereafter referred to as IPR). As will be detailed below, there exists more agreement between the two economies than opposition on this issue. Therefore, this report will focus primarily on the agreements that Japan and Canada have in force with other economies around the world to use as a basis for an agreement between each other. Issues of disagreement and concern will also be addressed – but play a much smaller role in this report due to the very lack of difference.

Economies today are linked together in ways that trading systems of past did not have to consider. Trading relationships between economies have increasingly been playing catch-up with advancements in technology and knowledge transfer. Commerce conducted in the twenty-first century involves much more than just ‘goods’, trade increasingly involves services and IPR.

The fundamental rights protected by IPR are over a person’s right to creations of their own mind. IPR includes coverage of patents, trademarks and copyrights. These commercial items are so intrinsically linked to products and services in commerce today that they can actually be more important than the actual goods or services they protect.

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights, otherwise known as TRIPS, setup the international rules governing intellectual property. TRIPS is the baseline for all agreements between economies on the topic of IPR. All free trade agreements (FTA) and economic partnership agreements (EPA) reference TRIPs and either modify or reiterate this agreement.

Canada and Japan work together in many international forums that are developing IPR for the future. Because these two economies work together in these international venues – many of the issues surrounding IPR for each country are well known and understood.

A few issues of disagreement may arise during trade negotiations. In the past, Japan has complained about Canada’s enforcement of IPR within its borders, citing evidence that Japanese IPR has been infringed upon, meaning that pirated goods have been found within Canada. Another issue of IPR may be generic pharmaceuticals produced in Canada.

Many of the points of agreement arise from the very fact that Canada and Japan are developed economies – that both share narrow interpretations of IPR. Both countries – as a percentage of GDP – have large industrial (Japan 23%, Canada 20%) and service (Japan 75.9%, Canada 78%) sectors. Issues surrounding IPR protections will inevitably arise in trade negotiations, but will likely be minor in relation to other sectors.

Movement of Natural Persons

The primary focus of this report is on the movement of natural persons, however the report will touch on three other issues: mutual recognition; cooperation in tourism; and cultural exceptions. These three minor issues are primarily relegated to the later portion of the report, and will likely enter our final artifact as slightly altered forms of their current manifestations in existing FTAs.

When addressing the movement of natural persons, it is important to start with the General Agreement on Trade in Services (GATS). GATS identifies four modes of trade in services: cross-border supply, consumption abroad, commercial presence, and presence of natural persons. It is the fourth mode, and only the fourth mode, which relates to actual migration. Mode 4 is defined in Article I.2 (d) of GATS as being “the supply of a service… by a service supplier of one Member, through presence of natural persons of a Member in the territory of another Member”. This definition applies to nationals as well as, in certain circumstances, permanent residents of WTO Members seeking to supply services abroad. Generally, GATS mode 4 is seen as covering three areas:

When a foreign service supplier obtains a contract to supply services to the host country company and sends its employees to provide the services
An individual who sells services to a host country company or to an individual
Persons who are employed abroad by foreign companies established in the host country.

Mode 4 service suppliers can be differentiated from other migratory labor as these suppliers: gain entry for a specific purpose, are normally confined to one sector, and are temporary. Most countries, however, including Japan and Canada have only made horizontal commitments (as outlined in the table on page 5, under status quo).

While GATS commitments apply to all WTO members, FTAs/EPAs can include sections that expand on the movement of natural persons in order to create a special bilateral relationship between countries which would not be possible on a multilateral basis. Expansion typically takes to form of an extended list of professions which qualify for trade. In most agreements, labour mobility does not override general migration legislation. Exceptions are made for national security, public health and safety, and the protection of the domestic labor force. Hence, parties retain broad discretion to grant, refuse, and administer residence permits and visas. Many agreements exclude certain service sectors from coverage or apply special rules to certain sectors. Many agreements, foremost among them the North American Free Trade Agreement (NAFTA), are no longer limited to trade in services, but group intra-corporate transferees, service suppliers, and investors together in a separate chapter on the general movement of natural persons.

When dealing specifically with Japan and Canada, the WTO has isolated several key migration issues. Japan’s shrinking labor force should result in the country easing restrictions on the migration of foreign workers, however to date, this has not been a priority of the Japanese government. To date, most Japanese EPAs cover the movement of natural persons to some degree. In Canada however, immigration is difficult to address in FTAs because Canadian immigration regulations and the issuance and enforcement of licenses fall under both federal and provincial jurisdiction. Because FTAs are negotiated between federal governments, Canada often has its hands tied when dealing with immigration issues. The joint study by Canada and Japan identified several areas in which the Japanese would like to see improvements. In general, Japanese businesspeople would like visa issuance procedures to be simplified and the validity periods to be extended. They would also like greater transparency and clarification on the visa issuance procedures for skilled workers and tourism workers. The joint study does not identify any desire from the Canadian side with regard to migration issues.

Labor, Environment & Development

Executive Summary:
An FTA between two highly developed trading partners sharing common values would
open markets to new goods and services, promote competition and innovation, and
inevitably increase the flows of people. Canada and Japan stand in unity on many
issues around labour standards and environmental commitments. They also continue to work together on bilateral and multilateral development issues of human rights, security and nuclear proliferation.

Both Canada and Japan have commitments to the International Labour Organization
(ILO), but both are still in need of ratifying a number of labour standards, which are
discussed within this document. Canada needs to better address labour standards,
while Japan needs to better address gender wage gaps and equal access to employment.

WTO/GATT trade rules respect countries’ rights to adopt appropriate environmental
policies, according to their respective circumstances, to protect their own environment.
This basic principle should continue to be upheld firmly (see references). At the same
time, it should be borne in mind that protectionism in the name of environmental
protection often prevents efficient allocation of resources and destroys the mutual trust
among countries, which is necessary for stable functioning of the international trading
system, consequently damaging the prospect of attaining sustainable development in
the world.

Japan and Canada have been cooperating in many fields other than economic
liberalization. The Japan-‐‑Canada/Canada Japan Inter-‐‑Parliamentary Friendship Group meets every year. Talks between the two governments include peace and security, housing, fisheries, finance, and telecommunications. Grassroots-‐‑level exchanges are also active through such programs as the JET program and the Working Holiday programmes.