ENHANCING ASEAN FTA NEGOTIATING CAPACITY PROGRAMME WORKSHOP 1: EU AND ASEAN TRADE POLICY, NEW TRADE ISSUES, STAKEHOLDER

CONSULTATIONS AND FTA NEGOTIATIONS SIMULATIONS Stakeholders Participations in Trade Negotiation

Yose Rizal Damuri

Trade negotiation agenda in many layers of trade agreements is undergoing changes. It is no longer just about tariff cuts and the elimination of quotas. The widening coverage of trade policy results in involvement of many agencies within the government itself and with other non-public institutions. Good coordination of trade policy making is extremely important since it will affect trade performance and competitiveness. The involvement of nongovernment institutions in trade policy making is still limited in many developing nations, thus resulting in weak consensus building among trade-policy stakeholders which will in turn, adversely affect trade policy implementation once final decision have been agreed at multilateral level. The weak consensus building leads to wider criticisms, and in many cases, rejections against the implementation of trade agreements. In many cases, little involvement of multistakeholders in trade negotiations makes the liberalization efforts to take blame for losing competitiveness. When ASEAN-China FTA came into full implementation in 2010, Indonesian parliament and non-public institutions criticized the trade agreement for problems related to the flooding of imported products and lack of competitiveness, while the real problems lay on other aspects of the economy. This gives example that greater participation, in addition to effective trade policy formulation and coordination, to be the key for successful trade agreement negotiation and implementation.

Trade Policy Formulation and Negotiation: Stakeholders Importance

While preparing for trade negotiation is a big task with various different important aspects, starting it with stakeholders identification and greater participation could bring a lot of benefits to the process. From political perspective, careful stakeholders identification ensure better management of interests since those most affected have a strong motivation to use the political process to ensure that the countrys negotiating position reflects their concerns. Greater participation also means that information needed during negotiation and policy formulation can be collected more easily. Finally, stakeholders participated in the process would get full understanding of the outcome and are able to prepare their actions for the unfavourable impacts of trade agreements. Trade negotiation, like other decision making in trade policy, involves a range of public institutions and agencies. Figure 1 shows trade policy formulation process and groups of

stakeholders that likely to be involved. Continuous consultation and consensus building among ministries and agencies is essential to ensure commitment to trade and economic reform. Constant dialogue with legislative agencies and parliament also makes the ratification procedure and implementation more manageable. Constructive dialogue on trade policy between government agencies and private sector is also critical since trade agreement, in the end, is about commerce and business. While traditionally trade issues are alien to many civil organizations, recently some private interest groups began to organize and engage actively. Transparency and greater access to information on trade policy formulation and negotiation process lead to better acceptance of such policies. Academics and research institutions can provide information and analytical skills that may be required to shape trade negotiations but not available in the government agencies. It should be noted that stakeholders participation is an ongoing, two ways process. The participation should not be limited in terms of the launch of negotiation or socialization of the results. Trade authorities should collect initial input before starting the negotiation, inform the stakeholders on the progress and taking feedbacks from them. Active participation requires active contribution from a broad range of stakeholders, although not all are engaged at the same level and or during the same phase of trade policy formulation and trade negotiations. Therefore initial assessment on the importance of stakeholders and their likely influence and contribution at each part of the process become crucial. Finding the right balance between stakeholders contribution and the cost of managing different interests is the key to reap benefits from greater participation.

Intra-government Coordination
Coordination with trade-related government agencies proves to be very delicate and sometimes involves particular political propositions. This often results in policy controversies and inconsistencies 1. Common ways to deal with coordination problems include taking adhoc approach by setting up various inter-departmental teams to deal with a specific policy formulation under the supervision and coordination of an appointed agency. Import duties formulation, for instance, is a regular task that needs to be done with intensive consultation with related ministries and agencies responsible for relevant products. Having an interagencies team under the direction of finance ministry is a common approach to tackle coordination problem in tariff setting. For broader issues such as FTA negotiation, many countries set-up a national team at several levels of responsibilities and tasks 2. The focal point of such team is normally ministry of trade or commerce who responsible to facilitate and to coordinate the negotiation process.

For example, while government is committed to further trade liberalization and to improve performance of manufacturing industries, industrial policies that gives protection to upstream industries are likely to hold back the development downstream manufacture. Agriculture protection which aimed at enhancing food security may also likely worsen poverty. 2 Indonesia set up a National Team for International Trade Negotiation with two coordination levels to handle its multilateral, regional and bilateral trade negotiation. Thailand formed steering committee, supporting committee and negotiating committee for its FTA talks.

Despite all the efforts, coordination seems to be a significant problem in improving trade policy formulation and implementation. The ex-officio positions in the interdepartmental agency create additional workloads for government officials, resulting in a rather ad hoc approach in formulating trade policy. Frequent changes of official positions in government departments add to the already complicated interdepartmental coordination and often disrupt consensus building among trade-related agencies. To tackle this problem, each agency should be asked to designate individuals at permanent position to participate in inter-agency group responsible for the negotiations. Providing them with certain decision making power can also make the consultation process more efficient. Limited exchange of information due to the lack of communication infrastructure and system exacerbates the coordination problem. Information that should be used by many related agencies often can only be accessed by one agency only, or even by a small part of the agency. Conducting interdepartmental meeting on systematic and regular basis can improve the exchange of information, although more permanent solution lay on the development of better information system. In federal-like countries, coordination with local governments raises another concern. Local governments often implement measures that could have major implications for trade and investment that frequently out of central governments policy radar. Trade negotiating team may also have to establish a separate forum for consulting officials from sub-central governments although it may be less intensive. Parliament and other legislative bodies is another crucial branch of government for a successful implementation of a trade agreement. In many developing countries, authorities in conducting trade agreements are accorded to or assumed by the executive, while the role of legislature is limited to ratification of the final agreement. But as many countries have witnessed difficulties in convincing legislature to ratify trade agreements, greater involvement of parliament in the negotiation process is necessary to ensure smooth ratification and implementation process of the result 3.

Government-Private Dialogue
Normal practice for government-private sector dialogue includes awareness raising and information dissemination in form of workshops and public meeting. Those are carried out informally as many developing countries do not specify formal mechanism of private sector participation in trade policy formulation. But the practice currently has been expanded by including private sector in request and offer formulation or even as part of the negotiation group. Greater involvement of private sectors does not only allow trade negotiating authority to obtain support for the ongoing process but also make it easier to collect information needed. This task, however, is challenging because private sector often involve very diverse and conflicting interests. Some business currently gain from more protective regime might oppose
The implementation of US-South Korea FTA, for example, was delayed for more than three years due to objections of the agreement from legislatives of the two nations. ASEAN-India agreement has not been ratified by all members of the Association after three years of the signing.
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the moves toward more liberalization. They would put pressures on the negotiation process since trade agreement may harm the business interest. In many countries, government-private consultation normally takes place at sectoral level. This practice enhances protectionist sentiments among private sectors as they tend to preserve the status-quo. Institutionalized structure for dialogue across different private sectors is scant. Even different members of chamber of commerce regularly come up with different view on trade negotiation. Therefore it is important to mix the private sectors in the consultative mechanism to come up with a balance between those who opposed and those who gain from the agreement. The participation should be transparent and reach as broad as privates sector associations as possible to create To make the situation even more complicated for the negotiation authority, private sectors that may gain from the agreement often do not realize the benefit. Timely information about the progress of negotiation and its likely impact to business sector become more crucial in order to gain support from this type of business. They can be invited to participate in early joint study group normally conducted before the talk begins. Exporters need to be presented with the possible market access expansion come with trade agreement. Manufacturing industries need also be reminded that the trade agreement can bring significant reduction to the cost of intermediate goods. Service liberalization also brings possibilities for lower cost of many production-related-services, in addition to exporting opportunities. Designing an effective consultative mechanism with private sector is not an easy task, but a very important one since in the end those business are the principal users of trade agreements.

The Role of Academics and Civil Society

As many experienced trade negotiators would directly point out, going to the negotiation table unprepared is the most effective way to lose trade negotiation. Solid and appropriate research activities can supply necessary information and provide direction for successful trade negotiation and implementation. Apart from coordination problem discussed above authorities in trade-related institutions often to be inadequately equipped to address complex global trade agenda or to implement trade agreements. Preparing trade negotiation is a complicated task and often negotiating team has neither enough capacity nor human resources to carry out necessary assessment and research. This is where academics and research institutes can contribute to the negotiation process. There are at least three areas where academics can participate actively in the trade negotiation process. The first thing is to conduct research and supplying relevant information to the negotiating team. While the type of research that might be of use range from macro-level of impact assessment to more micro-level research, simple analysis such as possible scenario of tariff reductions or systematic description of non-trade barriers can be useful for the negotiators. To get better idea on what type of research and information that is more directly useful in the nitty-gritty of negotiations, intensive communication between negotiating team and academic advisers is pretty crucial. Whenever it is possible, inviting academic adviser to the negotiation process can also be useful for effective analysis.

The second role is to provide capacity building. While private research institutes can be hired to provide useful analysis for preparing trade negotiation, they may not be available timely as the negotiation normally need fast analysis. Moreover, access into many trade negotiations is sometime limited only to government officials. An in-house research agency is pretty handy for providing faster analysis and information. Capacity building in conducting trade related research and analysis can be provided by the academic society. Cooperation between academics and government agencies can be designed to increase capacity of both parties; government agencies supply data and resources while the academics strengthen their official capacities. The last role is in the dissemination of information and socialization of the negotiation outcome to wider public audience. This is also related to the role of civil society organization. There are some advantages of using academic and civil society to disburse information regarding trade agreement. Those parties are regarded to be relatively interest-free on the matter of sensitive issues such as trade liberalization. Excellent communication skill and public network possessed by the academics and civil society also contribute to better public outreach. For some specific civil society groups, such as environmentalists or labour union, greater participation also means better understanding of wider issue of trade liberalization in balance with their particular interest. Support from this type of group ensure better implementation of trade agreement.

Concluding Remark
Consultative activities need to be conducted simultaneously during trade negotiation process. While it is tempting to conduct the activities at sectoral level and allowing inputs from sectoral-related government agencies as mediator, performing such task directly by the negotiating team and trade authorities ensure faster information exchange and feedback, while also increase the debate and support for trade agreement. Trade authority and negotiating team also need to change their perspective on the activity. Stakeholders consultation should not be seen as a burden but rather an opportunity to take necessary and useful information for successful negotiation and implementation.