Canada to Impose Safeguard Measures on Steel Imports

This week the Government of Canada announced its intent to impose restrictions on imports of seven classes of steel products to mitigate harm caused by “the diversion of foreign steel products into Canada.”  See the News Release dated Oct. 11, 2018,  and Notice of Commencement of Safeguard Inquiry.

The seven classes include wire rod; stainless steel wire; hot-rolled sheet; heavy plate; energy tubular; pre-painted steel; and concrete reinforcing bar.

These “safeguard measures” were reportedly prompted by complaints from Canada’s steel industry that U.S. Section 232 tariffs on steel and aluminum have resulted in shipments of cheap steel to be diverted to Canada from the U.S., and follows the country’s countermeasures imposed on July 1st applying tariffs on over $12 billion worth of U.S. goods in response to those tariffs.

Notably, the safeguards do not apply to goods originating in and imported from the U.S., Chile and Israel.  However imports of energy tubular and wire rod from Mexico “are within the scope of the Tribunal’s inquiry.” Continue Reading

ITC Initiates Investigation of the Likely Impact of USMCA

Last Friday, the U.S. International Trade Commission (“ITC”) formally launched an investigation into the economic benefits of the new U.S.-Mexico-Canada Agreement (“USMCA”) that is to replace NAFTA.

Under the Trade Promotion Authority (“TPA”) law, known as the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, the ITC must prepare a report that assesses the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors, as well as the interests of U.S. consumers.  This report, which will be made public, is due to the President and Congress no more than 105 days after the President signs the agreement. The TPA requires the President to wait 90 days from the date of the notification before signing the USMCA.  President Trump notified Congress of his intent to enter into the new trade agreement on August 31, 2018.  Therefore, the earliest the President may sign the agreement is November 30, 2018.

Congress is expected to wait until the ITC report is issued before voting on the new agreement.  In fact, Senate majority leader Mitch McConnell recently told Bloomberg in an interview that the vote on USMCA will be a “next-year issue.”

If Congress does not pass the TPA, the President has threatened to withdraw from NAFTA.  Continue Reading

U.S. Opens Trade Talks with EU, Japan, and the UK

Yesterday, the Office of the U.S. Trade Representative (“USTR”) officially notified Congress that it would be launching separate trade discussions with the European Union, Japan, and the United Kingdom.  The letters sent to Congress provide notice of the Administration’s intent to negotiate trade agreements with each partner as required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, often referred to as Trade Promotion Authority (“TPA”).  USTR must wait at least 90 calendar days from yesterday’s notification to initiate negotiations, and must also publish specific negotiating objectives in the Federal Register at least 30 days before talks begin.

In addition to general negotiating objectives across numerous areas – including trade in goods, services, and agriculture; intellectual property; digital trade and cross-border data flows; labor and the environment; trade remedies; anti-corruption; and dispute settlement – TPA also establishes procedures for consultation with Congress and other stakeholders throughout trade agreement negotiations.  These procedures include required reports on certain aspects of the agreement prior to signing the agreement; Congressional notification 90 days before signature; release of the final agreement text 60 days before signature; and Congressional notification of expected changes to U.S. law 60-180 days before signature.  USTR also engages with public and private sector stakeholders through consultation with various policy- and sector-oriented trade advisory committees and through comment periods and hearings announced in the Federal Register.

The United States began bilateral negotiations with the EU in July 2013 in an effort called the Transatlantic Trade and Investment Partnership (“TTIP”).  The last round – the 15th – of those negotiations took place in New York in early October 2016, during the Obama Administration.  While the Trump Administration’s new trade talks with the EU will likely build on some aspects of the prior negotiations, it is unclear at this point how previously agreed upon terms will be treated.  Notably, the interests of the United Kingdom, as a member of the EU, were represented in those earlier TTIP negotiations.  As a result of the UK’s exit from the European Union, the Administration now intends to enter into a separate trade agreement with the UK.  As stated in USTR’s notification letter to Congress, those discussions will begin “as soon as {the UK} is ready after it exits from the European Union on March 29, 2019.”  In its Congressional notification letters regarding both the EU and the UK, the USTR cited challenges from multiple tariff and non-tariff barriers, leading to chronic U.S. trade imbalances.

The United States and Japan also have a history of trade negotiations, but in the context of the multilateral Trans-Pacific Partnership (“TPP”) among 12 countries.  Although the United States signed a completed TPP agreement in February 2016, that deal was never ratified by the United States, which withdrew from the agreement on January 23, 2017.  Japan was instrumental in corralling the remaining 11 countries to sign a modified agreement called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) in March 2018.  Until as recently as September 26th of this year, Japanese Prime Minister Shinzo Abe had resisted the idea of bilateral talks with the United States, instead favoring the United States’ return to the CPTPP.  Recent discussions on the potential for the United States to impose 25 percent tariff on automobile exports from Japan apparently brought Japan to the table.  “Japan is an important, but still too often underperforming, market for U.S. exporters of goods,” USTR said in its letter to Congress.  “U.S. exporters in key sectors such as automobiles, agriculture, and services have been challenged by multiple tariffs and non-tariff barriers for decades.”

China Lingers in the Background of USMCA

As we previously reported, the United States, Canada, and Mexico have reached agreement on the United States-Mexico-Canada Agreement (“USMCA”) to replace the North American Free Trade Agreement (“NAFTA”), which has governed trade between the three countries since 1994.  Article 32.10 of the agreement requires each country to notify the others of any intention to negotiate a free trade agreement with a “non-market country.”  The provision defines a “non-market country,” as any country that: (1) one or more USMCA member countries has determined to be a non-market economy for purposes of the USMCA member country’s trade remedy laws; and (2) none of the USMCA member countries has a free trade agreement with.

Last year, as a result of the expiration of certain language in China’s World Trade Organization (“WTO”) Protocol, the U.S. Department of Commerce conducted a review of its designation of China as a non-market economy country for purposes of the U.S. antidumping laws.  The Department announced the results of its review of China’s status on October 26, 2017, concluding that China continued to be a non-market economy country.  Further, none of the USMCA member countries have a free trade agreement with China.  As a result, China would be considered a “non-market country” for purposes of the USMCA.

Article 32.10 requires a USMCA member country seeking to negotiate a free trade agreement with China, or any other “non-market country” to: Continue Reading

Trilateral Trade Agreement Reached with Heads of State of Canada, Mexico, and US

On Sunday, the heads of state of Canada and the United States agreed on terms for a new trilateral deal with Mexico.  The agreement, now known as the United States-Mexico-Canada Agreement “USMCA,” provides several new updates to its NAFTA predecessor.  The deal’s terms, including those established in August in an agreement between the U.S. and Mexico, are contained in 34 chapters of various topics from Agriculture to Macroeconomic Policies and Exchange Rate Matters.   In addition, the agreement contains country-specific annexes and “Side Letters”.

The “Side Letters” accompanying the deal include, among other topics, promises that the U.S. will not impose tariff or import restrictions under Section 232 on Canada or Mexico for 60 days as the countries continue to negotiate on the topic.  The Side Letters also provide for the exclusion of several products from measures under Section 232.  In particular, the U.S. agreed to exclude light trucks and 2.6 million passenger vehicles per year from both Canada and Mexico.  In addition, the U.S. will exclude $32.4 billion and $108 billion in declared customs value of auto parts per year from Canada and Mexico, respectively.

Among other noteworthy updates, the agreement establishes new provisions for rules of origin.  The deal requires that 75 percent of auto content be made in North America and that 40-45 percent of auto content be made by workers earning at least $16 an hour.  Updated provisions and procedures for rules of origin were also included to help prevent duty evasion.

The new agreement also prohibits customs duties on digital products and minimizes limits on where data may be stored to promote digital trade, and includes extensive environmental obligations to address a variety of concerns.  Several new industry-specific agreements were reached, including those relating to pharmaceuticals, medical devices, cosmetic products, and chemicals.

Congress is expected to vote on the deal in 2019.

 

 

 

What are the prospects of a U.S.-UK trade agreement after Brexit?

Brexiteers claim that leaving the EU single market and customs union creates a golden opportunity for the UK to regain power over its international trade.  The potential future post-Brexit free-trade agreement that has received the most attention is that between the U.S. and the UK.  A U.S.-UK Trade and Investment Working Group was set up in July 2017 to lay the groundwork for a potential future U.S.-UK free-trade agreement after Brexit.  Political interest on both sides of the Atlantic was also boosted last week in New York as U.S. President Donald Trump and UK Prime Minister Theresa May reiterated their “mutual desire to form a wide-ranging trade deal.”  The U.S. is, however, the more important market with the stronger bargaining power. The UK takes only 3 percent of U.S. exports, while the U.S. accounts for 15 percent of UK exports, as well as roughly 19 percent of the UK’s total imports of services and nearly 22 percent of the UK’s total exports of services. Continue Reading

United States and Japan to Discuss Bilateral Trade Deal

In a joint statement issued yesterday, the United States and Japan announced that the two countries will begin discussions to enter into a bilateral trade deal.  The announcement comes after President Trump and Prime Minister Shinzo Abe attended a Summit Meeting in New York to discuss a host of issues, including trade.  The joint statement highlighted that the two countries will enter into negotiations for a trade agreement that will cover goods and services, as well as other unnamed areas.  Following completion of the trade deal, the two countries also “intend to have negotiations on other trade and investment items.”

The joint statement also reflects the established positions of each government with respect to certain sectors, with the auto industry likely to take center stage on the U.S. agenda: Continue Reading

United States and South Korea Sign Updated FTA

On Monday, President Trump and President Moon Jae-in of South Korea signed a revised U.S.-Korea (known as “KORUS”) free trade agreement on the sidelines of the United National General Assembly meeting this week in New York.  In April 2017, President Trump indicated that he wanted to either renegotiate or terminate the then-five year old agreement.  Since then, the parties have engaged in trade talks, under the auspices of the existing KORUS review procedures and otherwise, to update key provisions.  Early on, the United States appeared to be primarily focused on changes to help reduce the United States’ bilateral trade deficit.  In March 2018, the Office of the United States Trade Representative issued a summary of the agreed-upon outcomes of the negotiations, and released the draft text earlier this month, with emphasis on how the revisions will “rebalanc{e} our trade” and “reduce the trade deficit.”

The changes to KORUS focus on the auto sector, customs procedures, and pharmaceutical reimbursement.  With respect to autos, the largest change is a 20-year extended phase-out period for the current 25% U.S. tariff on imports of light trucks from Korea.  That tariff will now expire in 2041, instead of 2021, which, according to the U.S. International Trade Commission, will delay the anticipated increase of 59,000 Korean truck imports.  Korea has also agreed to increasing the quota of U.S.-origin autos that meet U.S. safety standards (but not Korean safety standard) from 25,000 to 50,000 per manufacturer, per year.  Korea further agreed to recognizing U.S. standards for auto parts exports necessary to service U.S. vehicles in Korea and a harmonized testing system for emissions standards.  With respect to improving customs procedures, Korea will address onerous and costly customs verification procedures for U.S. exports, which have been Continue Reading

Could Brexit Benefit Africa Through Science-based Decisions on GMOs?

Prime Minister Theresa May’s recent visit to Kenya, South Africa and Nigeria was the latest in the United Kingdom’s global diplomacy effort to secure strategic economic­ partnerships in preparation for the UK leaving the European Union (EU).  In the first visit of a UK Prime Minister to Africa since 2013, a 29 person delegation of government and private sector representatives pursued May’s goal of becoming Africa’s biggest foreign investor within four years.  As a result of the trip, trade and investment deals worth some 300 million GBP were announced, involving everything from automobile manufacturing and digital money transfer services to insurance and agricultural technology. Importantly, the UK also reached a deal with the Southern African Customs Union and Mozambique to facilitate trade and announced major investments in education and voluntary family planning for the future of African youth.

Trade between the UK and Africa already is worth 31 billion GBP annually.  By 2050, a quarter of the world’s consumers will be African. According to the Prime Minister, “With a shared passion for entrepreneurship, technology and innovation, now is the time for UK companies to strengthen their partnerships with Africa to boost jobs and prosperity both at home and overseas.”

According to the African Agricultural Technology Foundation, 233 million Africans are either suffering from hunger or are malnourished; 32 million of these are under the age of five.  While Africa’s economy is driven by agriculture, farming continues to be largely at a subsistence level:  80 percent of the 51 million farmers are small holder farmers.  Further, 95 percent of all farming in Africa is entirely dependent on rainfall.  The challenge under these conditions is to increase food production by 50 to 70 percent by 2050 without destroying the environment.  What will be required is a combination of increasingly sophisticated farming techniques (e.g. precision farming), precision breeding; improved stewardship; access to advancements achieved by modern biotechnology to increase drought tolerance, increase yield, and combat plant pests and diseases; and enabling regulatory policies and frameworks.  Critical is the fact that more efficient agriculture directly translates into freeing women and children to pursue other economic activities and/or education. Continue Reading

Preparing for the Worst:  Licenses Needed for UK Export of Dual Use Items

It has always been a possibility that the United Kingdom would crash out of the European Union on 30 March 2019 but “no deal” preparation is now highly recommended by both sides.  For organisations that export dual use items, the possibility of the UK becoming a “third country” vis-à-vis the EU without an exit agreement or transition period means an overnight need for export licenses where none are required today.

Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume.  In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls.   Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU.  Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed. Continue Reading

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