Trade Agreements

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What happens next in British politics could mean a significant shift in the United Kingdom’s trade ties with the United States – but the hurdles are many and the process to reach results could be lengthy. Voting in the Conservative Party leadership contest closes today, with the winner and successor to UK Prime Minister Theresa May to take up position on 24 July. The two Tory leadership rivals, former foreign secretary Boris Johnson and the incumbent foreign secretary Jeremy Hunt, both have been calling to strengthen the U.S.-UK “special relationship” as they vied for the support of 160,000 Conservative Party members. Frontrunner Boris Johnson has pledged to seek an ambitious UK-U.S. trade deal as one of his first acts in office. This would be good news for the more than 40,000 U.S. companies exporting to and operating in the UK, many of which are negatively impacted by uncertainty over Brexit and the possibility of an economic rupture between the UK and the European Union. If – as expected – UK Prime Minister Theresa May hands over the reins to Boris Johnson in two days, a highly topical question will be how his premiership might fare in securing a U.S.-UK trade deal.

On the U.S. side, there is strong political support by the Trump Administration and some Members of Congress for a U.S.-UK trading alliance. Several steps already have been taken to strengthen the Anglo-American trading relationship and mitigate negative impacts of Brexit. In February this year, a U.S.-UK Mutual Recognition Agreement (MRA) was concluded, which rolls over relevant aspects of the existing U.S.-EU MRA, covering electromagnetic compatibility, telecommunication equipment and good manufacturing practice of pharmaceuticals. U.S.-UK agreements on derivatives and insurance also have been agreed. These would take effect immediately after the UK exits the EU in an EU-UK “no deal” Brexit scenario or at the end of a transition period in a “deal” scenario. UK-U.S. preliminary talks on a bilateral free trade agreement (FTA) spanning the last two years, however, have failed to show any meaningful progress and are considered to be deadlocked. Should the UK leave the EU without a deal at the end of October, World Trade Organization (WTO) terms would govern U.S.-UK trade until such time as a trade deal is agreed.

Much hinges on the UK’s post-Brexit trading relationship with the EU, which still remains a priority for the UK. As Boris Johnson pursues hardline rhetoric on Brexit, insisting both that the current EU-UK deal needs to be renegotiated – which EU leaders reject – and that the UK will leave the EU on the scheduled date of 31 October 2019, with or without a deal, it is difficult to predict how the UK-EU trading relationship will unfold in the coming months. …
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The ongoing WTO aircraft subsidy disputes, resulting in both EU and U.S. retaliatory tariff announcements, and the failing EU-U.S. trade agreement negotiations certainly have strained trade relations. Nevertheless, there appears to be some hope of reaching a trade deal before the end of the European Commission’s term in October. As currently outlined, the trade agreement…

On 28 June 2019, the European Union and the South American customs union Mercosur (Brazil, Argentina, Paraguay, and Uruguay) struck a sweeping trade agreement covering almost 100 billion dollars’ worth of bilateral trade annually. Twenty years in the making, with stop-start trade negotiations having started in 1999, the EU-Mercosur political agreement is considered by the negotiating parties on both sides as a significant achievement. However, the terms of the deal – which have been published in draft individual chapters as both sides undertake a legal review of the text –  have elicited sharp criticism.

The European Commission characterises the accord as its most lucrative to date, saving businesses about 4 billion euros ($4.55 billion) in tariffs on exports, quadruple the amount achieved on its trade deal with Japan. For Mercosur, this would be its first deep trade agreement, which could spur economic growth in the region and strengthen Mercosur’s ability to compete in international markets. The Commission therefore has been quick to defend the deal, highlighting that it includes strong provisions on environmental protection and promotes sustainable development, notably by insisting that both parties maintain commitments and engagement under the Paris climate change agreement. EU Agriculture Commissioner Phil Hogan has been particularly vocal in support of the deal, underscoring that while including some trade-offs, it opens up new markets for EU agricultural producers and protects European food standards. While Irish Prime Minister Leo Varadkar has stated that he would not vote for the deal if it runs contrary to Ireland’s interests, Varadkar recently agreed to Hogan staying on in the next European Commission term, thereby positioning him to continue his strong advocacy in support of the agreement.

EU parliamentarians, several EU Member States and lobby groups, on the other hand, have decried the EU-Mercosur agreement as being detrimental for the environment, food safety and the EU’s agricultural sector. Surrounded by protesting Irish farmers, on 11 July, …
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On Friday, May 17th, the Trump Administration announced that it has reached a deal with Canada and Mexico to eliminate national security-focused Section 232 tariffs on steel and aluminum (at 25 percent and 10 percent, respectively) from Canada and Mexico.  According to a joint statement by the United States and Canada, US.…

On Friday, May 17, President Donald J. Trump issued a proclamation directing the United States Trade Representative (USTR) to negotiate trade agreements to address the national security threat posed by imports of foreign automobiles and certain automotive parts. The proclamation provides for 180 days of negotiations, delaying the decision on whether to impose import restrictions…

The European Union has just released a list of U.S. products for retaliatory tariffs following the recent announcement by the U.S. of its intent to levy additional duties on European products. The EU list covers nearly $23 billion worth of U.S. goods including tractors, luggage, frozen fish, fruit, wine, ketchup, nuts, and orange juice. …

European Commissioner for Trade Cecilia Malmström was in Washington, D.C. last week for exploratory trade talks with U.S. officials.  Although Malmström does not yet have a mandate to move ahead on EU-U.S. trade negotiations, which requires authorization by the European Council, both sides surely had plenty to discuss at this stage.

Two months ago, both the EU and the United States released their respective negotiating directives that highlight a disagreement over whether to include agriculture within the scope of any trade talks. While the European Commission intends to limit negotiations to industrial goods and conformity assessment, the United States is pushing for a more far-reaching trade deal that also covers agricultural goods.  The EU also wants to include discussions regarding automotive products within the scope of any trade negotiations on industrial goods, which it argues is required under World Trade Organization (WTO) rules on preferential trade agreements (i.e., these must cover “substantially all trade” between members).  Malmström is likely to also seek clarification on whether the Trump Administration intends to impose tariffs on certain EU automotive products.  If it does, the EU has indicated the possibility that it will suspend any trade talks and retaliate.  If the two sides can find common ground on these issues, however, the European Commission has stated that it hopes to conclude trade talks with the U.S. by November 2019.…
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Following President Trump’s announcement of his decision to delay the March 1, 2019 deadline to increase tariffs from 10% to 25% on $200 billion of Chinese goods (i.e., List 3 items), Ambassador Lighthizer testified before the House Ways and Means Committee about the progress that has been made on concluding a binding executive agreement with…

On January 29, USTR Ambassador Lighthizer delivered to Congress a list describing changes to U.S. laws that would be required to fulfill obligations agreed to under the United States Mexico Canada Agreement (USMCA).  This action, taken in accordance with procedures set forth in the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (also known as Trade Promotion Authority or TPA), brings the agreement one step closer to Congressional consideration by identifying the legal changes that must be included in an implementing bill to be voted on by legislators to approve the underlying agreement.

The changes in existing law are largely customs related, the bulk of which involve implementing market access commitments, including lowering tariffs and creating new tariff rate quotas, as well as updating provisions related to duty drawback, merchandise processing fees and customs enforcement.  For example, while USMCA preserves duty free treatment for industrial goods and textiles under NAFTA, the United States and Canada negotiated additional access on certain agricultural products.  Accordingly, modifications must be made to eliminate U.S. tariffs on such products from Canada, including dairy, sugar, sugar-containing products, peanuts and peanut products and cotton.

Changes are also required to implement rules of origin, origin procedures and customs measures to provide preferential tariff treatment for eligible goods.  The most significant and notable changes involve automotive goods.  Necessary legal revisions will end NAFTA’s tracing and “deemed originating” requirements and increase the required regional value content for vehicles and vehicle parts.  Changes are also needed to implement a new “Labor Value Content” rule, which for the first time requires that a minimum amount of car content …
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