Happy New Year! It is both a new year and a new decade, but several stories we were following in 2019 have spilled over into 2020. 2019 started off as a year of uncertainty and volatility with increased trade restrictive measures and slowing global merchandise trade growth and foreign direct investment (FDI) flows.
Towards the end of 2019 some positive developments occurred and so 2020 does present some potential bright spots, such as the likely ratification of the US-Mexico-Canada (USMCA) Agreement, a now definitive date for Brexit and what appears to be an initial US/China deal.
There are many things which are likely to impact global trade in 2020, including geopolitical developments, technological advancements, data privacy rules, climate change and the growing demand for more environmentally-friendly goods and services. All of these have the potential to either positively or negatively impact, inter alia, freight rates, supply chains and firms’ import, export and investment decisions, and on a wider scale, the global economy.
While this is not meant to be an exhaustive list, here are the top ten trade developments we will be watching in 2020:
- WTO Reform
The WTO is celebrating its 25th year of existence, but is also facing several challenges which threaten to undermine some seventy years of a rules-based multilateral trading system. Key this year to watch will be whether there will be a solution to the now defunct Appellate Body, and whether there will finally be a conclusion to the fisheries subsidies negotiations which again failed to yield an agreement last year. The US also continues to argue for a revamping of the current system of eligibility for Special & Differential Treatment. The 12th WTO Ministerial Conference will be held in Nur-Sultan, Kazahstan in June 2020, and will therefore be one of the organisation’s most important ministerial meetings to watch.
After several missed deadlines for leaving the European Union (EU), the decisive victory handed to the Conservatives in the December 12, 2019 snap United Kingdom (UK) election meant that Prime Minister Boris Johnson was able to get parliamentary approval of his deal with the EU. The UK is now on track to leave the current 28-member grouping on January 31, 2020. Some political and economic uncertainty remains, however, especially with the stronger electoral performance of the Scottish National Party (SNP). Will the Scottish opposition to leaving the EU undermine the unity of the UK and will there be yet another Scottish independence referendum? What kind of post-Brexit trade agreement will the UK and EU eventually negotiate?
3. Trade Wars: US/China and Japan/South Korea
After a year of continued touch and go negotiations and escalating tensions between the US and China, a ‘Phase One’ trade deal, which was announced in December 2019, will be signed January 15, 2020. The text of the Agreement has not yet been released, but it reportedly contains chapters on intellectual property, technology transfer, agriculture, financial services, unfair currency practices, trade expansion and dispute resolution. Under the agreement, China has agreed to increase imports from the US, and the US has deferred implementing the List 4B Section 301 tariffs which were to have come into effect on December 15, 2019 and decreased some of the List 4A tariffs.
Receiving much less attention is the Japan-South Korea trade tensions which escalated in summer 2019 with fears that it could have harmed the global economy. The two Asian economic behemoths have had a challenging political history, but tensions flared up in July 2019 when Japan restricted the export of three chemicals (fluorinated polyamides, photoresists, and hydrogen fluoride) to South Korea. Japan is the major exporter of these chemicals which are needed in the production of semi-conductors and display screens – top export products for South Korea. Senior-level negotiations between the two countries were held in December and there appears to be some de-escalation in tensions.
4. US Presidential Election
Without doubt, the inauguration of President Donald Trump in 2017 saw a radical shift in the US’ trade and foreign policy. At this stage, it is unclear who the democratic nominee will be. However, trade policy is likely to be a major issue in the US election campaign, and even among the current democratic contenders there are some differences in their approaches to trade policy.
What is certain, however, is that a Trump re-election in November 2020 would entail four more years of economic nationalism, a continued retreat from multilateralism, undermining of the rules-based multilateral trading system, and climate change denial.
4. Regional Trade Agreements: USMCA, RCEP and AfCFTA
After much uncertainty about the fate of the US-Mexico-Canada Agreement (USMCA) – the agreement which seeks to update and replace the NAFTA – a revised agreement was eventually signed in December 2019. It will need to be ratified by each of three parties in order to enter into force.
Another agreement to watch will be the Regional Comprehensive Economic Partnership (RCEP) whose negotiations began in 2012. At the Bangkok Summit in November 2019, it was announced that the text has been agreed. Although India pulled out of the RCEP negotiations, it appears that the remaining fifteen parties are on track to sign the Agreement in 2020.
Phase II negotiations on the operationalisation of the Africa Continental Free Trade Agreement (AfCFTA) will begin in 2020 and will focus on investment, competition policy and intellectual property.
5. IMO shipping fuel standards
The United Nations International Maritime Organisation (IMO) Low Sulphur Regulation comes into effect January 1, 2020. From this date, the IMO requires all shipping companies to reduce their sulphur emissions by 85%. The sulphur in fuel oil must be reduced to 0,50 from 3,50% for all sea-going vessels. This is an important move for reducing shipping emissions, although concerns have been raised about the possible freight rate increases.
6. ACP-EU Post-Cotonou Negotiations
The Cotonou Agreement – the partnership agreement which sets the framework for cooperation between the European Union (EU) on the one hand, and the countries of the ACP (renamed to the Organisation of the African, Caribbean and Pacific Group of States (OACPS) – is due to expire in 2020. The Cotonou Agreement was signed in 2000 and revised in 2010. Negotiations on a successor agreement will continue into 2020.
7. Second Review of the EU-CARIFORUM EPA
2020 would make it twelve years since the EU-CARIFORUM EPA has been provisionally applied between the EU and CARIFORUM countries. The second review on the implementation and impact of the EPA is currently on-going and consultations were held in 2019. The first EPA review in 2014 found that the EPA had not led to a significant increase in CARIFORUM exports to the EU, and there was still implementation work to be still done on both ends. The results of the second review will be important to gauging what additional progress has been made.
8. Pending CCJ Advisory Opinion on freedom of movement
The Caribbean Court of Justice (CCJ) will this year deliver its first advisory opinion pursuant to Article 212 of the Revised Treaty of Chaguaramas (RTC) on the circumstances under which it is lawful for CARICOM Member States to “opt-out” of CARICOM Heads of Government decisions that involve fundamental objectives of the Community. Last year the Court held a two-day hearing where it heard oral submissions. The ruling will be critical to clarifying Community law on opt-outs.
9. UNCTAD XV – October 2020
All eyes will be on Barbados and the United Arab Emirates in October 2020 when the two nations will co-host the UNCTAD XV quadrennial. This will be a good opportunity for Barbados to help influence the trade and development agenda for the next four years, highlighting issues such as climate change and small States issues.
10. COP26 Climate Talks
2020 is a ‘make or break’ year for climate action. By most measures, the UNFCCC COP25 was a disappointment despite being the longest UN climate talks on record. Agreement on Paris Agreement Article 6 (carbon markets) and common timeframes, for instance, remains elusive and has been pushed back again to COP26. It should be noted that 2020 is the year when parties are expected to undertake their first global stocktake under the Paris Agreement and ratchet up their climate ambition by submitting more ambitious nationally determined contributions (NDCs). Climate change both impacts and is impacted by trade. As such, these talks will be key to follow.
As usual, we at the CTLD Blog will be monitoring these developments. We welcome you to follow them with us by reading our weekly Caribbean Trade & Development News Digests. You can subscribe here to receive the mailings directly to your inbox:
Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.
DISCLAIMER: All views expressed herein are her personal views and do not necessarily reflect the views of any institution or entity with which she may be affiliated from time to time.