Category Archives: Trade Policy

Text of UK-CARIFORUM EPA Published

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Alicia Nicholls

The text of the United Kingdom-CARIFORUM Economic Partnership Agreement (UK-CARIFORUM EPA) has finally been published online. Whether you are a trade policy nerd or simply a business person concerned about the continuity of trade preferences between the UK-CARIFORUM countries post-Brexit, you would be forgiven for anxiously awaiting the release of the text.

Brexit Day (which was to have been March 29, 2019) has passed and the UK remains an EU member and no closer to any certainty regarding its future trading relationship with the EU-27 post-Brexit.  The UK government has requested a further extension to June 30, 2019 in hopes of getting British MPs to back the Draft Withdrawal Agreement which they rejected three times already.

Brexit chaos aside, on March 22, 2019, it was announced that the UK and CARIFORUM countries had signed a trade continuity agreement called the UK-CARIFORUM Economic Partnership Agreement which would preserve the preferences between the UK and CARIFORUM currently under the CARIFORUM-EU EPA. The CARIFORUM-EU EPA has been provisionally applied since 2008.

This means that CARIFORUM is one of the handful of trading partners with which the UK has managed to so far conclude trade continuity agreements. The UK is the most important trading partner in the EU for CARIFORUM countries and CARIFORUM leaders quickly recognised the need to ensure the continuity of trading conditions post-Brexit between the UK and CARIFORUM States.

The UK-CARIFORUM EPA was signed by the UK and nine CARIFORUM States (Barbados, Belize, The Commonwealth of Dominica, Grenada, The Republic of Guyana, Jamaica, St. Christopher & Nevis, St Lucia and St Vincent and the Grenadines) on March 22, 2019. Trinidad & Tobago signed on April 1, 2019, while the remaining CARIFORUM States have indicated they will sign shortly.

As it currently stands, UK-CARIFORUM trading relations remain governed by the CARIFORUM-EU EPA, and the UK-CARIFORUM EPA is only expected to take effect once the CARIFORUM-EU EPA no longer applies to the UK. For it to enter into force, ratification will be needed by each of the parties. The Agreement’s utility stems from the fact that it ensures the continuity of preferential trading relations between the UK and CARIFORUM States once the UK leaves the EU, particularly in the case of a no-deal Brexit.

The UK-CARIFORUM Economic Partnership Agreement replicates the provisions of the CARIFORUM-EU EPA to the extent possible, including its development cooperation provisions. It also establishes a Joint CARIFORUM-UK Council with responsibility for implementing the Agreement, as well as a CARIFORUM-UK Trade and Development Committee. For further information, please feel free to read my commentary on it here: UK-CARIFORUM Economic Partnership Agreement: What does it all mean?

The text of the UK-CARIFORUM Economic Partnership Agreement may now be found  online here.

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.

 

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Accelerating Gender Mainstreaming in CARICOM Trade Policy

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Dr. Jan Yves Remy and Alicia Nicholls

While we can all agree that trade offers the potential for inclusive and sustainable growth in small Caribbean states, deployment of a successful trade strategy requires recognition and ultimately monitoring of its differentiated impacts on women and men. Despite immense strides made in empowering women, they remain under-represented in global trade and are disproportionately affected by international competition and technological changes.

On the occasion of International Women’s Day 2019, we highlight the link between trade and gender and make the case that accelerating gender mainstreaming in trade policies of CARICOM Member States promotes not just gender equality, but inclusive growth as well.

Gender Equality and Development Nexus

Under the United Nations Sustainable Development Goal 5, the international community has committed to achieving gender equality and empowering all women and girls by 2030. Not only is enhancing women’s equality and economic empowerment a human right, but the removal of legal and other barriers to women’s economic inclusion has a multiplier effect in the economy due to women’s dual role as caregivers and economic actors. World Bank research has found that women invest up to 90% of their income in their families, with positive spill-overs for their communities and the economy. A recent Mckinsey Global Institute Report found that advancing women’s equality could add $12 trillion to global GDP by 2025.

Despite this compelling data, and although they account for half of the world’s working age population, women remain under-represented in international trade on account of their unequal access to factors of production and inbuilt gender biases. A recently released World Bank Report entitled “Women Business and the Law 2019” found that out of 187 countries globally, women had equal legal rights to men in only 6.

Gender and Trade Nexus

Trade policies are not necessarily gender neutral: they impact women and men differently at both the country and sectoral levels. Recognizing this, a policy of “gender mainstreaming” aims to promote gender equality by integrating gender considerations in the preparation, design, implementation and monitoring of policies.

Trade creates opportunities for women’s empowerment by creating both employment and business opportunities, but it can also alienate them. For example, while e-commerce can improve women’s access to foreign markets, increased competition through trade liberalisation can displace and marginalize women in agriculture. Because they are both caregivers and economic actors, women often have less time on average than men to engage in entrepreneurial and exporting activities. At the same time, their access to market information is often lower due to fewer networks and lower education levels. Knowing this, ex ante gender-based analysis can assist policymakers to avoid negative gender impacts of policies that they implement.

A number of international institutions have developed programmes to increase women’s inclusion in trade. For instance, the International Trade Centre (ITC) has created a She Trades electronic platform; and the World Trade Organization (WTO), at its Buenos Aires Ministerial Conference in 2017, adopted a Joint Declaration on Trade and Women’s Economic Empowerment. Regionally, the Caribbean Export Development Agency’s Women Empowered Through Export (We-Xport) initiative supports Caribbean businesswomen looking to export for the first time or to increase their goods and services exports.

But there is still lots to do in CARICOM. Despite the fact that CARICOM Member States are signatory to a plethora of international treaties aimed at the empowerment of women, their trade policies are to a large extent being enacted and maintained in the absence of evidence and data that is timely, comparable and sex-disaggregated. Mainstreaming gender into CARICOM countries’ trade and development policy-making would help to ensure that initiatives under the CARICOM Single Market and Economy (CSME) and CARICOM’s trade negotiations with third parties are gender-sensitive. It is, therefore, a welcome development that Belize’s recently launched National Trade Policy (2019-2030) incorporates gender equality as a cross-cutting issue. Another praiseworthy development is that in February 2019, it was announced that national consultations were underway on a draft CARICOM Regional Gender Equality Strategy to advance gender equality and equity and the empowerment of women and girls in each of the fifteen CARICOM Member States.

How can CARICOM Member States promote Gender Mainstreaming in Trade?

Based on the above, we recommend the following ways in which CARICOM’s trade policies may be more gender-sensitive:

  • Mainstreaming gender in the design and implementation of National Trade Policies. Belize’s new National Trade Policy can serve as a good model;
  • Gender sensitivity training of key technocrats charged with formulating, implementing and monitoring trade and economic policies and their gendered impact. Gender-based policy making and monitoring will require greater resource allocation to the agencies charged with gender affairs;
  • Enlisting the assistance of civil society and the private sector in designing trade policies and measuring their impact;
  • Increasing specific programmes in Member States’ aimed a promoting women’s entrepreneurship and export activities through capacity-building, improving their access to finance and to trade information;
  • Promoting greater inclusion of gender provisions in CARICOM’s free trade agreements (FTAs). The most far-reaching of these FTAs like the Canada-Chile and Chile-Uruguay FTAs, contain dedicated trade and gender chapters. CARICOM’s trade agreements, however, are generally sparse on gender provisions;
  • Continued lobbying of regional policy makers to honour the commitments they have made both regionally and internationally to promote gender equality, particularly their reporting and gender mainstreaming commitments.

International Aid for Trade programming is becoming increasingly gender-focused. With foreign donors increasingly making gender an important plank of their aid strategies, CARICOM governments seeking development assistance are increasingly under pressure to include gender considerations. However, gender mainstreaming is not just about ensuring CARICOM Member States meet their international treaty obligations or increase their access donor to funding. When properly implemented, gender-sensitive trade policies promote women’s empowerment, eradicate poverty and foster inclusive growth.

Dr. Jan Yves Remy is the Deputy Director of the University of the West Indies, Cave Hill’s Shridath Ramphal Centre for International Trade Law, Policy & Services. Alicia Nicholls is an international trade and development consultant and contributing author to the UWI SRC’s Trading Thoughts column.

Caribbean Trade & Development Digest – February 3-9, 2019

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Welcome to the Caribbean Trade & Development Digest for the week of February 3-9, 2019! We are happy to bring you the major trade and development headlines and analysis from across the Caribbean Region and the world from the past week. We apologise for the delay in the publication of this edition.

THIS WEEK’S HIGHLIGHTS

A bi-partisan bill has been introduced in the US House of Representatives to reauthorize the US Caribbean Basin Trade Partnership Act (CBTPA) until 2030.

Trade was one of themes touched on by US President Donald J. Trump in his State of the Union Address. See write up here.

UNCTAD identified the winners and losers from the US-China trade tensions in a recently released report entitled The Trade Wars: The Pain and the Gain which may be viewed here.

REGIONAL

Bipartisan Caribbean Trade Bill introduced in US congress

CaribbeanNewsNow: US Reps. Terri Sewell (D-AL) and Brad Wenstrup (R-OH) have introduced legislation to reauthorize the US Caribbean Basin Trade Partnership Act (CBTPA) until 2030. Since 2000, CBTPA has allowed for the duty- and quota-free import of goods made with US yarns, fabrics and threads from Caribbean countries. Read more 

Efforts take shape to reduce OECS food import bill

St. Lucia News Online: Spurring domestic agricultural production to meet local and international demand while reducing the region’s food import bill is the focus of a powerful new data tool recently presented to agricultural decision-makers at the OECS Commission. Read more 

Commercial Court ‘could boost’ Barbados economy

Barbados Today: The minister responsible for business is counting on the planned commercial law court to transform the way business is done and boost the flagging economy. Read more 

Trinidad: PM wants technology to play greater role in energy sector; offers help to Caribbean countries

St Lucia News Online: The Trinidad and Tobago government Monday said it is prepared to assist its fellow Caribbean Community (CARICOM) countries develop their hydrocarbon sector as it placed much emphasis on the importance of technology in developing its own industry. Read more 

Marshall and Brown launches Jamaican gourmet line in UK

Jamaica Observer: A new premium Jamaican product line, Marshall & Brown, has been launched in the United Kingdom (UK) to fill a gap in the market for authentic Jamaican food and cooking ingredients.  Read more 

High demand for Jamaican black castor oil in United States

Jamaica Observer: A new study on the local castor oil industry is showing significant potential for Jamaican black castor oil in the United States. The Complete Caribbean study indicates that the US market for the product stands at about US$28 million. Read more 

CDB President calls for resilience, transformation to drive Regional economic growth

CARICOM Today: Although grappling with challenges related to climate change; wide fiscal deficits and high public debt; as well as high unemployment, the Caribbean Development Bank (CDB) today projected that the Region’s economy is expected to grow by 2% in 2019. Read more 

Trinidadians seeking business opportunities in Jamaica

CARICOM Today:A business delegation from Trinidad and Tobago is in the island for a four-day trade mission from February 5 to 8. The team, being hosted by the Jamaica Chamber of Commerce, represents 10 companies involved in various sectors. These are construction, architectural services, food and beverage, agro-chemical, consumer and household products, software development, marketing and advertising. Read more 

Consultations on CARICOM Gender Policy

CARICOM Today: The first of 15 national consultations on a draft Regional Gender Equality Strategy for CARICOM opened on Thursday, in St. John’s, Antigua and Barbuda. Read more 

INTERNATIONAL

Japan seeking big concessions from Britain in trade talks

The Guardian: Japan is seeking tougher concessions from Britain in trade talks than it secured from the EU, while negotiations between London and Tokyo are also being slowed by the looming risk of no-deal. Read more 

US-China trade war could slash almost 1 million jobs from the US economy, new study says

South China Morning Post: Research from the Washington-based consultancy Trade Partnership Worldwide, paid for by the pro-free trade lobbying group Tariffs Hurt the Heartlands, ominously predicts that more than 2 million American jobs could be on the line should US President Donald Trump push ahead with his threat of a 25 per cent tariff on all Chinese exports. Read more

WTO awards South Korea $85 million against U.S. over washing machine tariffs

Reuters: South Korea can impose annual trade sanctions of $84.81 million on the United States after challenging U.S. anti-dumping and anti-subsidy tariffs on washing machines, a World Trade Organization arbitration panel ruled on Friday. Read more

India, Peru to hold next round of free-trade agreement talks in March in Lima

ET Now: India and Peru will hold the next round of negotiations for a proposed free-trade agreement (FTA) in the South American nation next month, a move aimed at boosting two-way commerce between the countries, an official said.  Read more 

Uruguay Betting On Exports Of Medical Marijuana

Jamaica Gleaner: The country got a head start on competitors in December 2013 when it became the first in the world to regulate the cannabis market from growing to purchase, a move that has brought a wave of investment. Read more 

No-deal Brexit: What does the WTO rules option actually mean and how would it work?

iNews: If the UK leaves the EU without a deal, which is still the default option if one cannot be agreed, it would automatically fall back to World Trade Organization (WTO) rules. But what would this actually mean? Read more

Brexit: May says she can get deal through with binding changes

BBC: Theresa May has told EU leaders she can get the Brexit deal through Parliament if they give her legally-binding changes to it. Read more 

African Free Trade Zone deal may come into force in 2 months: Egypt’s FM

Egypt Today: The agreement of the African Continental Free trade Area (AfCFTA) for 55 member states of the African Union may come into force within six months, said Egyptian Foreign Minister Sameh Shoukry on the sidelines of the 32nd session of the African Union that will kick off on Sunday in Addis Ababa. Read more

Turkey, US ‘will reach $75 bln trade target with free trade agreement’

Hurriyet: Trade volume between Turkey and the United States may reach $75 billion through a free trade agreement and the removal of regulations and tariffs, the chairman of the American-Turkish Council has said, stressing that the bilateral potential has never been realized. Read more

A modernized WTO is far better than no WTO at all

The Hill: Last month, on the sidelines of the World Economic Forum in Davos, leading members of the World Trade Organization (WTO) met to discuss how to improve the organization. At the same time, more than 70 governments agreed to commence WTO negotiations on trade-related aspects of electronic commerce. Read more

China says US report on its WTO compliance lacks factual basis

CNBC: China opposes a report by the U.S. Trade Representative’s office on its World Trade Organization (WTO) compliance, the commerce ministry said, saying it is inconsistent with the facts. Read more

WTO NEWS

Arbitrator issues decision in dispute between Korea and US on large residential washers

WTO: On 8 February 2019, a WTO arbitrator issued a decision on the level of trade suspension Korea may request in its dispute with the United States regarding US anti-dumping and countervailing duty measures on large residential washers from Korea (DS464). Read more 

The Caribbean Trade & Development Digest is a weekly trade news digest published by the Caribbean Trade Law & Development Blog. Liked this issue? To read past issues, please visit here. To receive these mailings directly to your inbox, please follow our blog.

Trade Takeaways from Trump’s Second State of the Union Address

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Photo source: Pixabay

Alicia Nicholls

Last night (February 5, 2019), United States (US) President, Donald J. Trump, delivered his second State of the Union (SOTU) address before a joint session of the US Congress. The President highlighted his administration’s progress on his campaign promises, including on immigration, trade, tax policy, infrastructure and national security. This article takes a brief look at the trade takeaways from the SOTU.

The Context

President Trump came to office with the promise, inter alia, of effecting a seismic shift in US trade policy. America, Trump argued, was being taken advantage of by other countries, while “unfair” trade deals were leading to the outsourcing of American jobs to the detriment of American workers and the American economy.

An underlying theme of President Trump’s SOTU address last night was that of “promises made, promises kept”. The President reminded viewers of his campaign promise “to defend American jobs and demand fair trade for American workers”, while highlighting the achievements made thus far.

Much of President Trump’s trade policy actions have been done through executive actions utilising legislation like the Trade Act which empower the President to take certain trade-related action, such as raising tariffs. Indeed, in just two years, the Trump presidency has heralded a decidedly mercantilist turn in US trade policy, marked by increased unilateral action (even against traditional US allies, such as Canada and the EU), the US’ withdrawal from the Trans-Pacific Partnership Agreement, the renegotiation of the tripartite North American Free Trade Agreement (NAFTA), more aggressive action against China, coupled with threats of withdrawal from the WTO and blockage of appointments/re-appointments of WTO Appellate Body members.

Main Trade Takeaways from SOTU

However, in his address, President Trump focused exclusively on trade policy achievements regarding increased enforcement of US trade laws and the renegotiation of NAFTA. Below are the takeaways:

US-China Trading Relations

China has been the principal target of President Trump’s trade policy actions, leading to an escalation in trade tensions between Washington and Beijing which, according to the major multilateral institutions, are already negatively impacting global trade flows and dampening the outlook for the global economy.

In 2018, the Trump administration imposed tariffs on $250 billion worth of Chinese goods, to which Beijing retaliated with tariffs on $110 billion worth of US goods. Although those parties threatened to impose further tariffs, they made a truce on the sidelines of the G20 Summit in December 2018 not to impose any further tariffs for a 90-day period while trade talks resumed between them. Since the start of the truce, two sets of face-to-face trade talks have been held between the two economic behemoths.

While President Trump proudly boasted that America is “now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end”, he further noted that he and Chinese President Xi were working on a new trade deal. The President, however, reiterated that any US-China trade deal “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs”.

From NAFTA to USMCA

In his SOTU address, President Trump noted that “to build on our incredible economic success, one priority is paramount – reversing decades of calamitous trade policies”. To this effect, one of the President’s major trade policy campaign promises was the renegotiation of NAFTA, an agreement which he derided as a “historic blunder” in his SOTU address.

This renegotiation was accomplished last year with the signing of a replacement agreement called the US-Mexico-Canada (USMCA) Agreement. Some of the major changes include the requirement that 75 percent (up from 62.5 percent under NAFTA) of an automobile’s contents needs to be made in North America for it to qualify for duty-free treatment, greater access to the Canadian dairy market for US farmers, an extension of the terms of copyright protection, stronger labour provisions, a sunset clause and provision for review of the Agreement every six years.

The USMCA was signed in November 2018, but is awaiting ratification by the three parties. However, some Democrats have raised issues with the Agreement. President Trump encouraged Congress to ratify the USMCA, in order to “bring back our manufacturing jobs in even greater numbers, expand American agriculture, protect intellectual property, and ensure that more cars are proudly stamped with our four beautiful words: “Made in the USA.”

United States Reciprocal Trade Bill

President Trump also made a strong appeal to Congress to pass the United States Reciprocal Trade Bill (HR 764), “so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the same product that they sell to us”.

The US Reciprocal Trade Bill, was introduced in the House on January 24, 2019, by Republican representative from Wisconsin’s 7th District, Sean Duffy (R-WI), who is currently the ranking Member of the Financial Services Subcommittee on Housing & Insurance.

Inter alia, the Bill provides that if the President determines that the rate of duty or non-tariff barriers imposed by a foreign country on a particular US good is “significantly higher ” than the rate of duty or non-tariff barriers imposed by the US on that same good imported from that country, the President is empowered to take several actions, including imposing a rate of duty on imports of that good that is equal to that imposed by that country.

The Bill currently has 19 co-sponsors. According to Representative Duffy’s press release, the proposed legislation would give the President “more flexibility in responding to foreign tariffs on U.S. products” and “the tools necessary to pressure other nations to lower their tariffs and stop taking advantage of America”.

If passed, the Bill will, however, likely be challenged by affected countries through the WTO’s dispute settlement system. However, it should be noted that its successful passage by Congress is not guaranteed. Firstly, the Democrats are the majority in the House of Representatives since January 2019, some of whom have openly criticised Trump’s protectionist trade policies. Secondly, and more importantly, some members of Congress, including some Republicans, are already proposing bi-partisan legislation to limit the President’s authority to unilaterally impose trade restrictions for national security purposes.

In the House, for example, Representative Mike Gallagher (R-Wi-8) introduced H.R.940 to amend the Trade Expansion Act of 1962 to impose limitations on the authority of the President to adjust imports that are determined to threaten to impair national security, and for other purposes. Meanwhile, in the Senate, for example, Senator Mike Lee (R-UT)  introduced the Global Trade Accountability Act (S 177), which would amend the Trade Act of 1974 to require congressional approval of unilateral trade action. The House version (HR 723) was introduced by Representative Warren Davidson (R-OH-8).

However, the passage of any of these proposed bills limiting the President’s trade policy powers are not a sure bet either. Even if passed by both Congressional chambers, the bill would almost certainly be vetoed by the President, and would require a two-thirds majority in each house to override a presidential veto, which is not an easy feat.

The big takeaway

The big takeaway is that President Trump is convinced that his mercantilist trade policy is delivering for the American people, a fact he evidences by the increase in jobs and economic growth. Indeed, a fact sheet  was released by the White House on the same day highlighting the President’s trade policy achievements.

However, his trade policies have come at the cost of increased trade tensions, alienating traditional US allies and creating an impending crisis in the WTO’s Appellate Body whose membership is now down to three – the minimum number of members required to hear an appeal.

Several WTO members have already initiated complaints against certain of President Trump’s trade measures, and/or have raised issues during the US’ most recent Trade Policy Review (TPR).

However, barring some Congressional limit on Presidential trade policy powers, the current trade policy approach is likely to continue for the remainder of the Trump Presidency.

The full transcript of the President’s SOTU Address may be viewed here.

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.

Global Trade Policy in 2019: What to Watch?

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This article has been updated.

Alicia Nicholls

Happy New Year to all! 2018 was without doubt a nail-biting year for global trade policy developments. In our first blog for the year, we take a look back at some of the key trade policy developments in 2018 and five developments to watch for 2019!

  1. US-China Trade Tensions and Truce?

Starting with the scary; 2018 saw an escalation in global trade tensions among major trading powers. Without doubt, the election of President Donald Trump in the US in 2016 has led to a more nationalistic, protectionist and unilateral turn in US trade and foreign policy. Under his ‘America First’ ideology, President Trump issued proclamations hiking tariffs on imported steel and aluminum under the guise of national security, with only a small handful of countries being spared.

Tensions between the US and its other key trading partners, such as Canada and the EU, were inflamed, but China was the main target of US trade action. According to the BBC, the US has imposed tariffs on over $250 billion dollars of Chinese goods and had threatened an additional $260 billion, while China has imposed tariffs on $50 billion dollars of US goods and threatened tariffs on an additional $60 billion. Both countries agreed to a truce in December to suspend any further tariff impositions for a 90-day period while talks resume.

Trade talks held between the US and China this week have been hailed as positive by both sides, but the two economic behemoths are still a long way from resolving long-simmering tensions. US President Donald Trump appears confident that China will acquiesce to the US’ demands given the current slowdown in the Chinese economy. However, the US has not escaped the trade tensions unharmed as, for example,  soybean farmers have been affected by the reduced Chinese demand for their produce.

The WTO has warned that the uncertainty around the escalating trade tensions was beginning to adversely impact business and investment confidence, with potential implications for continued global trade growth. Moreover, in its Global Economic Prospects – January 2019 report, ominously titled ‘Darkening Skies’, the World Bank has warned of darkening clouds over the global economy and softening global trade and investment flows.

2. WTO Reform

On the multilateral scene, the crisis in the WTO’s Appellate Body due to the US’ blockage of appointments appears to have given new political will and urgency to the need to reform the WTO, which is facing its greatest existential crisis since its founding in 1995.

The US’ continued blockage of appointments/re-appointments to the organisation’s seven-member Appellate Body has now resulted in only three sitting Appellate Body members – the minimum for the Body to function.

Several WTO members have tabled proposals for reforms on discrete issues, such as transparency/notification, while the European Union (EU) and Canada have both placed more comprehensive reform proposals on the table, including reform of the dispute settlement system.

However, WTO members are still a long way from deciding on how deep and wide-ranging the reform agenda should be. The US, which has for a long time expressed grave reservations about the Appellate Body, has so far not been convinced by any of the proposals tabled.

This year will be critical for deciding on the way forward for WTO reform, especially since the loss of yet another Appellate Body member will result in the Appellate Body being unable to operate, with grave implications for the prompt settlement of disputes and the rules-based multilateral trading system, on a whole.

3. Regional Trade Agreements – AfCTA, USMCA, CPTPP, EU-Japan 

On the regional trade agreement scene, there were several positive and major developments in 2018. One of the most exciting was in March, 2018 when forty-four African states signed the Africa Continental Free Trade Agreement (AfCTA) in Kigali, Rwanda. Since then, five other States have signed the agreement. Thirteen African States have ratified the agreement thus far and further ratifications will be needed before it comes into effect.

President Donald Trump made good on one of his major trade policy promises – the renegotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico to make it ‘fit for purpose’ for the 21st century. In November 2018, the three countries announced they had agreed an agreement under a new name – the United States, Mexico and Canada (USMCA) Agreement. Some of the major changes include more stringent rules of origin (RoO), extension of terms of copyright protection, a sunset clause and provision for a 6-year review.  The Agreement is awaiting ratification in the three countries.

After the US’ withdrawal from the Trans-Pacific Partnership (TPP) under President Trump, the remaining eleven TPP parties signed a successor agreement termed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in March 2018. The Agreement came into effect on December 30, 2018, and its parties account for an estimated 14% of global GDP.

Five years after negotiations began in 2013, the EU and Japan signed the Economic Partnership Agreement and the EU-Japan Strategic Partnership Agreement. The Agreement, which is on track to come in effect in February 2019, is the first free trade agreement to make explicit reference to the Paris Climate Change Agreement which was signed in 2015.

4. Bolsonaro’s Brazil

South America’s largest country, Brazil, elected Jair Bolsonaro who took office as president at the beginning of 2019. Riding the wave of right-wing populism, Mr. Bolsonaro has expressed support for the unilateral foreign policy espoused by his US counterpart and has expressed apathy about Mercosur. Brazil is one of the most influential emerging economies, both hemispherically and internationally. The implications of the South American nation’s shifting foreign and trade policy will, therefore, be key to watch.

5. Brexit Uncertainty

Of course, one of the biggest trade policy developments to watch in 2019 will be the UK’s impending withdrawal from the EU – Brexit – which, as it stands, is to take place on March 29, 2019.

After nearly two years of intense negotiations, the EU-27 and the UK finally arrived at a Draft Agreement on the UK’s Withdrawal from the EU and a Political Declaration Setting out the Framework for the Future Relationship between the EU and the UK in November 2018. The EU-27 leaders endorsed the two texts at a special emergency meeting of the European Council.

However, in the face of strong opposition to the deal, particularly the ‘backstop’ provisions regarding the Northern Ireland/Ireland Border, UK Prime Minister Theresa May cancelled a crucial House of Commons vote on the deal which she likely would have lost. Mrs. May has sought to obtain further binding concessions from the EU, but without success thus far.

This week, the British House of Commons MPs voted in favour of an amendment requiring the Prime Minister to present to Parliament a Brexit Plan B within three days, in the event that MPs reject the current Draft Withdrawal Agreement in their vote rescheduled for next week Tuesday. Meanwhile, Labour Leader Jeremy Corbyn is calling for a general election to break the Brexit deadlock.

The Brexit deadline looms, but the May Government has ruled out requesting an extension under Article 50. With the timeline for the UK’s withdrawal ticking and the real threat of a potentially economically disastrous ‘no-deal’ exit, this will be one of the major trade policy issues to watch in 2019.

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.

President Trump’s Trade Policy Agenda for 2017 Released

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Alicia Nicholls

The Office of the United States’ Trade Representative (USTR) today released a preliminary report outlining President Trump’s Trade Policy Agenda for 2017.  It should be noted that this is a preliminary report prepared in order to comply with the statutory deadline for the report’s annual release March 1, but bearing in mind that President Trump’s nominee for USTR, experienced trade lawyer and former deputy USTR under former President Ronald Reagan, Robert Lighthizer, has not yet been confirmed by the Senate. As such, it has been noted in the report that  a more detailed version will be published once the USTR has been confirmed and has had the opportunity to provide input in that report’s development.

As stated in the report, President Trump sees bipartisan support by the American people for a complete overhaul of US trade policy. In order to effect this, the report states that the overarching purpose of the Trumpian trade policy “will be to expand trade in a way that is freer and fairer for all Americans”.

To this effect, the report outlines four priorities identified by the Administration:

(1) defend U.S. national sovereignty over trade policy;

(2) strictly enforce U.S. trade laws;

(3) use all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services, and provide adequate and effective protection and enforcement of U.S. intellectual property rights; and

(4) negotiate new and better trade deals with countries in key markets around the world.”

Several preliminary things stand out from the report:

(1) The report highlighted that the US is not bound by WTO decisions and evinces a policy stance going forward not to accept any adverse rulings from the WTO. The paragraph below taken directly from the report is instructive:

“And, when the WTO adopts interpretations of WTO agreements that undermine the ability of the United States and other WTO Members to respond effectively to these real world unfair trade practices with remedies expressly allowed under WTO rules, those interpretations undermine confidence in the trading system. None of these outcomes is in the interest of the United States or a healthy global economy.”

This is coupled with what appears to be the Trump administration’s plans to make greater use of unilateral remedies.

US disregard for adverse WTO rulings is a troubling prospect for many reasons, but particularly for small island states’ enforcement of their trade interests. It should be noted that the Caribbean island state of Antigua & Barbuda is still awaiting compensation from the US, after many years, since winning the US-Gambling dispute. It remains to be seen whether this will ever be resolved.

(2) Based on the arguments made in this report, I think it likely that Trump’s team will advocate for changes to be made to the WTO’s dispute settlement mechanism for their own interest.

(3) The Administration has stated its intention to not only more aggressively go after countries the US deems to be “engaging in unfair trade practices”, but will also with equal zeal go after countries which do not sufficiently open their markets to US exports. As mentioned previously, the pursuit of countries’ trading practices which are perceived to be inimical to US interests is not new and has been US policy for years. The singling out of China in this regard came as no surprise.

(4) The Trump administration’s criterion for whether a trade agreement is bad or good appears to be based solely on whether the US has a trade (merchandise) deficit with the country in question. This is not just a facile way of assessing the merits of a trade agreement, but also ignores services trade and investment which in many cases the US has a surplus with its trading partners.

(5) While there are references to “free and fairer trade” throughout the report, I believe the term “zero sum” trade may be the more appropriate term to describe these proposals.

The full report may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a 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.

 

Trump Trade Policy ‘Achievements’: The First Month

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Alicia Nicholls

February 20th marked United States (US) President Donald Trump’s first full month in the Oval Office. And what a month it has been! We have seen a lot of focus by his administration on immigration. But what about trade? Trade occupied a major part of the platform of then US presidential candidate Trump. In his Contract with the American Voter , he had enumerated several trade-related pledges as part of his 100-day action plan to “Make America Great Again”. His first one hundred days are not yet up, but it is worth looking at what have been the achievements towards his “America first” trade policy during his first month in office.

President Trump’s Trade Promises

As a reminder, these were the major trade-related promises gleaned from his Contract with the American Voter. He pledged to:

  • Announce his intention to renegotiate the North American Free Trade Agreement (NAFTA) or withdraw from the deal under Article 2205;
  • Announce the US’ withdrawal from the Trans-Pacific Partnership;
  • Direct the Secretary of the Treasury to label China a currency manipulator;
  • Direct the Secretary of Commerce and U.S. Trade Representative to identify all foreign trading abuses that unfairly impact American workers and direct them to use every tool under American and international law to end those abuses immediately;
  • Work with Congress to introduce the “End Offshoring Act” to establish tariffs to discourage US companies from laying off their workers in order to relocate in other countries and ship their products back to the U.S. tax-free.

Three main reasons possibly explain Mr. Trump’s slow progress on his trade agenda thus far. Firstly, two key members of his trade team  who are needed to help effect his policies are still awaiting Senate confirmation, namely his United States Trade Representative (USTR) pick, noted trade lawyer and former deputy USTR under President Ronald Reagan, Robert Lighthizer, and his commerce secretary nominee, Wilbur Ross, an investor and former banker.

Secondly and related to the first point,Mr. Trump’s policy inexperience means he will likely be more reliant on the guidance and advice of his yet-to-be confirmed trade team than would other presidents. Thirdly, it is possible that Mr. Trump is realising that there is a wide chasm between presidential campaign rhetoric and how Washington and the role of president actually work, particularly when contrasted with being a CEO of one’s own company.

What has he achieved so far and what hasn’t he?

With that in mind, it is not surprising that of his stated promises, his only substantive trade policy achievement thus far has been directing the USTR via a presidential memorandum to withdraw the US from the Trans-Pacific Partnership (TPP). Withdrawal from the TPP was a low-hanging fruit. The US had signed but not yet ratified the Agreement and there was almost bi-partisan criticism of the deal. The acting USTR has since followed up on this memorandum, submitting a withdrawal letter to the TPP depository and TPP partners, and indicating their interest in bilateral trade deals with former TPP partners with which the US does not currently have a trade agreement.

Further to the latter point, President Trump and his soon-to-be confirmed trade team have been consistent so far on their preference for bilateralism over multilateralism. Trade was one of the hot button topics at his initial meetings with United Kingdom (UK) Prime Minister Theresa May,   Japan’s Shinzo Abe and Canadian Prime Minister, Justin Trudeau.

In keeping with his campaign promise that post-Brexit UK would not be at the back of queue for a trade deal, Mr. Trump received Prime Minister May as his first foreign head of government. The two have reportedly agreed to establish working groups in regards to a possible post-Brexit US-UK trade deal. Indeed, the UK House of Common’s International Trade Committee has already launched an inquiry on this.  However, formal negotiations on any such deal can only legally begin once the UK concludes its withdrawal agreement with the European Union (EU) pursuant to Article 50 of the Lisbon Treaty.

More immediately possible, however, may be trade talks between Japan and the US. Despite Mr. Trump’s earlier criticism of former TPP partner Japan’s “unfair trade practices”, the meeting with Mr. Abe went cordially, with agreement in principle for beginning US-Japan trade and investment talks. It should be noted that Japan has a large trade surplus with the US, boosted particularly by automobile exports, which might be a bone of contention in any trade talks between the two countries.

Outside of withdrawing from the TPP and these preliminary aspirational trade talks, there has been limited progress so far on his specific campaign promise in comparison to the ambitious agenda he proposed. So far he has not labelled China a “currency manipulator”. Indeed, the International Monetary Fund (IMF) had indicated that China’s currency was no longer below value. Nonetheless, Trump’s Secretary of the Treasury, Steve Mnuchin, hesitated in a recent CNBC interview to “pass judgment” on China’s currency practices, stating his preference to go through the US Treasury’s established process on judging whether China (and other countries) was manipulating its currency to boost exports.

Additionally, President has not yet triggered the 90-day notice period by informing Congress of his intention to renegotiate NAFTA, which he had promised to do “immediately”. While Mr. Trump has criticised the shift of US jobs to Mexico and the US’ large merchandise trade with that NAFTA partner, it is also not clear on what particular provisions of the agreement he wishes to “tweak”.

What is clear is that Mr. Trump’s main grievance with NAFTA appears to be with Mexico more so than with Canada. Indeed, Mr. Trump took a less protectionist stance towards Canada during his meeting with Prime Minister Trudeau, speaking collectively of keeping jobs and wealth within North America (US and Canada) and not just the US. While reporting on his meeting with Canada’s Prime Trudeau indicates that he would be looking for greater access by American firms to Canadian procurement markets, it is unclear when the NAFTA renegotiation talks will begin.

With respect to the promise to direct the USTR to identify countries engaging in “unfair trade practices”, his USTR nominee is still awaiting confirming. However, it has been longstanding US policy to challenge nations whose actions are against US economic and trading interests, as evidenced by the large number of disputes brought by the US before the WTO’s dispute settlement body.  Therefore, President Trump will not be doing anything more than what previous US administrations have done in this regard, although we will likely see an even more aggressive stance towards China’s trade practices.

Mr. Trump has spoken frequently against US companies which offshore production processes (and therefore jobs), as evidenced by his deal with air conditioner maker Carrier. He has promised to, but has not yet proposed, legislation to impose a punitive tax on US companies seeking to offshore may receive stiff opposition from the business community and from Congress.

He has, however, vacillated in his views on the controversial Border  Adjustment  Tax (BAT) proposal being pushed by Congressional Republicans as part of their tax reform plan. Different from Trump’s border tariff proposal, the GOP BAT Proposal seeks to convert the US corporate income tax from an origin-based to a destination-based tax. It would prevent companies from deducting the costs of their imported goods as an expense, while giving a tax break to companies which export. However, while some business leaders have praised the idea, some economists have argued that it will not boost US exports.

What next?

Besides the questions surrounding the renegotiation of NAFTA and which other nations the Administration will earmark for future bilateral deals, it is unclear what will be the Trump administration’s stance on other existing trade agreements, and on the on-going negotiations, including the Trans-Atlantic Trade and Investment Partnership (TTIP) with the EU and on the plurilateral negotiations such as the Trade in Services Agreement (TISA). There is also need for clarity on the Administration’s position on key multilateral trade issues, bearing in mind the WTO’s upcoming 11th Ministerial Conference in Buenos Aires at the end of this year.  Nonetheless, it is early days yet and it is hoped there will be greater policy clarity before the one hundred days have elapsed.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a 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.

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