Category: United States

  • US Request for CBERA Waiver Extension Approved by WTO General Council

    US Request for CBERA Waiver Extension Approved by WTO General Council

    Alicia Nicholls

    The World Trade Organization (WTO)’s General Council on October 16, 2019 approved the request by the United States (US) for a further extension of the waiver for the trade preferences it extends to certain Caribbean countries pursuant to the Caribbean Basin Economic Recovery Act (CBERA) of 1983 and its subsequent amendments.

    The CBERA is a major legislative component of the Caribbean Basin Initiative, a unilateral preferential programme operated by the US since the 1980s which extends duty-free treatment for most goods from beneficiary countries entering the US with the view to promoting economic development in the beneficiary countries. The programme is non-reciprocal as these countries are not required to extend similar treatment to US goods.

    Initially, the programme also included the Dominican Republic and several Central American countries as well, but these ceased being beneficiaries after entering into free trade agreements (FTAs) with the US.

    Seventeen Caribbean countries and territories currently benefit from the programme. These are: Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, Curaçao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, and the British Virgin Islands. Haiti also enjoys additional benefits under the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006, the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008, and the Haitian Economic Lift Program Act of 2010.

    Because the US only extends this preferential treatment to a select group of countries, the programme would be in violation of the non-discrimination principles undergirding the WTO, most specifically, paragraph 1 of Article I of the WTO’s General Agreement on Tariffs and Trade (GATT) which speaks to Most Favoured Nation treatment. The US has, therefore, had to request waivers of its obligations under paragraph 1 of Article I of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and paragraphs 1 and 2 of Article XIII of the GATT 1994 in order to maintain the programme.

    The US first obtained a waiver under the GATT (precursor to the WTO) in 1985 and obtained subsequent waivers under the WTO. The previous waiver decision of May 5 2015 would have expired on December 31, 2019 . The current WTO waiver decision extends the waiver until September 2025.

    In the preamble to its decision, the General Council listed several factors it took into consideration. Among these were:

    • the exceptional situation of the CBERA and CBTPA beneficiary countries, and the stated objective of the CBERA as amended to assist the trade and economic development and recovery of Caribbean Basin countries by encouraging the expansion of productive capacity in those countries in response to more liberal access and to new trading opportunities;
    • the preferential treatment provided under the CBERA as amended will not alter benefits provided under the US Generalized System of Preferences to other developing countries; that the duty-free treatment provided under CBERA should not prejudice the interests of other Members not benefiting from such treatment, and that it is expected that the extension of such duty-free treatment will not cause a significant diversion of United States imports of products eligible under CBERA originating in Members who are not beneficiary countries;
    • assurances given by the United States that it will promptly enter into consultations, on request, with any interested Member with respect to any difficulty or matter that may arise as a result of the preferential treatment provided under the CBERA as amended.

    Under the waiver, the US is required to submit to the General Council an annual report on the implementation of the trade-related provisions of the CBERA with a view to facilitating the annual review provided for in paragraph 4 of Article IX of the WTO Agreement. It is also required to promptly notify the General Council of any trade-related measure taken under CBERA, in particular, any changes in the designation of beneficiary countries, as well as any modification being considered in the list of eligible products and the duty-free treatment provided. The US is also required to give the General Council all the information it may deem appropriate relating to such action. The United States is additionally required to consult with regard to any modification being considered in the list of eligible products

    In September, the US International Trade Commission recently released its biennial report on the programme’s operation. The report found that overall, the US’ total imports from CBERA countries grew from $5.8 billion in 2017 to $6.1 billion in 2018. This translates to an increase of 4.7 percent. Turning specifically to US imports under the CBERA programme, those grew from $1.5 billion in 2017 to $1.7 billion in 2018, an increase of 9.1 percent. US imports under CBERA accounted for 27.8 percent of all imports from CBERA beneficiaries.

    The waiver decision may be found on the WTO’s document’s portal.

    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.

  • Has Canada become Collateral Damage in the US-China Trade War?

    Has Canada become Collateral Damage in the US-China Trade War?

    Renaldo Weekes, Guest Contributor 

    The trade tensions between the United States (US) and China have subsided for a while as each side has promised not to introduce new tariffs during a 90 day period starting from December 1, 2018, when US President Donald Trump and Chinese President Xi Jinping had a dinner at the G-20 summit in Argentina. Negotiations resume on January 7, 2019 and, so far, it seems that not much has changed as both have committed to their previous stances on the matter. However, the overall context of the negotiations has changed. Canada has arrested Huawei Technologies Co., Ltd’s Chief Financial Officer Meng Wanzhou at the US’ request. Shortly thereafter, China arrested two Canadian citizens, Michael Kovrig and Michael Spavor. Many see China’s actions as a tit-for-tat response to Meng’s arrest and wonder if Canada will now become collateral damage in a trade war between the US and China.

    Why were Meng and the Canadian duo arrested?

    Meng has been accused by the US of allegedly violating its sanctions on Iran by defrauding multiple US banks. On a layover in Canada, she was arrested by Canadian authorities on request from the US. She has since posted bail and is required to wear an ankle monitor and stay in her residence from 11 p.m. until 6 a.m. Kovrig and Spavor were arrested on suspicion of engaging in activities that were considered as breaching national security. The pair reportedly is subjected to three interrogations a day, must sleep with the lights, does not have access to legal representation and can only have consular visits once a month. Both Canada and China have denied that the arrests of the Canadian pair are related in any way to the arrest of Meng Wanzhou but Canada has said that the arrests were unfounded.

    Did Meng’s arrest influence Kovrig and Spavor’s arrests?

    Some may see it as a coincidence that Kovrig and Spavor, both Canadians, were arrested in China shortly after Meng, a Chinese heavy-weight, was arrested in Canada. As mentioned earlier, both countries have denied that the arrests are related. However, some persons, including former diplomats, are quite sure that the opposite is true. Reportedly, Chinese officials are concerned about Meng’s arrest. A Canadian parliamentary delegation, currently in China, has engaged in talks with Chinese officials about the pair of Canadians they arrested.  The officials demanded to know why Canada arrested Meng. It is public knowledge that Canada has detained Meng for bank fraud on the US’ request but it seems as though the Chinese believe there is more to the arrest than meets the eye. Fearing the worst, they may have retaliated by detaining two Canadians in order to keep Canada in check. It seems probable that Meng’s arrest had an impact China’s decision to arrest the Canadians.

    Do the arrests have an effect on the trade war?

    The trade war between the US and China has been quite contentious as each side continually laid tariffs on the other party’s goods until recently. When dealing with any high stakes negotiation such as this one, persons may wonder if external issues would impact the talks. This is especially the case in the current situation as the US has pointed out many problems it wants China to fix such as alleged forced transfer of intellectual property from foreign companies and restricted market access. There is also the issue of the disputed South China Sea where, as recently as today (Monday, January 7, 2018), China claimed that the US violated its domestic and international law by performing acts interpreted as provocation near the sea.

    As it relates to the arrests, China’s actions may be ostensibly seen as its modus operandi whenever one of its citizens is arrested overseas, and not related to the trade war. In a previous tit-for-tat situation in 2014, Canadian aid workers Kevin and Julia Garratt were detained for the same national security reasons as the pair of Michaels shortly after Canada arrested Su Bin, a Chinese man wanted for industrial espionage in the US. Mrs. Garratt was released on bail while Mr. Garratt remained detained for more than two years until his eventual deportation, which occurred after Su Bin was extradited to the US and sentenced.

    However, as mentioned earlier, Chinese officials seem to believe that Meng’s arrest was political. One may infer that the Chinese may not want the US to receive Meng as this may give additional leverage to the US in the trade talks. China’s paranoia may have been bolstered by comments President Trump made which insinuated that Meng’s arrest may assist in securing the “the largest trade deal ever made.” China may, therefore, seek to create its own leverage by punishing Canada, a US ally, in whatever way it can. China may refrain from committing any additional acts that directly affect the US but still continue current acts with which the US is concerned.

    Canada’s situation

    Canada is in a sticky situation. China will continue to punish Canada until it secures Meng’s release. Though it is a US ally, Canada’s citizens are the ones being used as pawns in China’s game so it will have to navigate this situation mostly on its own merit. This situation can be, theoretically, immediately remedied by Canada releasing Meng, rejecting the US’ extradition request. China may likely release the Canadians in return and refocus its attention solely on the US. However, this decision cannot be made lightly. Should Canada disregard all credible evidence of Meng’s crimes in order to appease China or will it repeat its 2014 decision of extradition? When weighing this decision against the well-being of your own citizens, it is not an easy decision to make. Canada must keep in mind that this is not a simple tit-for-tat situation for China as is usually the case but a piece on the battlefield. China cannot allow the US to gain what it sees as additional leverage. This ostensibly personal spat is being fought against the backdrop of the US-China trade war.

    If Canada arrested Meng outside of the context of a trade war between the US and China, the situation probably would have been the same. The US would have still made the request to Canada as Meng’s arrest was predicated on her committing bank fraud with the intent of violating the US’ sanctions on Iran. China would have still arrested the two Canadians in retaliation since this is its established modus operandi. The weighing of Meng’s crimes versus its citizens’ well-being would still be an issue. As mentioned earlier, the US has a number of issues with China’s actions. Therefore, if not the trade war, Canada may have been collateral damage in some other dispute. It is safe to conclude that Canada is indeed collateral damage in the US-China trade war. However, the trade war is just the biggest of many disputes that have the potential to create more collateral damage.

    Renaldo Weekes is a holder of a BSc. (Sociology and Law) who observes international affairs from his humble, small island home. He has keen interest in how countries try to maneuver across the international political and legal stage.

  • Trump Trade Policy ‘Achievements’: The First Month

    Trump Trade Policy ‘Achievements’: The First Month

    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.