Alicia Nicholls
Happy New Year to all of our readers! Since our last Caribbean Trade & Development News Digest was published near the end of December 2020, some major trade developments have occurred. If you missed any of these developments, we will bring you up to speed with the top ones in this article!
UK-EU begin trading under new trade arrangements
The United Kingdom (UK) and European Union (EU) received the Christmas present they both wanted. On Christmas Eve (December 24) 2020, political agreement was reached on their future trading terms before the Brexit transition period deadline of December 31, 2020. The deal averts the no-deal scenario, that is, trading on World Trade Organization (WTO) Most Favoured Nation (MFN) terms. Such a scenario would have caused, among other things, the reintroduction of tariffs. This would have been disastrous for both parties, and is a circumstance both sides sought to avoid at all costs, even as contingency plans were put in place in case of the worst case scenario.
The new EU-UK Trade and Cooperation Agreement covers not just trade and investment, but also deals with issues such as competition policy, fisheries, State aid, tax transparency, among other areas of mutual interest. January 31, 2021 marked the start of the EU-UK’s new trading arrangement. Of course, implementation of the new arrangements have not been without their kinks, including border delays due to the reintroduction of customs checks.
The UK-CARIFORUM EPA, which rolls over the provisions of the EU-CARIFORUM, now governs trade between the UK and CARIFORUM countries. The EU-CARIFORUM EPA, of course, remains in effect as between CARIFORUM countries and the remaining EU-27. It remains to be seen what practical impact the new EU-UK trading arrangement may have on CARIFORUM’s trade with the EU and UK respectively, including on supply chains.
Trading under AfCFTA begins
Originally slated for July 1, 2020, but delayed due to the COVID-19 pandemic, trading under the Africa Continental Free Trade Agreement (AfCFTA) has officially started from January 1, 2021. A special ceremony marking the Start of Trading was held to mark this historic occasion and the recording may be viewed here.
The AfCFTA is a landmark trade agreement comprising 54 African countries, with an integrated population of 1.3 billion people and a combined GDP of US 3.4 trillion. It is second only to the WTO as the world’s largest trade agreement. While full implementation of the AfCFTA is not expected for some time, it is expected to help boost economic development on the continent.
A recent PWC report highlights the ways the AfCFTA could assist African countries in their COVID-19 economic recovery. These include providing the opportunity to reconfigure supply chains, allowing for greater intra-regional sourcing of goods, such as pharmaceuticals, thereby reducing dependence on third countries.
CARICOM-Africa relations continue to develop and it was announced that the African Union (AU) has offered CARICOM access to approved COVID-19 vaccines from a shipment the AU recently secured.
EU-China reach agreement in principle on Comprehensive Agreement on Investment (CAI)
On December 30, 2020, it was announced that the EU and China had reached agreement in principle on the text of a Comprehensive Agreement on Investment (CAI). While the text does not appear to be public as yet, the agreement is said to cover market access for EU and Chinese investors respectively, sustainability commitments and provision for State-to-State resolution of disputes arising under the agreement. The EU and China also commit to try to complete negotiations on investment protection and investment dispute settlement within two years of the agreement’s signature.
US Section 301 investigations on Vietnam currency valuation and on DSTs
In December, the US Department of the Treasury designated Vietnam as a currency manipulator. According to the USTR, Vietnam currently enjoys a $55 billion dollar merchandise trade surplus with the US, but a $1.2 billion services trade deficit. In the report on its Section 301 investigation of Vietnam’s acts, policies, and practices related to currency valuation, the USTR concluded that in their totality, they were “unreasonable and burden or restrict US commerce”, but stopped sort of recommending punitive tariffs.
On the digital services tax front, the USTR has suspended retaliatory duties on French luxury goods, until further notice, which were scheduled to have taken effect on January 6, 2021. On another note, the USTR’s section 301 investigations on digital services taxes adopted by several other countries, including Italy, India and Turkey, found that these countries had placed “unreasonable or discriminatory and burdens or restricts U.S. commerce” but did not recommend any retaliatory action as yet.
A new direction for US trade policy?
On January 20, Joseph R. Biden will be sworn in as the 46th president of the US, and it is widely anticipated that this will herald a change from the outgoing administration’s often chaotic trade policy.
In a key note speech delivered last week, Katherine Tai, the nominee for United States Trade Representative (USTR), provided some idea of the incoming Biden administration’s trade policy priorities, of which China and the USMCA remain foremost. Notable was that there was no mention in Ms. Tai’s speech of the WTO, including the current impasse on the appointment of a Director-General or the Appellate Body crisis. However, further information on the Biden administration’s trade policy priorities and disposition will be gleaned when the USTR releases its report on the President’s trade agenda, expected sometime in February.
Without doubt, domestic issues, such as COVID-19 vaccine roll-out and economic recovery, are expected to absorb much of the administration’s policy agenda within the first 100 days. Biden has proposed a $1.9 trillion-dollar stimulus package to combat the COVID-19 pandemic and its economic fall-out. Climate change is also one of the policy priorities and Biden has indicated that the US will rejoin the Paris Climate Agreement.
Despite the outgoing Trump administration’s limited cooperation with the President-elect’s transition team, fate appears to have dealt Biden some fortune on the legislative front. With both Houses of Congress controlled by Democrats (albeit a slim majority in the case of the Senate), Biden should have some breathing space to get his policy agenda enacted, at least for the first two years of his administration.
US redesignates Cuba as a State Sponsor of Terrorism
The outgoing Trump administration’s State Department has redesignated Cuba as a state sponsor of terrorism (SST) for allegedly “repeatedly providing support for acts of international terrorism in granting safe harbor to terrorists”. Cuba had been delisted in 2015 under the Obama Administration as part of that administration’s attempts to normalize US-Cuba relations. However, the US’ illegal and unwarranted economic, commercial and financial embargo on Cuba, which requires Congressional action to remove, remains.
The redesignation of Cuba as a SST is just the latest of several actions taken over the course of the Trump administration, which has seen a hardening of the US’ policies against the island nation. This included, for example, ending the suspension of Title III of the Helms-Burton Act. With regard to the trade implications of Cuba’s redesignation, which is extraterritorial in application, it penalises persons and countries engaging in certain trade with Cuba, bans defense exports and sales, and imposes certain controls on exports of dual use items.
In a strong statement condemning this unilateral action taken by the administration, the Caribbean Community (CARICOM) argued that “Cuba’s international conduct does not in any way warrant that designation.” CARICOM also unequivocally condemned it as a “further attack on the country adversely affects its international standing and its social, human and economic development”.
US President-elect Joe Biden, who had been the VP under the Obama administration and part of the efforts at rapprochement, has been critical of the Trump Administration’s handling of Cuba affairs. It remains to be seen what will be his administration’s approach to Cuba policy.
Post-Cotonou Agreement Text faces opposition by some EU Member States
Towards the end of last year, the EU and the Organisation of African, Caribbean and Pacific States (OACPS) announced political agreement on the text of a deal to succeed the Cotonou Agreement which was meant to have expired in December 2020. The post-Cotonou agreement is not a trade deal; trade between the EU and the OACPS is covered by the various Economic Partnership Agreements (EPAs). It is, however, the overarching framework for EU-OACPS relations and, therefore, covers EU-OACP cooperation on a variety of political and social issues.
A Devex exclusive report released last week revealed that some EU states, particularly Poland and Hungary, expressed reservations with the proposed text, especially on the treatment of issues such as sexual education issues and migration and mobility.
WTO Developments
According to Bloomberg WTO reporting, in its final General Council meeting for the year held December 16-17, 2020, WTO members approved the WTO’s budget for 2021 and also decided that a Special General Council meeting will be held earlier this year to determine where and when the next Ministerial Council will be held. However, the US maintained its veto on the selection of Dr. Ngozi Okonjo-Iweala as the new Director-General. It remains to be seen whether the Biden administration will maintain the US’ current objection.
The African Union, Cuba and African Union’s proposal on strengthening the WTO for promoting development and inclusivity was also one of the agenda items. At the meeting, WTO Members were unable to agree on the proposal advanced by several developing country members on amending the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement to facilitate developing countries’ access to COVID-19 vaccines. This week, the countries proposing the amendment released their responses to WTO Members’ questions on their proposal.
In other developments, India was the first WTO Member to have its Trade Policy Review for 2021. Costa Rica has requested WTO dispute consultations with Panama regarding measures affecting strawberries, dairy products, meat products, pineapples and bananas.
Caribbean Community (CARICOM) developments
From January 1, 2021, Prime Minister of Trinidad & Tobago, the Hon Dr. Keith Rowley, has assumed chairmanship of CARICOM under its six-month rotating chairmanship. He took over from then outgoing chairman, the Hon. Dr. Ralph Gonsalves, Prime Minister of St. Vincent & the Grenadines. Dr. Rowley’s statement as incoming Chair may be viewed here.
CARICOM has already had a busy start to the year. According to a press release from the Community, the Heads of Government last week held their 13th Special Emergency Meeting of the Conference and under Prime Minister Rowley’s chairmanship. Among other things, they received an update on the Caribbean Economic Recovery and Transformation (CERT) Plan.
CARICOM IMPACS and the Small Arms Survey signed a Memorandum of Understanding to Reduce Gun Violence in the Caribbean, including support efforts to improve CARICOM Member States’ to prevent the illicit circulation of small arms and light weapons.
The CARICOM Committee of Ambassadors also met later last week and among other things, reviewed plans for the Thirty-Second Inter-Sessional Meeting of the Conference of Heads of Government slated for 23-24 February 2021. The Community Council of Ministers also convened to, inter alia, advance preparations for the Intersessional Meeting and to approve the CARICOM Secretariat’s Budget for the financial year 2021-22.
The Secretariat has since the start of the year already released separate statements condemning the US’ designation of Cuba as a State Sponsor of Terrorism and repudiating any Venezuelan aggression in the escalating Guyana-Venezuela border dispute. The latter statement was in response to a statement released by the Maduro Government on January 7, announcing the creation of a so-called “Territory for the development of the Atlantic Façade” in the disputed Essequibo region of Guyana over which Venezuela has repeatedly claimed as part of its territory. An interesting development is that the Brazilian Government has expressed support for Guyana in the matter.
In its statement demanding greater equality in COVID-19 vaccine dissemination, CARICOM has called for a global summit in the context of the World Health Organisation’s (WHO) ACT-A Facilitation Council to discuss equitable access and distribution of the COVID-19 vaccines.
Now you are all caught up! We look forward to continuing to follow these developments and more throughout the course of what promises to be a critical year for trade.
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. All views herein expressed are her personal views and should not be attributed to any institution with which she may from time to time be affiliated. You can read more of her commentaries and follow her on Twitter @LicyLaw.
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