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The previous edition of the This Time in Trade series centered on the unprecedented impact of COVID-19 on international trade. Though the pandemic has created numerous obstacles to global trade flows, the global trade upheaval has begun to cool and this edition of This Time in Trade will discuss other important issues. The past few months have seen developments in many trade disputes – the US-EU Civil Aircraft Dispute, Section 232 tariffs on aluminum, and US Section 301 tariffs on China – as well as other trade facilitation efforts like the recently concluded Regional Comprehensive Economic Partnership and continued negotiations of a UK-EU trade deal. Following the 2020 election, we anticipate a shift in the ways of working to tackle these trade issues under the Biden Administration in the coming years.
US Section 232 Aluminum Tariffs on Imports from Canada On 6 August 2020, citing an influx of aluminum products flooding the domestic market, the US once again imposed duties of 10% on imports of Canadian aluminum.[1] Deputy Prime Minister Chrystia Freeland called the US actions “unwarranted and unacceptable” and announced that dollar for dollar countermeasures would be imposed on US aluminum and aluminum containing products. [2] On 15 September, Canada was expected to announce finalized countermeasures. However, hours prior to the anticipated announcement, United States Trade Representative (USTR) announced that the Section 232 duty would be dropped, retroactive to 1 September. In light of the tariffs being dropped, Freeland announced that Canada would not be retaliating.[3] In the 15 September announcement, USTR cautioned that this duty will be re-imposed if imports of Canadian aluminum exceed expected levels by 105%. President Elect Biden has noted in the past that the US will not be using national security geared trade actions against allies such as Canada, but he has emphasized his “Buy American” plan to promote manufacturing in the US. [4] We will continue to monitor how the Biden Administration will address this issue beyond tariff actions in the coming years. For a more in depth look at Section 232 Tariffs, see our blog summarizing the Trump Administration’s past implementation of Section 232 tariffs and other Section 232 investigations. US-EU Civil Aircraft Dispute On 13 October, the WTO authorized the EU to retaliate with $4 billion in tariffs on US goods in the US-EU civil aircraft dispute.[5] This longstanding dispute stems from accusations of unfair subsidies by both the US and the EU to Boeing and Airbus, respectively. On 9 November, the EU announced its finalized retaliatory measures. Tariffs of 15% or 25% were applied to a variety of US products, from airplanes parts to alcohol and food products. The US currently is retaliating against the EU and UK at a rate of 25% on a number of products ranging from wines to confectionery, and 15% on aircraft stemming from illegal Airbus Subsidies. The US has not announced intentions to carousel these duties, but is scheduled to rotate the goods on the list this Winter. Looking ahead: President-Elect Biden is expected to deescalate and rebuild ties with the EU as part of his multilateral approach to advancing American goals, while also addressing trade imbalances between the US and EU.[6] Though we anticipate that Biden’s domestic agenda will take precedent in the early days of his presidency, we will continue to monitor how he ultimately decides to handle this dispute. US Section 301 and China Beginning 6 July 2018, the US imposed additional duties of up to 25% on Chinese goods as a result of a US Section 301 investigation into “China's acts, policies, and practices related to technology transfer, intellectual property, and innovation.” [7] After many consultations failed to resolve the dispute, the WTO established a panel to examine the facts and provide a ruling. On 15 September 2020, the WTO panel ruled that US Section 301 tariffs on Chinese goods were not substantiated. The US appealed this ruling and the USTR issued a statement questioning the efficacy of the WTO to address IP theft and indicating that there will be no change in US policy as a result of the ruling. Looking ahead: We will continue to see how the US-China economic relations develop under the Biden Administration. Biden has shared that he will be tough on China and will not immediately remove tariffs, as domestic investment and job creation are his priorities.[8] He has also noted that he will take a multilateral approach to seek reforms within the WTO.[9] Trade Facilitation – RCEP & UK Post-Brexit Trade Deals RCEP Though the above updates detail ongoing trade disputes in the recent months, the latter half of 2020 has also brought continuing and concluded negotiations for bi and multi-lateral trade deals. The recently concluded Regional Comprehensive Economic Partnership (RCEP) will create the largest trade bloc once it enters into force. The agreement led by China was signed on 15 November 2020 by 15 member countries, including China, Australia, New Zealand, Japan, Korea, and 10 ASEAN member countries. RCEP members have agreed to lower tariffs on a variety of goods over the coming years.[10] All RCEP members will now go through domestic ratification process in order for RCEP to enter into force. The deal must be ratified by at least six ASEAN countries and three non-ASEAN signatory countries before it can come into effect. Looking ahead: Though Biden has not said that the under his administration the US would seek to join RCEP, he did note that the US and its allies should “set the rules of the road” instead of allowing China to dominate global trade.[11] Analysts have conjectured that he may seek to curb China’s power by joining CPTPP, which President Trump pulled the US out of in 2017.[12] India’s notable absence from RCEP also opens an opportunity for the US and India to further pursue trade negotiations with the mutual goal of countering China’s advancing regional dominance. UK Post-Brexit Trade Deals China is not the only country looking to advance its cross-border trade. With multiple deadline extensions and a constantly evolving status, the results of negotiations of the EU-UK Brexit trade deal will likely not be finalized until the end of 2020. Officials, including Prime Minister Boris Johnson, have noted that though they hope to reach an agreement, the UK’s impending exit from the EU customs union on 1 January may occur without a trade deal.[13] Significant gaps still remain on issues such as fisheries and personal date protection.[14] Though the UK has not yet sealed the deal with the EU, it has signed a trade agreement with Japan and is also in negotiations for bilateral agreements with the US and Canada, which we will likely be following well into 2021. Conclusion As we come to the end of a tumultuous year and the beginning of the presidential transition, we continue to monitor trade policy developments. Though some continuity will remain in the transition from the Trump Administration to the Biden Administration, we expect to see an increasingly multilateral approach to pushing for change in the global arena and less aggressive actions towards US allies. Happy holidays from the TradeMoves team. Please stay tuned as we continue to provide you updates into 2021 on the ever-evolving trade environment. Colleen Cosey [email protected] [1] USTR Statement on Presidential Proclamation, USTR, 6 August 2020 [2] Statement by the Deputy Prime Minister on US tariffs on imports of Canadian aluminum, Deputy Prime Minister of Canada, 6 August 2020 [3] U.S. calls off tariffs on Canadian aluminum — for now, CBC, 15 September 2020 [4]Here's how Trump and Biden differ on U.S.-Canada trade tensions , CBC, 6 October 2020 [5] UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT), WTO, 13 October 2020 [6] Biden would end trade war with EU, but focus on fixing imbalance in ag trade: adviser, Reuters, 22 September 2020 [7] UNITED STATES — TARIFF MEASURES ON CERTAIN GOODS FROM CHINA, WTO, 15 September 2020 [8] Rewind: For Biden, sooner or later, a China reckoning InsideTrade, 7 December 2020 [9] Joe Biden to remain tough on trade while re-embracing partners, Financial Times, 16 November 2020 [10] Asia forms world's biggest trade bloc, a China-backed group excluding U.S., Reuters, 14 November 2020 [11] Biden says U.S., allies need to set global trade rules to counter China's influence, Reuters, 16 November 2020 [12] Analysts: Biden could find common ground on trade with a GOP-led Senate, Inside US Trade, 9 November 2020 [13] EU deal is far from certain, Johnson tells ministers, Reuters, 17 November 2020 [14] Statement by Michel Barnier following Round 9 of negotiations for a new partnership between the European Union and the United Kingdom, European Commission, 2 October 2020 Comments are closed.
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