Since early 2020, there have been three major drivers to the trade agenda: COVID-19, the rapid deterioration and corresponding decoupling of the US-China relationship, and the US’s continued nationalist approach to trade. We underline that most international trade, notwithstanding these major drivers, including goods and services crossing borders, trade agreements, and related disputes, continues to work in the normal course. That said, it is crucial to properly take into account the emerging forces impacting trade to ensure your business is prepared for a consistently evolving international landscape.
COVID-19 and trade
First, in relation to trade, COVID-19 rapidly altered the course of global trade, including Canadian trade. As early as February, throughout both the first and second quarters, global trade and supply chains were significantly effected by COVID-19 disruptions. Both globally and in Canada, trade volumes fell below levels that have been scarcely seen before, as key indicators such as east-west shipping hit historic lows, and the global economy contracted. The below chart sets out Canadian trade flow differentials from the previous year. Most trade projections for goods and services continue to predict significantly reduced numbers for the remainder of the year, although steady increases from current levels are expected.
However, increased trade volumes will continue to be dependent on COVID-19 conditions.
| Jan – April 2019 | Jan – April 2020 | % Change 2020/2019 | |||
|---|---|---|---|---|---|
| Globally | Exports | 190,225 | 171,454 | -9.9% | |
| Imports | 199,824 | 176,057 | -11.9% | ||
| US | Exports | 143,114 | 128,685 | -10.1% | |
| Imports | 102,795 | 90,177 | -12.3% | ||
| EU | Exports | 15,530 | 14,375 | -17.5% | |
| Imports | 25,241 | 21,769 | -13.8% | ||
Source: Trade Data Online – value in millions of CAD
In response to the COVID pandemic, Canada and many countries adopted measures to both liberalize and restrict trade in certain goods, including personal protective medical equipment. We have discussed some of these measures here and here. While certain restrictions globally have now been removed, “temporary” restrictions imposed for an overly lengthy period of time may result in trade disputes.
US-China relations and the impacts on Canadian trade
Second, the schism between China and the US has been accentuated throughout 2020. This has placed Canada in a position of having to make significant decisions in relation to trade. For example, in response to China’s actions in relation to Hong Kong, Canada changed Hong Kong’s trading status, along with suspending the Canada-Hong Kong extradition treaty.
The rapid decoupling between the US and China will also force Canada to make key decisions in relation to Chinese participation in its critical infrastructure. As the US-China relationship deteriorates, and may be subject to further trade-restrictive measures, Canadian companies sourcing goods from China or the US will need to be increasingly cognizant of trade rules, in the event that the final products are destined for the US or Chinese market. Despite being imported to Canada before being sold to these markets, goods may be subject to tariffs or other trade-restrictive measures. Given the tension and the decoupling, we anticipate a further significant restructuring and re-ordering of supply chains over the next five years to take into account geopolitical tensions between the US and China.
Reimposition of aluminum tariffs
On August 6, 2020, the Trump Administration announced its intention to re-impose a 10% tariff on non-alloyed unwrought aluminum imported from Canada. Citing significant increases in Canadian imports to the US, President Trump, through an Executive Order, ordered the reimposition of the tariffs on the basis of a threat to national security under section 232 of the Trade Expansion Act of 1962.
In response, Canada swiftly vowed to impose counter-measures matching the US tariffs dollar for dollar. The proposed Canadian counter-measures were announced on August 7, 2020, and provide a comment period for Canadian business until September 6, 2020. The counter-measures include various aluminum goods, but also refrigerators, washing machines, bicycles, golf clubs, among others. The Canadian counter-measures will enter into force on September 16, 2020.
The initial May 17, 2019, Joint Statement by Canada and the United States on Section 232 Duties on Steel and Aluminum provided for both countries establish an agreed-upon monitoring process, as well as to engage in consultations in the event of a surge beyond historical volumes of trade. In addition, the removal of the 232 tariffs was a key aspect for Canada to move forward with the entry into force of the USMCA, which included two side letters one in relation to autos and another on future 232 measures.
The initial US tariffs were the subject of nine World Trade Organization (WTO) disputes, and four additional disputes requested by the US in relation to counter-measures imposed in reaction to the tariffs. While certain cases challenging the US measures were settled or terminated as certain countries were exempted from the tariffs, this was not the case for all disputes, some of which are expected to be decided this fall. That said, the aluminum tariffs are likely to remain a significant sticking point for Canada-US relations throughout the remainder of 2020 and will likely result in further legal challenges.
Our 2020 update
1. CBSA priorities and antidumping and countervailing duties investigation
As a result of COVID-19, the Canada Border Services Agency’s (CBSA) activities were either suspended or effected. Only recently has the CBSA re-started certain trade verification procedures. That said, the CBSA has recently updated its verification priorities, which identify certain new goods that will be subject to heightened compliance and enforcement scrutiny. These include spent fowl, LED lamps, certain batteries, furniture mounts and fittings, and lamp parts.
In relation to antidumping and countervailing duties investigations, the CBSA has continued with the investigation of corrosion-resistant steel, despite investigative disruptions that have delayed both the final determinations by the CBSA and the Canadian International Trade Tribunal outside of the statutory deadlines imposed by the Special Imports Measures Act. Despite this, the CBSA has pushed forward with its investigation, with the hope that COVID-19-related legislation will retroactively remedy its lack of legislative authority to proceed. Notably, domestic producers have filed applications at both the Federal Court and Federal Court of Appeal in an attempt to force the CBSA to make its statutorily required decisions.
Additionally, the CBSA has initiated investigations with respect to heavy plate steel from Chinese Taipei, Germany, South Korea, Malaysia and Turkey, decorative and other non-structural plywood from China, and wheat gluten from Australia, Austria, Belgium, France, Germany and Lithuania.
2. CUSMA entry into force
CUSMA entered into force on July 1, 2020. Although there were initial uncertainties earlier in the year about its entry into force, and also throughout the ongoing COVID pandemic, to date, the transition between NAFTA and CUSMA has been relatively smooth, with goods continuing to pass through borders without any major delays or issues.
We note that while the CUSMA is similar to the NAFTA in many respects, importers and exporters should verify what the new agreement specifically means for them. Notably, the CUSMA contains certain new and differing provisions that may significantly alter trade or create new opportunities for certain businesses.
3. Brexit
Brexit occurred on January 31, 2020. The result being that the UK is currently in the transition period, where the UK continues to follow EU law and retains the benefits of EU trade agreements until the end of the year. Notably, the one opportunity to extend the timeline for trade negotiations with the EU has now passed. Hence, the UK will no longer be able to avail itself of the EU single market or to benefit from EU trade agreements after the end of this year.
Aside from its negotiations with the EU on their further trade relationship, the UK has launched into an ambitious round of global trade agreement negotiations with several countries that the UK has prioritized, including Japan, Australia, New Zealand and the United States. The UK has also expressed interest in joining the CPTPP. The UK already has certain trade agreements already in place that will take effect on January 1, 2021, when existing EU trade agreements no longer apply to the UK, while various other trade agreements remain in discussions. Notably, the Canada-UK discussion on a new trade agreement to replace CETA is currently at a standstill, and it is unlikely that such a trade deal will be struck before the end of the year when the UK will no longer benefit from CETA.
4. World Trade Organization
Throughout 2020, the WTO has faced increasing difficulty. In addition to the Appellate Body paralysis mentioned in our previous post, the WTO suffered an additional set back when its current Director-General Roberto Azevêdo abruptly announced his resignation in May 2020, despite having over a year left on his term in office. This has prompted an expedited search for a new leader to take the helm of the multilateral trade body. While the role of Director-General is not defined specifically in the WTO agreements, past Director-Generals have been instrumental in guiding the WTO and securing negotiations and agreement between member states.
At the same time, as discussed in our previous article, since December 2019, the WTO Appellate Body has been placed in a state of paralysis due to political disagreements between WTO members that have blocked the appointment of new Appellate Body adjudicators required to form quorum and make decisions. In its stead, the Interim Appeal Arbitration Agreement (MPIA), the mechanism agreed to by an initial 16 WTO member states, was agreed upon to provide finality to first instance WTO decisions. Notably, state parties have agreed to MPIA procedures in four WTO cases to date:
- Canada - Measures oncerning Trade in Commercial Aircraft - WT/DS522/20 – a case involving a complaint from Brazil, with China, the European Union, Japan, the Russian Federation, Singapore, and the United States joining as third parties.
- Costa Rica - Measures Concerning the Importation of Fresh Avocados from Mexico - WT/DS524/5 - a case involving a complaint from Mexico, with Canada, China, the European Union, El Salvador, Honduras, India, Panama, the Russian Federation and the United States, joining as third parties.
- Canada - Measures Governing the Sale of Wine - WT/DS537/15 – a case involving a complaint from Australia, with Argentina, Chile, the European Union, New Zealand and the United States joining as third parties.
- Colombia – Anti-Dumping Duties on French Fries - WT/DS591 – a case involving a complaint from the European Union, with Brazil, China, Japan, the Russian Federation, Turkey and the United States joining as third parties.
The novel arbitration procedure is further advancing with the pool of arbitrators, which are separate from WTO adjudicators, having recently been announced. In brief, while much can be said about the efficacy of such an arrangement, it will provide finality to WTO disputes for state parties who agree to the interim mechanism.
"trade" - Google News
September 10, 2020 at 10:53AM
https://ift.tt/35or858
Trade trends update 2020 | Dentons - JDSupra - JD Supra
"trade" - Google News
https://ift.tt/2VQiPtJ
Tidak ada komentar:
Posting Komentar