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TradeInFocus   Our compilation of news to keep you in focus on key trade matters

AEO Update (EU and China)
TIACA ? 12 February 2016
The 2014 signed Mutual Recognition (MR) agreement on AEO programs between the European Union and China, was entered into effect in November 2015. The EU Commission has now uploaded some FAQ?s to clarify the implementation, since there were numerous questions regarding how the agreement would be actually be implemented.

They key statement within the agreement is ?each customs authority will treat members of the other customs authority?s programs in a manner comparable to the way it treats members of its own programs?. In practicality, this means that holders of an EU AEO F or AEO S certification can possibly profit from the benefits the ACE (Advanced Certified Enterprise) status issued in the context of the IMECM (Interim Measures of Customs Administration for Enterprise Credit Management) provided to the Chinese company, and vice versa.

Listed benefits are:
- Fewer security and safety related controls
- Recognition of business partners during the application process
- Priority treatment at customs clearance
- Business continuity mechanism

Details of this can be found under FAQ #7

FAQ?s #13-16 explain how the respective AEO status must be communicated to the authorities in order to enjoy the benefits noted above.

The FAQ?s can be found under the following links:

Frequently Asked Questions China-EU Authorized Economic Operators Mutual

A general note on the AEO MR agreement can be found here

The May 2014 signed agreement document can be found here

TPP Countries Gear Up for Ratification Push After Auckland Signing Ceremony
Bridges Weekly - 11 February 2016
Signatories to the Trans-Pacific Partnership (TPP) trade pact are ramping up their efforts to build domestic support for the agreement, as they prepare to launch their domestic ratification procedures. Trade ministers from the 12 TPP countries signed the accord in Auckland, New Zealand, on Thursday 4 February, starting the clock on a two-year ratification window for all members to approve the deal. While the agreement can still go into effect without all 12 ratifying in that space, at least six countries making up 85 percent of the group?s GDP would need to do so. Otherwise, the entry into force would have to wait until enough countries ratify to pass that threshold.

?After more than five years of negotiations, we are honored to be able to formalize our collective agreement of TPP which represents an historic achievement for the Asia-Pacific region,? ministers said in a joint statement at the signing ceremony. ?The signing of the agreement signals an important milestone and the beginning of the next phase for TPP. Our focus now turns to the completion of our respective domestic processes,? they added.

The 12 nations involved in the trade pact vary in size, economic heft, and political systems, with legislative processes varying depending on the country. Some countries are also involved in major political transitions, raising additional questions on the timing of ratification. However, some signatories have already stated their plans to advance the TPP approval process rapidly. In Auckland, ministers from Australia and Mexico said that they aim to ratify domestically this year, with Australian Trade Minister Andrew Robb confirming plans to table the text in his country?s parliament this week.

?Talking with the trade ministers last night I think most countries, if not all will have it ratified sometime during this year and now I would assume Australia will do the same,? Robb told ABC Radio last week. New Zealand Prime Minister John Key, in outlining his government?s 2016 priorities to the parliament this week, also presented both the trade deal text and a related National Interest Analysis for review. Subsequent legislation for any domestic law changes required by the trade deal will soon follow, he said. ?TPP offers much better access to large and important markets for New Zealand?s goods and services, and New Zealand has had to make relatively few concessions in return,? he told lawmakers.

However, public sentiment in New Zealand has already proven to be mixed when it comes to the TPP, with the signing ceremony in Auckland prompting protests with over 1000 participants. Other members, most famously the US, have also seen some heated public opposition to elements of the trade deal. Malaysia, for its part, has already approved the pact, though reportedly still needs to make some changes to domestic law.

Whether Canada will move to ratify the trade deal remains an open question, given that it saw a major political shift of its own with the entry of Justin Trudeau?s government. Trade Minister Chrystia Freeland, who attended the Auckland ceremony to sign the TPP, stressed in an open letter to Canadians last month that ?signing does not equal ratifying,? and has pledged to have a ?full and open? parliamentary debate. The 12 TPP signatories include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.

The US presidential election has also raised questions over TPP?s ratification prospects, particularly given that the North American nation is the largest economy in the trade deal. Bringing the TPP into force would therefore require US ratification to help meet the 85 percent threshold. Should the agreement not come to a vote in Congress under US President Barack Obama, whose term ends in January 2017, it would fall to the next administration to decide whether to lobby Congress to approve the pact; to attempt renegotiating parts of the deal; or to put it aside altogether. So far, the reactions from many top presidential contenders have largely been lukewarm or in outright opposition to the trade pact, in both the Democratic and Republican parties, though some have hinted that they might be more amenable to the trade deal if renegotiated.

?I did hope that the TPP, negotiated by this administration, would put to rest a lot of the concerns that many people have expressed about trade agreements,? said Hillary Clinton, the former Secretary of State who is running for the Democratic Party nomination, in a debate against Vermont Senator Bernie Sanders last week. ?I waited until it had actually been negotiated because I did want to give the benefit of the doubt to the administration. Once I saw what the outcome was, I opposed it,? she added, noting that past trade deals have been renegotiated to reach better outcomes ? specifically, the US? trade agreement with South Korea. The US-South Korea free trade deal was negotiated under former President George W. Bush, with the deal later re-opened under Obama in order to secure better terms on automobiles and beef. Congress then ratified the deal the following year.

Sanders, who is also vying for the Democratic Party nomination, opposes the TPP, saying during the same debate that the deal is one in a long line of trade pacts making it harder for US workers to compete against lower-priced goods from abroad. ?Workers today are working longer hours for lower wages. Trade is one of the reasons for that,? he said, noting that while he does not oppose trade in principle, he does take issue with free trade compared to fair trade.

Republican Party candidates, for their part, have expressed mixed views on the trade deal. Real estate magnate Donald Trump, for his part, has openly lambasted the TPP, suggesting in a CNN interview this week that he would move to renegotiate US trade deals for better terms. However, Ohio Governor John Kasich, who placed second among Republicans in Tuesday?s New Hampshire primary, has spoken in favor of the TPP.

Many congressional leaders in the United States have already warned that securing TPP approval in Washington could be a long and difficult process, particularly in a year that also has the entire House of Representatives and one-third of the Senate up for election.

?No one should be under any illusions that, because the TPP is being signed today, an up or down vote on the agreement is imminent or that our oversight responsibilities are at an end,? said Senator Orrin Hatch, the Utah Republican who chairs the Senate Finance Committee, last week. Furthermore, Hatch noted, ratifying trade deals in the US Congress is often a prolonged process. ?In fact, it?s not an exaggeration ? or even all that remarkable ? to say that it can take years to get an agreement through Congress after it is signed.?

As TPP signatories work to build domestic buy-in for the trade pact, one of the key arguments that continues to be raised ? mainly in the US ? is that approving such a wide-reaching, comprehensive pact is essential for ensuring continued leadership in trade rule-making, particularly given China?s own efforts in that respect. China is involved in various other trade initiatives in the region, including a 16-country negotiation known as the Regional Comprehensive Economic Partnership (RCEP), which includes all 10 members of the Association of Southeast Asian Nations (ASEAN), as well as India, South Korea, and three TPP members ? New Zealand, Australia, and Japan.

?TPP allows America ? and not countries like China ? to write the rules of the road in the 21st century, which is especially important in a region as dynamic as the Asia-Pacific,? said Obama last week, reiterating similar comments on the subject. ?Put simply, TPP will bolster our leadership abroad and support good jobs here at home.? Speaking to reporters on Friday, Chinese Foreign Ministry Spokesman Lu Kang countered such arguments publicly. ?We have never thought that China or any other specific country could decide by itself how to write the rules or agenda or global trade in the 21st century,? he said, adding that countries should continue looking to the WTO for having a ?leading role? in setting international trade rules.

?We understand that governments of some countries have to let the business circle and the public of their countries know the pros and cons about relevant free trade arrangements, then just give them the facts. There is no need to politicize the economic issue,? the Chinese official said, warning that such suggestions would be both misleading and could harm Washington?s ties with Beijing.

Congress Passes Customs Reauthorization
TIACA ? 12 February 2016
On Thursday, the US Senate voted overwhelmingly in favor of the Trade Facilitation and Trade Enforcement Act of 2015, a bill that reauthorizes U.S. Customs and Border Protection (CBP). Among other things, the legislation increases the US de minimis threshold from $200 to $800 ? a provision strongly supported by TIACA and many other industry groups. The bill was previously passed by the House of Representatives, so it now heads to President Obama, who is expected to sign it soon.

Obama Makes Clean Energy Push in Final Annual Budget Proposal
Bridges 11 February 2016
US President Barack Obama on Tuesday put forward a series of clean energy finance proposals as part of his final annual budget request before leaving office. The proposed US$4.1 trillion fiscal budget includes a plan for a ?21st century clean transportation system,? to be funded by a new fee levied on oil, as well as a bid to double federal investment in clean energy research and development (R&D) from US$6.4 billion to US$12.8 billion by 2021. The boost to R&D funds comes after the US and 19 other economies ? making up 80 percent of global clean energy R&D budgets ? committed to doubling their current investment in the sector during a UN climate meet held last December in Paris, France. In Paris, 28 major investors also backed ?Mission Innovation,? as the initiative is known, pledging to invest patient capital in early-stage technology development from participating economies.

While the overall fiscal year 2017 (FY17) budget proposal was lambasted by Republican congressional leadership, who criticized the overall levels of federal spending, several commentators suggested that the document was not redundant and that some bipartisan support might be garnered for defense, cancer research, and certain anti-poverty measures. The US Congress can choose to advance some elements of the President?s budget and not others, in what is usually a protracted ? and often contentious ? legislative process. Several experts also suggested the clean energy R&D spending might make it through the legislative process, although many noted the oil tax for the green transportation plan was a non-starter. The plan has already attracted the ire of the oil industry who, reacting to a preview released last week, said it would raise the cost of petrol by 25 cents per gallon.

Tuesday?s budget proposal would increase American investments in green transportation infrastructure by roughly 50 percent. This includes plans to invest nearly US$20 billion per year above current spending to reduce traffic through improving transportation options, another US$10 billion annually on transforming regional transportation systems, and US$2 billion per year for research on clean vehicles and aircraft.

Core funding for these investments would come from a new US$10 per barrel fee on oil paid for by oil companies, gradually phased in over five years. One-time revenues from business tax reform are proposed as an additional revenue source. The plan would also provide assistance to families to relieve energy cost burdens where needed. ?By placing a fee on oil, the president?s plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future,? read last week?s White House Factsheet on the plan.

Transport accounts for around 30 percent of US greenhouse gas (GHG) emissions and 14 percent of the global total in 2010. Almost 95 percent of the world?s transport energy derives from petroleum-based fuels and abatement in the sector has proved particularly challenging. Questions have been raised on how exactly the tax will be levied and implications for the competitiveness of US exports. Jeffrey Zients, Director of the National Economic Council and Assistant to the President for Economic Policy, told journalists last week that the tax would not be collected at wellhead and would not apply to exported oil products. Imports, however, will be charged. Further details on the clean transport vision would need to be resolved with Congress.

Although the plan is unlikely to get the green light, several experts have suggested it is primarily an effort to prompt political debate on the future of transportation and energy use, particularly in the context of this year?s presidential race. ?Even if that proves impossible this year, President Obama has helpfully started a national conversation about how to deliver the clean energy economy, which polls suggest the American people strongly favor,? said Nigel Purvis, head of consultancy Climate Advisers and a former White House staffer.

Some commentators have noted that continued low oil prices ? which plunged to approximately US$30 per barrel over the past month from over US$100 nearly 18 months ago ? could make Obama?s plan easier to swallow at the consumer level. Beyond the US, several experts have argued that low oil prices offer a ripe opportunity to reform energy market incentives, switching support away from climate-warming fossil fuels towards low carbon alternatives.

In order to fulfil the Mission Innovation pledge, the FY17 budget requests US$7.7 billion in funding for clean energy R&D across 12 agencies, representing a 20 percent increase on this year?s funds. The Obama Administration budget proposal makes the US the first Mission Innovation economy to outline plans to hit the clean energy R&D spending target.

The US Department of Energy (DOE) is set to receive the lion?s share of this sum, with plans for around US$5.85 billion to be spent on the creation of regional innovation centers and partnerships, investment in developing renewable energy technologies, support for R&D of nuclear energy, and plans to modernize electricity grids, among other things.

?Rather than subsidies the past, we should invest in the future,? Obama said in his weekly address last Saturday previewing the budget release. ?This will include new investments to help the private sector create more jobs faster, lower the costs of clean energy faster, and help clean renewable power outcompete dirty fuels in every state.?

Ensuring a low carbon energy transition will be a major part of curbing climate-warming emissions, according to many experts, given that 80 percent of the world?s current energy use relies on fossil fuels. UN Secretary-General Ban Ki-moon warned last month that clean energy investments were still below levels needed achieve long-term global temperature limits, enshrined in the Paris climate deal, and urged investors to boost capital in this area.

The DOE budget also includes a US$750 million request for the multilateral Green Climate Fund (GCF). Obama pledged in 2014 to contribute US$3 billion by 2020 to the nascent UN institution, designed to help poorer countries transition to a low carbon future and adapt to climate change?s negative impacts.

However, the US$500 million pledge in Obama?s budget request last year faced a rocky ride, with lawmakers agreeing only in late November not to block the payment.

A GCF informal board meeting in Cape Town, South Africa, last week focused on how to meet an aspirational target to invest US$2.5 billion this year in green projects in developing countries, a goal some stakeholders fear will be difficult to meet given the dearth of suitable project proposals put forward to date.

USCBP Revises Automation Schedules
TIACA ? 12 February 2016
This week, US Customs and Border Protection (CBP) pushed back its timeline for mandatory use of the new Automated Commercial Environment (ACE) for US import transactions. In particular, CBP is allowing more time for ?partner government agency? data ? other government agencies that require data for import transactions, such as the Food and Drug Administration ? to be provided through ACE. The revised ACE timelines are available at http://www.cbp.gov/trade/automated/ace-mandatory-use-dates.

Similarly, US exporters that file electronically through AESDirect face a mandatory transition to ACE, which has been programmed to include an export portal. CBP also announced a revised timetable for that transition this week, with legacy AESDirect accounts beginning the transition on February 29. Additional information is available from the US Census Bureau at 1.800.549.0595 or via email at askaes@census.gov.

tradeinfocus is a summary of news and events on the trade policy front for clients, trade & legislative colleagues, and professional friends of W.J. Byrnes & Co.