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

China Risks Undermining a Unique Economic and Environmental Pact
The Hill - December 03, 2016
In Geneva this week, senior officials will seek to conclude a deal to lower the cost of environmentally-friendly technologies, but it will take greater leadership and increased flexibility from China to get this unique economic and environmental agreement over the finish line. The Environmental Goods Agreement (EGA) would eliminate tariffs between China, Europe, Japan, the United States, Costa Rica and other innovative economies on a broad range of products beneficial to the environment from wind turbines to LED lighting.

Such a deal would have important economic benefits for all of the participants. For China, a study commissioned by the Coalition for Green Trade suggests that an agreement would increase China's GDP and national income by billions of dollars. For the United States, the Office of the US Trade Representative notes that American exporters produced and sent $130 billion of environmental goods abroad in 2015, and this agreement would enable American manufacturers to grab a larger share of the $1 trillion dollar global environmental goods industry. Other Asian, European and Latin American economies would see new markets open for their manufacturers.

An agreement would also have a positive effect on the global environment. In particular, it would help China and other participants meet their global climate commitments and reduce air and water pollution at a lower cost. The Paris-based International Energy Agency estimates that one million people die each year in China from outdoor air pollutants. This deal would help economies including China adopt air pollution control technologies at a lower cost. Ultimately, the Coalition for Green Trade study notes that China could gain approximately $659 billion annually in economic benefits that stem from improved environmental quality thanks to cost savings that an EGA would bring.

For all of these reasons, experts and business groups from around the world have strongly encouraged negotiators to finish the deal this year. Last month at a seminar in Beijing, Professor Tu Xinquan, Dean of China Institute of WTO studies at the University of International Business and Economics noted that an EGA "will have very great environmental benefits," and noted that China's pollution "will challenge the Chinese government to make great progress in the EGA negotiations." At the same seminar, Wang Zhuo, Vice Secretary-General of the China Association of Lighting Industry (CALI), highlighted how LED lighting can reduce energy consumption and called for a rapid conclusion to the negotiations.

In the United States, the effort enjoys strong and longstanding bipartisan support across multiple Administrations and Congresses, as well as from business groups from the Business Council for Sustainable Energy to the Business Roundtable and US Chamber of Commerce. And dozens of business groups, including the Australian Industry Group, Business New Zealand, Canadian Association of Importers and Exporters, Japan Machinery Center for Trade and Investment, Singapore Business Federation, and Solar Energy Industries Association, signed a letter earlier this year calling for a conclusion of the agreement by year-end.

Despite these clear, shared benefits for Beijing and Washington in particular, as countries send their senior ministers to Geneva in an attempt to finalize an agreement, China has arrived with a lengthy shopping list but little flexibility or currency in its pockets to pay for what it wants. The hallmark of any successful negotiation is a good-faith give-and-take between countries that results in a deal which benefits all parties. To the extent that any one party to a negotiation arrives asking that all of its requests be accommodated while simultaneously refusing to accommodate the requests of others, as China appears poised to do, that is a recipe for failure.

Failure to conclude this unique agreement now would be more than another missed deadline. It would undermine the authority of world leaders who, under Chinese President Xi Jinping's leadership at the G-20 Ministerial in Hangzhou, hailed a "landing zone" for the agreement and emphasized a shared commitment to finish an ambitious deal by the end of 2016. The inability to conclude an EGA would be a particular blow to China's credibility on trade. Last month, President Xi touted China's commitment to free trade, saying at the APEC leaders" summit that Beijing "oppose[s] all forms of protectionism? and wishes to "inject positive energy into economic globalization." China's state-run news agency touted the idea that China would "take the driver's seat in terms of pushing for greater free trade" in the Asia Pacific.

Failure would also diminish the World Trade Organization (WTO), the umbrella under which this agreement is being negotiated. A failed ministerial meeting - on a topic that is relatively uncomplicated and enjoys broad support  - could undermine the credibility of the organization as a forum to modernize other, more complex trade rules in the future.

The flip side is that an ambitious agreement would be an important shared victory for the participants" economies, the global environment and the international institutions and rules that support the global marketplace. Success would also help cement the leadership of China, the United States, Europe, and the other innovative participants in the global economy. We will soon find out whether world leaders can keep their word, and whether innovative economies can join forces and secure an ambitious agreement that enhances shared economic and environmental goals before time runs out.

Jake Colvin is Vice President for Global Trade Issues at the National Foreign Trade Council and Executive Director of the Global Innovation Forum.


EU Trade Chief Warns Against Protectionism, Bloc Can "Fill Void" if US Turns Inward
European Union (EU) Bridges - 08 December 2016
EU Trade Commissioner Cecilia Malmstr'm called for the 28-nation bloc to continue its efforts to push back against protectionist policies and better answer and address the concerns raised about globalization's impacts, while suggesting that the EU could also "fill the void" should US policy take a more inward-focused approach.

"We are seeing now huge changes in societies. But failing to sign trade deals will not stop globalization or technological change, at home or abroad. It will just mean that we have fewer resources to manage the change," said EU Trade Commissioner Cecilia Malmstr'm, speaking at the Alliance of Liberals and Democrats for Europe (ALDE) Party Congress in Warsaw, Poland, last week. "We liberals, we've always been fighting for openness, opportunities " not putting needless barriers in the way of business is a part of that," she said, calling for the EU to ensure that it takes a role in shaping globalization, rather than just accepting it.

Indeed, the coming year could prove to be a pivotal one for the European Union, as it faces elections in large member states such as France and Germany. The "Brexit" negotiations between the UK and the other 27 member states are also expected to kick off by late March, unless legal challenges underway in Britain prevent it. The trade debate in Europe has been especially heated over the past year, as already seen in the process leading up to the signing of the Comprehensive Economic and Trade Agreement (CETA) with Canada. The accord is now being considered at the committee level within the European Parliament, with a plenary vote slated for next February.

Malmstr'm warns against walls, protectionism
Across the Atlantic, US President-elect Donald Trump is due to take office on 20 January 2017. The incoming leader has not made his views known on EU-US trade, including the prospects for the Transatlantic Trade and Investment Partnership (TTIP). European officials say they expect those talks to enter a "freeze" next year until there is more clarity from Washington. Most recently, Trump has reaffirmed his election pledge to pull the US out of another trade accord, the 12-country Trans-Pacific Partnership (TPP), along with warning on social media site Twitter that any US company "that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the US without retribution or consequence is WRONG" (emphasis in original quote).

Furthermore, the President-elect pledged that those companies who engage in those practices and then attempt to sell their goods back to the US will face a tax of 35 percent. The suggestion has reportedly drawn pushback from various House Republican lawmakers.

Without referring specifically to either situation, Malmstr'm told the ALDE conference attendees last week that the EU should be ready to step up to the plate should the US pursue a more isolationist approach in trade negotiations or other international areas. "Whether that is bad news, I think the EU has the possibility to fill the void. We can show that walls, that protectionism, is not what the world needs right now," she said.

She also touted the EU's ability to negotiate strong, values-based deals, while warning that the trade debate needs to become more fact-based, particularly in light of today's political climate. Furthermore, she suggested that trade plays an essential role in supporting individual livelihoods, broader economic growth, and in testing out new ideas. "Those who claim that we should prosper and thrive without trade need to explain how we're going to compensate if we don't take these benefits. They cannot. That is why I would rather trade in facts than in fantasies," she said.


WTO Trade Facilitation Agreement Nearing Entry into Force
International Centre for Trade and Sustainable Development - 08 December 2016
The process to bring the WTO's Trade Facilitation Agreement (TFA) into force is entering the home stretch, with the Geneva-based organization reporting that only eight more ratifications are needed to do so. The two most recent ratifications " Gabon and Kyrgyzstan " were confirmed this week, coming fast on the heels of Dominica and Mongolia. Under WTO rules, two-thirds of the global trade body's membership must ratify an accord in order for it to enter into force for those members.

To date 102 of the WTO's 164 members have ratified the TFA. The deal includes a series of provisions aimed at making customs and border procedures easier, thus speeding up the passage of goods between countries and lowering their costs. These include commitments relating to publishing import, export, and transit procedures and forms online; allowing opportunities for comments on new laws and regulations that may affect the movement and clearance of goods; disciplines on fees and charges for customs processing; pre-arrival processing of goods; and various others

Overall, the Geneva-based organization predicts that the TFA's export gains could add up to US$750 billion to US$1 trillion annually. According to the global trade body, developing countries " particularly African and least developed countries " are expected to see the greatest reductions in costs due to the TFA. The WTO's Trade Facilitation Agreement was adopted in Bali, Indonesia, in December 2013 at the organization's Ninth Ministerial Conference. It then opened for ratification in November of the following year.

Category notifications, donor support
Along with its potential to cut costs and speed up trade, the TFA is also notable among the WTO's body of rules as having provisions that enable developing and least developed countries to notify which commitments they can implement right away, and which ones will require more time or support to implement.

According to a list provided by the WTO's TFA Facility " a mechanism designed to help developing and least developed countries implement the new deal's requirements " 90 WTO members have put forward their Category A notifications, which list those commitments which will enter into force as soon as the TFA comes online. For the other two categories " those that require a transition period, known as "Category B" and those that will need both extra time and technical assistance " six notifications have been received.

To that end, various bilateral donors and regional/multilateral organizations have already been making preparations to provide the necessary support. WTO members having difficulty getting the help or information they need can also turn to the TFA Facility for additional assistance. The facility is working to provide training materials, courses, regional workshops, and other support, according to a 2016 work plan.
Once the Trade Facilitation Agreement enters into force, a series of institutional arrangements will also take effect. For example, the Preparatory Committee on Trade Facilitation which has been shepherding the process of preparing for the deal to come online - will be replaced with a Committee on Trade Facilitation which will meet at least annually. That new committee will aim to provide a forum for information sharing, while collaborating with the World Customs Organization (WCO) and other relevant international bodies that could help support the TFA. It will also hold a review on the TFA's "operation and implementation" four years after it takes effect, with subsequent reviews held regularly. Meanwhile, WTO members will also need to have in place national committees on trade facilitation, or their equivalent, in order to help in the implementation process.


Brady: Ending Tax on "Made in America" Goods Will Unleash US Economic Growth
House Ways and Means - November 5, 2016
On December 1, House Ways and Means Committee Chairman Kevin Brady (R-TX) discussed "Built for Growth" tax reform. This bold Blueprint delivers a 21st century tax code built for the growth of families" paychecks, the growth of American businesses, and the growth of our nation's economy.

Chairman Brady (R-TX) said: "One, it levels the playing field for American-made products. Competition going forward in the future will not be based on the tax code" competition will be based on price and service and quality. Whenever you do that, consumers win. Secondly, it allows us to dramatically simplify the international tax code, which is stunningly complex today. Thirdly, and perhaps most importantly, combined with lower rates in a territorial system, this provision ensures that we have eliminated every tax incentive to move jobs, innovation, or headquarters overseas. In fact, our goal is not simply to stem the tide and stop businesses in America from locating overseas. Our goal is to bring those investments back " we will become a 21st century magnet for new investment on this planet."

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