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

EU Trade Chief Warns Against Protectionism, Suggests Bloc Can "Fill Void" If US Turns Inward
EUROPEAN UNION (EU) - BRIDGES - VOLUME 20 - NUMBER 42 - 8 December 2016
EU Trade Commissioner Cecilia Malmstrom 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 Malmstrom, 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.

Malmstrom 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, Malmstrom 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
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.

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, along with 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.


Australian Treaties Committee Urges TPP Ratification
Australian Joint Standing Committee on Treaties - 8 December 2016
The Australian Joint Standing Committee on Treaties (JSCOT) issued its report on the Trans-Pacific Partnership (TPP) Agreement to the country's parliament last week, recommending that Canberra ratify the accord. The report, released on 30 November, is one of the necessary steps towards approving the accord in Australia. A separate enquiry is being conducted by another Australian panel, which is known as the Foreign Affairs, Defence and Trade References Committee. That report is due out by early February 2017.

Once these reports have been submitted to Australian lawmakers, implementing legislation can later be tabled to ratify the accord. The JSCOT report is not binding, however. The opposition Labor Party had previously asked that the JSCOT wait on issuing its report, given the political developments seen in the United States, though has not yet indicated its final position on the TPP itself.

The JCOT report's stated aim was to review what it deemed the most relevant aspects of the TPP for Australia. It therefore includes a series of chapters dealing with the agreement's strategic implications; investment protections; copyright protections for patent medicines and provisions on "biologic" drugs; services and non-tariff barriers; "unequivocally good" tariff outcomes; and the imperative to make a better public case for trade.
The committee process also included a period for receiving e-mailed comments from the public, with some treated as correspondence and others as submissions depending on length. Many of these raised concerns with the accord's content, such as its investor-state dispute settlement (ISDS) provisions; how much the TPP would actually benefit Australia's economy; pharmaceutical prices; and "temporary entry provisions" for professional workers.

"The Committee acknowledges that many Australians have deep concerns about how free trade agreements will affect their lives," the report says, suggesting that these public comments are indicative of a more widespread skepticism over the merits of trade accords.
The panel added that international trends - specifically a growing tendency towards inward-focused policy approaches - make it key for Canberra to work on its public engagement in order to build the necessary buy-in.

Therefore, along with recommending that the TPP be ratified, the committee also suggests revising the Australian government's approach to trade talks so that more private sector and civil society members can have access to domestic negotiating positions, so long as these individuals receive the necessary security clearance.

The JSCOT also makes related recommendations on assessing trade deal benefits that will focus more on measuring actual outcomes - such as by ?a single set of documentary procedures and the paperless trading provisions of the TPP? - rather than solely creating models for estimating their potential impact, which might fuel "false expectations."

The JSCOT report makes a reference to the broader political tensions over trade at the international level that have been heightened over the past year, as already seen most starkly in the US presidential election process and in the "Brexit" referendum vote in the UK.
"The Committee is aware of the resurgence in nationalist and isolationist points of view across the globe, and the threat this represents to the benefits brought by free trade. Addressing these views is an underlying theme in the Committee"s recommendations and comments throughout the Report," says the document. Indeed, what this may mean for the TPP's ratification prospects is not yet known. Just last month, US President-elect Donald Trump reaffirmed his campaign trail promise that he would pull Washington out of the 12-country accord, and that he would submit a "notification of intent" for doing so on his first day in office this coming January.

However, some TPP country officials say that they will continue to press on with their ratification processes in order to allow additional time for the US transition, and that doing so could help in making the case in Washington for staying part of the Pacific Rim trade accord. "Ultimately, Australia will continue to pursue our domestic processes. New Zealand's doing that. Singapore's doing that. Japan's doing that," said Australian Trade Minister Steven Ciobo in an interview with Bloomberg Markets Asia on 7 December. "So I just think we've got to give it time. It's too early to call it a day." The Australian trade official also recently suggested to BBC Radio that the group plans to look into expanding their membership, which "may potentially include China" or Indonesia.


UN General Assembly Grants Observer Status to International Chamber of Commerce in Historic Decision
New York, N.Y., December 13, 2016 - In an unprecedented move, the United Nations General Assembly has today granted Observer Status to the International Chamber of Commerce (ICC) - the world's largest business organization representing more than six million members in over 100 countries, according to the United States Council for International Business (USCIB), ICC's American national committee.

The decision - taken by 193 members of the UN General Assembly during its on-going 71st session in New York - is the first time that a business organization has been admitted as an Observer at the UN General Assembly. The list of UN observers is highly restricted and features principally intergovernmental organizations.

NAFTA Under Trump - Cities along the border would suffer mightily if NAFTA is ended.
By Rosemary Coates - December 13, 2016
Last week I spoke at the Economic Development Council in Brownsville, TX about the urgent need to bring manufacturing back to America. Brownsville is a somewhat economically depressed area with 7% unemployment rate. The city is anxious to attract new manufacturers to the area and is working very hard to do so. But the current economy in Brownsville is dependent on the Mexico-US border crossing that separates the city from Matamoros on the Mexico side. The cross-border trade provides many jobs in Brownsville for import brokers and their staff, truckers, warehousing and distribution services.

On the Mexico side of the border are huge manufacturing sites in Matamoros and further south to the industrial areas of Monterrey. In this region, Mexicans make everything from apparel to electronics to automotive parts. Companies move to Mexico of course, to take advantage of low-cost labor and operating environments. In addition, NAFTA adds to the economic appeal of manufacturing in Mexico by eliminating import tariffs between the three signatory countries: Canada, US, and Mexico.

So what might happen in Brownsville and all along the Rio Grande Valley border areas if NAFTA is renegotiated or the US withdraws from the treaty as Donald Trump has promised? There are certainly two sides to this story. About half the residents in the area voted for Trump and half for Clinton and they will readily offer their opinions. No matter what your political party, and even if NAFTA is modified or ended, all of the jobs are not likely to come back.

If the NAFTA treaty ended, the US would be free to increase tariff rates on imports, presumably to make manufacturing in the US look more cost-effective. But imports tariffs mask the problem and allow companies to get lazy about getting cost-competitive. Tariffs protect companies from foreign competition. Meanwhile, these same companies are not getting more efficient and ultimately the goods they produce will become more expensive for US consumers. If US consumers continue to buy imported goods, they too, will become more expensive. The consumer loses either way.

Cities along the border would suffer mightily if NAFTA is ended. Many people have come to depend on border trade jobs over the past 25 years. If trade stops or slows significantly, many of these jobs will be eliminated.

On the other hand, there are economists who say NAFTA has already caused the loss of so many jobs to the lower-cost environments in Mexico. They argue that instead of doing nothing, we should take every opportunity to raise tariffs, eliminate NAFTA and close our borders to immigrants and trade. But we have gone down this pathway before with the Smoot-Hawley Tariff Act of 1930, which raised tariffs on about 900 products. Historians blame Smoot-Hawley for triggering the Great Depression of the 1930s.

For sure, NAFTA has its problems. The import/export paperwork to keep track of goods moving across the borders can be onerous. The special rules for truckers from Mexico have taken a toll on American truckers. But overall, most economists think NAFTA has had a net positive effect on the US economy I hope we have learned our lesson from American history

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.