Trade Compliance

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7 Key Trade Issues to Watch in 2019

Posted January 04, 2019


Last year was a particularly eventful one for international trade as Washington aggressively pursued U.S. President Donald Trump’s “America First” agenda on a number of different fronts. With things promising to get even more hectic in 2019, here are seven key issues that we think importers and exporters should be keeping an eye on in the new year.

NAFTA 2.0 (USMCA) Ratification


The renegotiated North American Free Trade Agreement that was signed by the leaders of Canada, Mexico and the United States at the end of November on the sidelines of the G20 summit in Buenos Aires will be gradually working through the ratification process in all three countries over the coming months. While the pact is expected to pass with relative ease in both Canada and Mexico, being approved by the U.S. Congress should be a far more daunting ordeal. The Trump administration has indicated that it wants to secure passage by the middle of 2019, but multiple Democratic lawmakers (who now control the House of Representatives) have said the deal requires stronger labour and enforcement provisions before they will give it a thumbs-up.

US-China Trade Talks


President Trump and his Chinese counterpart Xi Jinping stepped back from an escalating trade war in December, agreeing to a 90-day cease-fire while the two sides attempt to work out their differences. Trump recently tweeted that “Big progress” was being made towards striking a “comprehensive” deal, although the first face-to-face encounter between negotiators won’t take place until next week when a U.S. delegation travels to Beijing for talks with Chinese officials. Whether substantial progress can be made by a March 1st deadline set by the two leaders remains to be seen, but will be a formidable challenge given there are a host of contentious issues involved that defy quick and easy solutions. Should the two sides fail to reach a deal, Trump has vowed to hike tariffs on $200 billion of Chinese goods to 25% from 10%.

Brexit & Europe


A deal on the terms of the UK’s withdrawal from the European Union and the framework of future relations has been agreed between the government of Theresa May and the EU, but it requires approval by parliament. The crucial vote, which was postponed last month owing to its widespread unpopularity, is now slated to take place sometime during the middle of January.

In the event May’s Brexit plan is approved, the UK will enter into a 21-month “transition period” beginning March 30, 2019 until the end of 2020 that would allow government and businesses to prepare for the new post-Brexit regime. However, if May’s agreement is rejected by lawmakers, then the UK runs the risk of leaving the EU without a deal, meaning there would be no transition phase and World Trade Organization rules and tariffs would immediately apply. Under this disorderly “hard Brexit” scenario, significant and far-reaching logistical and supply chain disruptions can be expected as everything coming into the UK would need to be checked at the border, but the country does not presently have the infrastructure needed to do this. With respect to Canada’s trade with the UK under a no-deal Brexit, Britain would lose its stake in the Comprehensive Economic and Trade Agreement after March 29, therefore making many goods once again subject to import duties.

US-European Trade Talks


Looking to avert further escalation of a dispute prompted by Trump’s metals tariffs while also defusing fears an all-out trade war, the two sides agreed in July to start talks intended to achieve “zero tariffs” and “zero subsidies” on non-automotive industrial goods. While officials have been meeting informally since then to define the scope of the discussions, little progress has been made so far. To date, the White House hasn’t published its formal objectives, which is required in accordance with the Trade Promotion Authority before negotiations can officially get underway. U.S. Trade Representative Robert Lighthizer and EU Trade Commissioner Cecilia Malmström are scheduled to meet in Washington next week to discuss bilateral trade liberalization, along with other issues such as how to tackle China’s trade practices and WTO reforms.

US-Japan Trade Talks


Formal talks to negotiate a comprehensive trade agreement between the U.S. and Japan could begin later this month. On December 21, the USTR posted the Trump administration’s objectives, which among the 22 areas covered involve tackling Japan’s “multiple tariff and non-tariff barriers” and reducing the roughly $60 billion bilateral merchandise trade deficit. Tokyo’s main goal will be to protect its access to the all-important U.S. auto market while offering concessions to mollify Washington’s calls for greater access for its farm exports without sparking too much of an angry backlash from Japan’s small but powerful agricultural lobby.

Section 232 Report on Automotive Imports


A report on the findings of a probe launched last May by the U.S. Commerce Department into the national-security implication of automotive imports becomes due on February 17. Commerce issued two similar reports last year that provided Trump with the pretext to bypass Congress and impose tariffs on steel and aluminum imports. Should the report arrive at the expected conclusion, it would provide Trump with added leverage in negotiations with the EU and Japan, both of which were bullied into bilateral talks by threats of a punitive 25% tariff on their auto exports. If Commerce takes until the deadline to submit the Section 232 report to the president, Trump then has until May 18 (90 days) to make a decision on whether to impose tariffs.

World Trade Organization at the Brink


The WTO is widely seen as facing its greatest crisis of its 23-year existence as it contends with an influx of more than a dozen cases stemming from Trump’s contentious metals tariffs and the countermeasures taken in retaliation to them. Rulings in these disputes could have major implications for the future of the WTO, which officials fear could be sidelined if countries increasingly abuse a loophole in international trade law that allows members to take any action deemed necessary to defend “essential security functions” in three areas: nuclear material, arms trafficking or actions taken in time of war or international emergency.

This fraught situation is taking place at time when the WTO’s dispute settlement system as a whole faces losing its appeals mechanism by the end of the year if the U.S. maintains its opposition to the appointment of new judges. Since mid-2017 under the Obama administration, the U.S. has used its position to block nominees to the Appellate Body, claiming that “activist judges” seeking to impose their own policy preferences have led the WTO to overstep its mandate. The U.S. has argued that the body should not be able to review the factual findings of WTO panels, issue “advisory opinions,” or have its rulings be considered precedent (thereby effectively writing new rules that members would never have agreed to), among other issues.

The Trump administration also argues that the WTO is dysfunctional because it has manifestly failed to hold China to account for not opening up its economy as envisaged when Beijing joined the organization in 2001. While both the EU and Canada have led recent efforts aimed at reforming and modernizing the WTO, the various changes proposed to date have found little favour from President Trump, who has repeatedly threatened to pull America out of the multilateral trade body which it helped to create largely for its own benefit, complaining that it is “unfair” to the U.S.