Trade & Policy Round-up for May

Updated: Jun 2, 2021

By SPESA

Below is a collection of stories related to trade and government policy that may impact the sewn products industry around the world.


Post-Brexit EU-UK Trade Deal Ratified

The EU-UK Trade and Cooperation Agreement officially went into effect May 1, 2021, after it received an overwhelming majority of votes in the European Parliament. The agreement sets out preferential arrangements in areas such as trade in goods and in services, intellectual property, public procurement, aviation and road transport, judicial cooperation, and participation in EU programs. While this doesn’t change much — the agreement has provisionally been in place since January — it should give some peace of mind to those moving goods across Europe. Read more.


Request for Comments on AGOA Eligibility The Office of the U.S. Trade Representative (USTR) has initiated its annual eligibility review of the African Growth and Opportunity Act (AGOA). AGOA provides eligible sub-Saharan African countries with duty-free access to the U.S. market for over 1,800 products not included in the Generalized System of Preferences (GSP), as well as preferential treatment for certain textile and apparel articles. To receive AGOA benefits, countries must establish or make continual progress toward establishing a market-based economy and democratic processes. Countries must also eliminate barriers to U.S. trade and investment, enact policies to reduce poverty, combat corruption, and protect human rights. Interested parties are encouraged to submit written comments on the countries eligible to receive AGOA benefits by the June 23rd deadline.


Federal Register Notice Outlining the Public Comment Process | 2020 USTR Report on AGOA Implementation


Industry Groups Testify on USTR Section 301 Proposal

Last month, we highlighted USTR’s proposal to impose new Section 301 tariffs on goods imported from Austria, India, Italy, Spain, Turkey, and the United Kingdom in response to the countries’ Digital Service Taxes (DSTs). During USTR’s public hearings in early May, several industry lobbying groups spoke out against the proposal. The Retail Industry Leaders Association (RILA) stressed that the imposition of additional tariffs on imported goods would punish American companies, consumers, and workers without obtaining the elimination of the DSTs. The American Apparel & Footwear Association (AAFA) argued the tariffs “would result in great harm to our industry and exacerbate supply chain disruption issues during the Covid-19 pandemic.” Read more on Sourcing Journal. Read more on Just-Style.


USTR will review all of the oral testimony and written comments before announcing their next steps. You can read written comments submitted by clicking “Access Public Docket” for each case here.


EU Suspends Retaliatory Tariff Plan The European Union will suspend its June 1st tariff increase on imports of U.S. goods planned in response to the U.S. Section 232 tariffs on EU steel and aluminum. In a joint statement, representatives from both parties announced they are entering into discussions to reach a mutual resolution on global steel and aluminum excess capacity before the end of the year. The statement also made this joint stab at China: “They agreed that, as the United States and EU Member States are allies and partners, sharing similar national security interests as democratic, market economies, they can partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account.”


Joint European Union-United States Statement | ABC News/Associated Press Analysis


Side Note: Ganging up on China seems to be a theme for this month’s update. In a recent meeting between the U.S. Secretary of State and the British Foreign Secretary, the two top diplomats pledged unity between the two nations based on their “convergence” of interests and shared values, including holding human rights abusers to account, specifically calling out those in the Xinjiang Uyghur Autonomous Region and elsewhere in China. Read more.


EU Identifies Potentially Hazardous Chemicals

The European Chemicals Agency (ECHA) has determined that 290 registered chemicals could be hazardous and may be candidates for additional regulatory risk management at the EU level. Most of the chemicals will require further research and confirmation of hazard before any actions can start. These chemicals, along with recommendations to authorities and industry on managing the risks, are included in the agency’s third report on its Integrated Regulatory Strategy. Read more.


Senate Committee Passes Make PPE in America Act

The Senate Homeland Security and Governmental Affairs Committee passed the Make PPE in America Act (S.1306) last week. The legislation was introduced by Senators Rob Portman (R-OH) and Gary Peters (D-MI) to strengthen efforts to onshore production of personal protective equipment (PPE) in the United States by requiring federal agencies to issue long-term contracts for American-made PPE. The bill still has a long way to go before it could become law, but we will continue to keep an eye on it. Read more.


Related: At the end of April, President Biden announced the hiring of Celeste Drake as the first Director of Made in America at the Office of Management and Budget. Biden established the Made in America Office in an executive order at the beginning of the year to push federal agencies to buy more products made in the United States. Read more.


Senate Opens Debate on China Tech Bill*

The U.S. Senate voted May 17th to open debate on the Endless Frontier Act (S.1260), which would significantly boost federal funding for U.S. technology research and development in the face of rising competition from China. The legislation seeks to invest $100 billion in basic and advanced research, commercialization of the research, and education and training programs in key technology areas like artificial intelligence. Politico speculates the Senate is keying up for broader legislation that would help expand the U.S. political, diplomatic, and economic toolkit for dealing with China, and curb China’s growing geopolitical influence. “Ultimately it's expected to include additional measures boosting technology research and development, revitalizing manufacturing sectors, and outlining a diplomatic and national security strategy for the U.S. in the Indo-Pacific region.” Again, we are still early in the legislative process, but this effort has a fair amount of bipartisan support in the Senate, and reportedly from the White House as well. It could get interesting soon.


JD Supra Breakdown of Legislation | Reuters Analysis


*Update 6/2/21: The Endless Frontier Act has since been incorporated into a larger legislative package known as the U.S. Innovation and Competition Act (USICA). Learn more.


U.S. Sticking to Phase One Agreement

More than once, the U.S. Government has criticized China for falling short on implementing its commitments under the United States-China Economic and Trade Agreement, also known as the Phase One Agreement. Most recently, USTR called China out in the agency’s annual Special 301 Report related to intellectual property rights. Read more.


However, despite the challenges, the Biden Administration continues to use the agreement created by its predecessor as a foundation for U.S.-China relations, noting the benefits of policy continuity. U.S. Trade Representative Katherine Tai recently stated that she expects to meet with her Chinese counterparts soon to assess implementation of the deal. She also noted that any possible tariff removal will depend on the outcome of those conversations. Read more.


Some additional reading from Dr. Sheng Lu: What Biden’s First 100 Days Say About his Approach to Trade - Just-Style


U.S. Considers Border Adjustment Tax U.S. climate envoy John Kerry told reporters yesterday that the Biden Administration is exploring the idea of introducing a border adjustment tax that would apply to imports from countries with weaker climate policies. He added that President Biden instructed U.S. officials to examine the potential consequences and impact of the move. This is the second time we’ve heard Kerry make this comment in the last few weeks. Read more.


Similar initiatives are gaining interest from other world leaders as well as a way to shield domestic workers making energy-intensive goods while encouraging other countries to slash their emissions. In fact, the European Union has indicated it will put forward plans for a “carbon border adjustment mechanism” next month. In theory, the tax would discourage companies from shifting operations to nations with less-stringent rules. Read more.


Paving the Way for a UK-India FTA

The United Kingdom and India announced plans for £1 billion worth of new trade and investment between the two countries. The investment is expected to create more than 6,000 new jobs in the UK. These initial investments, along with a joint commitment to address immediate market access barriers, are meant to lay the foundation for a future free trade agreement. As Reuters explains it: “Britain, the world's fifth largest economy, sees closer ties with India, the sixth biggest, as a key pillar of its post-Brexit push to seek trade and influence in the Indo-Pacific region and address growing Chinese dominance.”

UK Government Press Release | BBC Analysis

Pakistan Removes Customs Duty on Cotton Yarn

In April, Pakistan’s Economic Coordination Committee temporarily withdrew customs duties on the import of cotton yarn until June 2021. The withdrawal is meant to ensure smooth supply of cotton and cotton yarns to the value-added industry, while bridging the gap between domestic production and overall demand for the inputs. Read more.

Japan Ratifies RCEP

Japan’s House of Councillors (its upper house of parliament) approved the country’s involvement in the Regional Comprehensive Economic Partnership (RCEP) late in April, making it the fourth country to do so after China, Singapore, and Thailand. The world’s largest trade agreement will take effect 60 days after it has been ratified by at least six ASEAN and three non-ASEAN signatories. Read more.

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