The latest monthly round-up of updates to key free trade agreements and trade preference programmes involving the United States, the United Kingdom and Japan covers developments in May 2020.
UNITED STATES
US-UK Free Trade Agreement
The United States and the UK officially kicked off negotiations for a comprehensive free trade agreement on 5 May 2020. The first round of the virtual talks, which lasted for about two weeks, involved 30 different negotiating groups, and covered nearly all aspects of the proposed agreement. The date for the next round has not yet been announced. However, the Office of the US Trade Representative (USTR) said reaching the trade pact with the UK would be a priority for the Trump administration.
According to the negotiating objectives released in February 2019, the US side wants to delimitate bilateral tariff and non-tariff barriers and achieve a fairer and deeper trade relationship with the UK. Specifically regarding textiles and apparel, the agreement will “secure duty-free access for US textile and apparel products and seek to improve competitive opportunities for exports of US textile and apparel products while taking into account US import sensitivities.” The agreement will also “establish origin procedures for the certification and verification of rules of origin that promote strong enforcement, including with respect to textiles.”
US-Kenya Free Trade Agreement
On 22 May 2020, the Office of the US Trade Representative (USTR) released the specific negotiating objectives of the proposed US-Kenya Free Trade Agreement. Overall, it intends to “build on the objectives of the African Growth and Opportunity Act (AGOA) and serve as an enduring foundation to expand US-Africa trade and investment across the continent.” USTR also envisions an agreement that “can serve as a model for additional agreements in Africa, leading to a network of agreements that contribute to Africa’s regional integration objectives.”
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By GlobalDataRegarding the textiles and apparel sector, USTR says it will: “Secure duty-free access for US textile and apparel products and seek to improve competitive opportunities for exports of US textile and apparel products while taking into account US import sensitivities.” The proposed agreement will also: “Establish origin procedures that streamline the certification and verification of rules of origin and that promote strong enforcement, including with respect to textiles.” The same/very similar language is used in the proposed US-Japan Free Trade Agreement and the US-EU trade negotiation.
While still being a relatively minor supplier, Kenya’s apparel exports to the US reached a record high of US$453m in 2019, which was an increase of 132% from ten years ago. For many US fashion companies, Kenya is also its single largest apparel-sourcing base in sub-Saharan Africa (SSA), accounting for one-third of the region’s total apparel exports to the US in 2019. As this article on just-style explains, there are various industry views on the agreement – and apparel-specific provisions are the focal point of the debate: US-Kenya trade deal – Here’s what the apparel industry wants.
Hong Kong update
On 30 May 2020, President Trump announced his administration’s latest China policy, which includes “beginning the process of eliminating policy exemptions that give Hong Kong different and special treatment.” While the details of the policy change remain unknown, should Hong Kong is no longer treated as separate customs territory, the following impacts could be expected:
- All products, including apparel items, exported from Hong Kong to the US, will no longer enjoy the duty-free treatment but be subject to the most-favoured-nation (MFN) tariff rate.
- All US Section 301 punitive tariffs as well as other trade remedy measures (such as anti-dumping and countervailing duties) imposed on exports from China, will also apply to products originating from Hong Kong.
- New requirements will apply to the country of origin labelling on goods made in Hong Kong.
- New restrictions on visa application and travel could destabilise the overall trading relationship and business environment.
UNITED KINGDOM
Post-Brexit tariff scheme
On 19 May 2020, the UK government released its latest most favoured nation (MFN) tariff schedule (also called the UK Global Tariff or UKGT), which will take effect on 1 January 2021. The new tariff scheme will offer nearly 60% of products from any WTO member duty-free access to the UK market. The tariff rates for most apparel items (HS chapters 61 and 62) will remain unchanged. However, 23 items (8-digit HS code) will see a slight decrease in their tariff rate since 1 January 2021 as shown in the table below. Further, the UK will continue to offer preferential duty-access to all beneficiaries of the EU GSP, GSP+ and EBA programmes after the Brexit transition period, which ends on 31 December 2020.
JAPAN
Regional Comprehensive Economic Partnership (RCEP)
The 30th round of negotiations for the Regional Comprehensive Economic Partnership (RCEP) was held by members from 15-20 May 2020 via video conference. According to media reports, intensive talks were conducted on a few remaining issues and it looks hopeful the agreement will be signed later in 2020 as scheduled during the ASEAN summit. During the latest round, RCEP members offered India the option of “deferring commitments” in exchange for its return to the trade talks. However, India has not yet accepted the offer. However, the outlook for the agreement remains unclear, and Covid-19 adds to the uncertainty.
The RCEP is a proposed free trade agreement between the 10 member states of ASEAN and six dialogue partners: China, Japan, South Korea, India, Australia and New Zealand. In November 2019, concerns about intensified competition with Chinese goods saw India announce it would not be joining the pact immediately.
