The latest monthly round-up of updates to key free trade agreements and trade preference programmes involving the US, EU and Japan covers developments in October 2018. Trade agreements, rules of origin, tariffs and schedules are all covered in depth in the re:source by just-style strategic planning tool.
UNITED STATES
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African Growth and Opportunity Act (AGOA)
On 2 October 2018, the Committee for the Implementation of Textile Agreements (CITA) released the new quota level that applies to the special apparel rule for lesser-developed countries under the African Growth and Opportunity Act (AGOA). This means that during the period from 1 October 2018 to 30 September 2019:
- Apparel exports from qualified AGOA members to the US that use sub-Saharan African (regional) yarns and fabrics are limited to 2,048,357,135 square metres equivalent (SME). [Note: this refers to the regional cap, which is no higher than 7% of all apparel articles imported into the United States in the preceding 12-month period.]
- Apparel exports from qualified AGOA members to the US that use fabric originating anywhere in the world are limited to 1,024,178,567 square metres equivalent (SME). [Note: this refers to the “third-country” fabric provision; usually, the quota level is no higher than 3.5 percent of all apparel articles imported into the United States in the preceding 12-month period.]
In fiscal year 2018 (1 October 2017-1 October 2018), the filled rate was 0.02% for the regional cap and 6.8% for the “third-country” fabric provision cap.
US-EU Free Trade Agreement
On 16 October 2018, the Trump Administration notified US Congress of its intention to negotiate the US-EU Free Trade Agreement. The Office of the US Trade Representative (USTR) says the negotiation aims to address both tariff and non-tariff barriers and to achieve “fairer, more balanced trade” with the European Union. USTR noted that reducing the EU trade deficit would be an important objective in the negotiation. According to the 2015 Trade Promotion Authority Act, the earliest day talks can start will be around 14 January 2019 (that is, 90 days after notifying Congress of the intention to begin negotiations). Meanwhile, USTR will publish objectives for the negotiations at least 30 days before formal trade talks begin.
US goods and services trade with the EU totalled nearly $1.2 trillion in 2017, including $527bn US exports to EU and $627bn US imports from EU.
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By GlobalDataUS-Japan Free Trade Agreement
On 16 October 2018, the Trump Administration notified US Congress of its intention to negotiate the US-Japan Free Trade Agreement. The Office of the US Trade Representative (USTR) says the negotiation aims to address both tariff and non-tariff barriers and to achieve “fairer, more balanced trade” with Japan. USTR noted that agriculture would be a particularly important sector in the negotiations. According to the 2015 Trade Promotion Authority Act, the earliest day talks can start will be around 14 January 2019 (that is, 90 days after notifying Congress of the intention to begin negotiations). Meanwhile, USTR will publish objectives for the negotiations at least 30 days before formal trade talks begin.
US goods and services trade with the Japan totalled nearly $1.2 trillion in 2017, including $114bn US exports to Japan and $55.5bn US imports from Japan.
US-UK Free Trade Agreement
On 16 October 2018, the Trump Administration notified US Congress of its intention to negotiate the US-UK Free Trade Agreement. The Office of the US Trade Representative (USTR) says the negotiation aims to address both tariff and non-tariff barriers and to achieve “fairer, more balanced trade” with Japan. USTR noted that support for higher-paying jobs in the United States and cutting trade barriers for emerging sectors would be important aspects of the negotiation. According to the 2015 Trade Promotion Authority Act, the earliest day talks can start will be around 14 January 2019 (that is, 90 days after notifying Congress of the intention to begin negotiations). Meanwhile, USTR will publish objectives for the negotiations at least 30 days before formal trade talks begin.
US goods and services trade with the UK totalled nearly $235.9bn in 2017, including $125.9bn US exports to the UK and $110bn US imports from the UK.
US-Korea Free Trade Agreement (KORUS)
United States and South Korea plan to hold consultations soon under the auspices of the US-Korea Free Trade Agreement (KORUS) to review and revise the short supply list (“Commercial Availability”) for textiles under the agreement. According to the procedure statement in KORUS, during those consultations “each party shall consider all data presented by the other party that demonstrate substantial production in its territory of a particular fibre, yarn, or fabric. The parties shall consider that there is substantial production if a party demonstrates that its domestic producers are capable of supplying commercial quantities of the fibre, yarn, or fabric in a timely manner.”
EUROPEAN UNION
Cambodia and Myanmar’s Eligibility for Everything but Arms (EBA) programme
On 5 October 2018, European Union (EU) Trade Commissioner Cecilia Malmström said the EU had launched the formal process to withdraw Everything But Arms (EBA) benefits from Cambodia. The announcement starts a year-long process that could lead to the removal of duty-free access to Europe for apparel, footwear, and travel goods from Cambodia, meaning exports from Cambodia will face the most-favoured-nation tariff rate set by the EU. However, Cambodia could be given about six months to rectify any violations. Cambodia is a major apparel supplier to the EU – and in 2017 the EU imported $1,021m worth of apparel from Cambodia (or 4% of the total).
Also on 5 October 2018, Malmström said the EU is considering taking steps to remove EBA benefits from Myanmar over the Rohingya refugee crisis. A monitoring mission of experts from the European Commission and the European External Action Service visited Myanmar from 28-31 October. The European Commission says “the EU stands ready to provide necessary support to Myanmar to address the concerns of the international community. Nevertheless, withdrawal of trade preferences [EBA] is a clear possibility if other channels of cooperation have failed to reach results.” Myanmar is a relatively small apparel supplier to the EU, which in 2017 imported $213m apparel products from Myanmar (or 0.8% of the total).
EU-Indonesia Free Trade Agreement
The sixth round of talks on the EU-Indonesia Free Trade Agreement took place from 15-19 October in Palembang, Indonesia. The two sides exchanged text proposals for tariff reductions in goods as well as transparency and regulatory practices. The next round of negotiations will be held in March 2019. Indonesia is a relatively small apparel supplier to the EU, which in 2017 imported $209m apparel products from Indonesia (or 0.8% of the total).
EU-Singapore Free Trade Agreement
On 19 October 2018, the EU and Singapore officially signed the EU-Singapore Free Trade Agreement. While the agreement still needs to be approved by the European Commission and then agreed upon by the Council of Ministers and ratified by the European Parliament, the aim is for it to enter into force before the end of the current mandate of the European Commission in 2019. Within the ASEAN bloc of nations, Singapore is by far the EU’s largest partner with a total bilateral trade in goods of EUR53.3bn (US$60.6bn) in 2017, and in services of EUR44.4bn in 2016.
EU-Vietnam Free Trade Agreement (EVFTA)
The EU Trade Commission officially adopted the EU-Vietnam Free Trade Agreement (EVFTA) on 17 October 2018, paving the way for its signature and conclusion. The proposed agreement will now be submitted to the Council of the European Union for signature, after which it will be presented to the European Parliament for consent. Vietnam is the European Union’s second-largest trading partner within the Association of Southeast Asian Nations (ASEAN). Also, Vietnam is a major apparel supplier for the EU, which imported $696m apparel from Vietnam (or 2.7 % of the total) in 2017.
EU-New Zealand Free Trade Agreement
The second round of the EU-New Zealand free trade agreement took place in Wellington, New Zealand from 8-12 October. The negotiation covered 13 topics, including customs and trade facilitation, dispute settlement, code of conduct, rules of procedure, energy and raw material, public procurement, intellectual property, rules of origin, small and medium-sized enterprises, state-owned enterprises, technical barriers to trade, trade in goods and trade remedy measures. The next round will take place in Brussels in February 2019.
CANADA
Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP)
On 29 October 2018 and 30 October 2108, Canada and Australia announced plans, respectively, to ratify the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP). Based on the rules, the agreement will officially take effect as of 30 December 2018.
The CPTPP is a free trade agreement (FTA) reached in January 2018 among 11 countries in the Asia-Pacific region (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam). It is essentially a replica of the Trans-Pacific Partnership (TPP) trade agreement joined by the 11 CPTPP members and the United States. However, the Trump Administration decided to withdraw the US from the TPP in January 2017.
Many of the original TPP provisions will remain intact in CPTPP, except a few controversial issues such as the Investor-State Dispute Settlement (ISDS). CPTPP tariff elimination schedules in general are kept as negotiated by TPP, with custom duties on 95% of trade in goods to be removed, including all textiles and apparel.
Countries yet to ratify are Brunei, Chile, Malaysia, Peru and Vietnam. The scheduled tariff cut under CPTPP will not apply to these countries until they finish the ratification process.
JAPAN
Regional Comprehensive and Economic Partnership (RCEP)
The 24th round of the RCEP negotiations took place in Auckland, New Zealand from 18-27 October 2018. In this round, discussions focused on trade in goods, trade in services, rules of origin, intellectual property and e-commerce. The 16 RCEP members still aim to reach a broad agreement by the end of 2018.
