By Dr Sheng Lu | 22 March 2019

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 February 2019. Trade agreements, rules of origin, tariffs and schedules are all covered in depth in the re:source by just-style strategic planning tool.


US-UK Free Trade Agreement

On 28 February 2019, the Office of the US Trade Representative (USTR) released the negotiating objectives of the proposed US-UK Free Trade Agreement. Overall, the agreement aims to address both tariff and non-tariff barriers to achieve fairer and deeper trade between the two countries.

Regarding 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" during the discussions. 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." According to the 2015 Trade Promotion Authority Act, USTR is authorised to start talks with the UK in late March 2019 (around 30 days after the release of the negotiating objectives). 

US-EU Free Trade Agreement 

An economic analysis submitted by the European Commission to the European Parliament and EU Member States on 19 February shows that a targeted US-EU Free Trade Agreement eliminating all tariffs on industrial goods would increase EU exports to the US by 8% and US exports to the EU by 9% by 2033. This corresponds to additional gains of EUR27bn and EUR26bn in EU and US exports respectively. Specifically, the study predicts EU apparel exports to the US could increase by EUR2.3bn (110%) to EUR4.5bn by 2033.

For years the United States has been the EU's largest apparel export market. In 2017, the EU exported around $3.5bn worth of apparel to the US, accounting for 12% of the EU's total global apparel exports that year.


European Union-New Zealand Free Trade Agreement

The European Union (EU) and New Zealand undertook their third round of negotiations for a proposed free trade agreement from 18-22 February. The third round covered practically all areas of the future agreement, such as cutting tariff and non-tariff barriers and promoting smart, sustainable and inclusive growth. The talks also included a first discussion on the respective market access offers for goods. In most cases, the discussions were based on text proposals submitted by the EU side. The fourth round is tentatively scheduled to take place in New Zealand in May 2019.

Bilateral trade in goods between EU and New Zealand has risen steadily in recent years, reaching almost EUR8.7bn in 2017. The EU is New Zealand's third-biggest trade partner.

EU-Singapore Free Trade Agreement

The European Parliament approved the EU-Singapore Free Trade Agreement on 13 February 2019. The two parties concluded the negotiation of the agreement on 17 October 2014 and officially signed it in October 2018.

The EU-Singapore Free Trade Agreement is EU's first bilateral trade agreement with a Southeast Asian country. In addition to cutting tariff and non-tariff barriers, the agreement also aims to eliminate nearly all customs duties, remove trade obstacles for green tech, create opportunities for environmental services, and encourage more mutual investments. 

Specifically for the textile and apparel sector, the agreement will eventually allow Singapore to export apparel to the EU duty-free during a five-year staging period. In general, the agreement adopts the double transformation rules of origin, meaning fibres and yarns may be produced anywhere – but each component starting with the fabric used to make the apparel garments must be formed within the free trade area.

For the next step, the trade agreement could enter into force once Singapore concludes its own internal procedures and both sides complete the final formalities. The EU's processes will be sending the agreement to the regional and national parliaments of EU member states for approval. The aim is for the entry into force of the trade agreement before the end of the current mandate of the European Commission in 2019.

Cambodia's Eligibility for Everything but Arms (EBA) programme

In a statement made on 12 February 2019, the European Commission said it has started the process that could lead to a temporary suspension of Cambodia's eligibility for the EU Everything But Arms (EBA) programme. Specifically, the EU process will include the following three stages:

  • Stage 1: A six-month period of intensive monitoring and engagement with the Cambodian authorities;
  • Stage 2: Another three-month period for the EU to produce a report based on the findings in Stage 1;
  • Stage 3: After a total of 12 months in Stages 1 and 2, the EU Commission will conclude the procedure with a final decision on whether or not to withdraw tariff preferences. It is also at this stage that the Commission will decide the scope and duration of the withdrawal. Any withdrawal would come into effect after a further six-month period.

On the other hand, the EU Commission also stressed that launching the temporary withdrawal procedure does not entail an immediate removal of Cambodia's preferential access to the EU market, which "would be the option of last resort."

Cambodia is a major apparel supplier to the EU. In 2017, the EU imported $1,021m apparel from Cambodia (or 4% of the total). 

EU-Eastern and Southern Africa States Agreement

On 11 February 2019, Comoros became the fifth country from the Eastern and Southern Africa (ESA) region to ratify the Economic Partnership Agreement with the EU. The other four member countries include Madagascar, Mauritius, Seychelles and Zimbabwe, which have been putting the agreement into practice since May 2012. 

In general, the EU-Eastern and Southern Africa States Agreement adopts the "cut and sew" rules of origin, which means that fibres, yarns and fabrics may be produced in any country, but cutting and sewing of the finished apparel garments must be formed within the free trade area. 


Japan-Turkey Economic Partnership Agreement (EPA)

The thirteenth round of negotiations for the Japan-Turkey Economic Partnership Agreement (EPA) was held from 12-15 February  in Tokyo, Japan. Discussions covered areas including trade in goods, trade in services, investment, sanitary and phytosanitary measures (SPS), rules of origin, technical barriers to trade (TBT), intellectual property, e-commerce, government procurement, customs procedures and trade facilitation, among others. The EPA negotiation was launched in 2014 as an outcome of the Japan-Turkey summit. Japan is Turkey's most important partner in the Asia-Pacific region.

Regional Comprehensive and Economic Partnership (RCEP)

The 25th round of the RCEP negotiations took place in Bali, Indonesia from 19-28 February. In this round, the talks focused on trade in goods, trade in services, rules of origin, intellectual property and e-commerce. While the 16 RCEP members aim to reach a broad agreement as soon as possible, whether it will happen in 2019 remains unclear.

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