By Dr Sheng Lu | 17 October 2018

A round-up of updates to key free trade agreements and trade preference programmes involving the US, EU and Japan covers developments in September 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-Mexico-Canada Agreement (USMCA)

On 30 September 2018, the United States reached an agreement with Canada, alongside Mexico, on the updated North American Free Trade Agreement (NAFTA) – now called the United States-Mexico-Canada Agreement (USMCA). The full text of the agreement is available here.

According to the fact sheet released by the Office of the US Trade Representative (USTR), USMCA will include new provisions on textiles that incentivise greater North American production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the three parties. More specifically, USMCA will promote greater use of Made-in-the-USA fibres, yarns, and fabrics by:

  • Limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade.

  • Requiring that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.

  • Establishing a Textiles chapter for North American trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in this important sector.

USTR says the new Textiles chapter provisions "are stronger than those in NAFTA 1.0 with respect to both enforcement and incentivising North American production of textiles."

A month earlier, on 31 August 2018, President Trump had formally notified Congress of his intent to sign a trade agreement with Mexico – and Canada – toreplace the existing NAFTA. This means that under the Trade Promotion Authority (TPA) timeline requirement:

  • The earliest that President Trump can sign the agreement will be 11/29/2018 (90 days after notifying Congress).

  • The US International Trade Commission has until 3/14/2019 (150 days after President signed the agreement) to release an assessment of the new trade pact.

  • After this, the Trump Administration will need to work with Congress to develop legislation to approve and implement the agreement.

US-Japan Trade Agreement on Goods

In a joint statement on 26 September 2018, the United States and Japan announced that following the completion of necessary domestic procedures,the two countries would enter into negotiations for a United States-Japan trade agreement on goods [Note: NOT a comprehensive bilateral free trade agreement], as well as on other key areas including services. The US will seek more access to the Japanese auto market, and the Japanese will not go beyond any previous commitments to open their protected agriculture market. Regarding the timeline, the USTRmust notify Congress 90 days before it can formally enter into trade negotiation with another country. This means talks may not be able to get start until the end of the year.

US-Korea Free Trade Agreement (KORUS)

On 24 September 2018, the United States and South Korea announced the signature of the renegotiated US-Korea Free Trade Agreement (KORUS). The revised KORUS will open up the Korean auto markets to US exports and will allow the US to continue to impose a 25% tariff on Korean trucks until 2041. There is no change to the textile chapter in the updated agreement. The US also agreed to permanently exclude South Korea from its steel tariffs, while South Korea will cap its exports to the United States at 70% of the average of its export levels from 2015 through 2017. South Korea will still face the US aluminum tariffs.

US-EU trade talk

On 10 September 2018, the USTR released a statement to saythe US and EUplan to hold discussions in October 2018 to identify tariffs and non-tariff barriers to cut. The two sides plan to finalise the outcomes "in a number of areas" in November, and hope for an "early harvest" in the areas of technical barriers to trade (TBT). USTR will begin consultations with Congress "pursuant to Trade Promotion Authority to facilitate negotiations on longer-term outcomes" – a necessary step for a potential US-EU trade agreement.

Miscellaneous Tariff Bill (MTB)

On 13 September 2018, President Trump signed the Miscellaneous Tariff Bill (MTB) Act of 2018 into law. The new bill goes into effect 30 days after the President's signature, which should be as early as 13 October 2018. The last MTB passed by Congress expired on 31 December 2012. The new MTB will temporarily cut or eliminate import tariffs until December 2020 on articles such as chemicals, footwear, textiles, toasters, and roughly 1,660 other items that are not made in the US. Around half of these items are produced in China. The 2018 MTB will cover two apparel items:

  • Babies' woven apparel of linen (provided for in subheading 6209.90.90)

  • Men's or boys' knitted or crocheted pullovers and cardigans, containing 70% or more by weight of silk, each with more than 9 stitches/2 cm, measured in the direction the stitches were formed, and an average of less than 10 stitches/linear cm in each direction counted on an area measuring at least 10 cm by 10 cm, such apparel articles that reach the waist (provided for in subheading 6110.90.10)


European Union-West Africa Economic Partnership Agreement

On 21 September 2018, Mauritania became the 15th West African country to sign the region-to-region Economic Partnership Agreement (EPA) with the EU. The EU-West Africa EPA covers goods and development cooperation – but also includes the possibility to hold further negotiations on sustainable development, services, investment and other trade-related issues in the future.

The other 14 West African countries that have already signed the EPA with the EU between 2014 and 2017 include: Benin, Faso, Cape Verde, Côte d'Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Senegal, Sierra Leone, and Togolese Republic.However, Nigeria has not yet signed the EPA. After being signed by all the parties, the EPA will be submitted for ratification.


Japan-Turkey Economic Partnership Agreement (EPA)

The eleventh round of negotiations for the Japan-Turkey Economic Partnership Agreement (EPA) was held in Tokyo from 4-7September 2018. Discussions were held in 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.

Tagged in this post: Trade Agreements

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