Beyond Brussels

Beyond Brussels: ISDS, NAFTA, China MES, solar panels

In trade news from outside the EU this week, we have:


ISDS: A working group of countries organized under the United Nations Commission on International Trade Law is discussing a possible revamp of the investor-state dispute settlement system during a week-long meeting in Vienna that ends today. The effort isn’t expected to bring any major changes to the system, which is largely negotiated independently between nations through investment treaties of trade agreements. Still, the UN effort supports global deliberation about the controversial mechanism.


The EU, which favours overhauling ISDS mechanisms and moving them into an international court system, voiced several grievances at the meeting. In a paper released before the gathering in the Austrian capital, the EU pointed out several “significant concerns”, including its belief that the system lacks consistency and predictability and has no effective appeal mechanism.


NAFTA: Mexican Economy Minister Ildefonso Guajardo said on Wednesday that the Trump administration’s demands for a US-specific automotive content requirement in the North American Free Trade Agreement was “not viable”, it was reported this week. Guajardo declined to specify when Mexico would formally respond.


Guajardo said Mexico was still trying to understand proposals by Washington that would require half of vehicles’ value content to be produced in the US as part of updated NAFTA rules.


“I was clear that the domestic content (requirement) is something that is not viable at this point,” he told journalists after meeting with senior US trade officials and lawmakers in Washington. Mexico intends to make a counterproposal on automotive rules of origin, he added, declining to specify the timing of that response.


MORE NAFTA: Scrapping NAFTA would hurt the Canadian economy, but businesses, markets and policymakers would adjust to this “manageable risk” fairly quickly, the Bank of Montreal said in a report. Consumers in Canada, Mexico and the US would be the biggest losers if NAFTA were abolished, with consumer prices in Canada rising about 0.8 percentage point, due to a weaker exchange rate and moderately higher tariffs, BMO said. Additionally, growth in Canada’s real gross domestic product would be 0.7% to 1% lower than would otherwise be expected over a five-year period, if the agreement were to end. 


CHINA’S MARKET STATUS: The US has joined the fight at the World Trade Organization over China’s status as a ‘market economy’ by filing a brief to the WTO as third party in a case that Beijing filed against the EU. The brief, made public on Thursday, lays out the Trump administration’s legal arguments for why China doesn’t deserve the designation of a market economy, a distinction that would entitle it to preferential economic treatment under global trade rules.


The US argument is, essentially, that the General Agreement on Tariffs and Trade 1994 and four legal precedents are adequate to protect surrogate dumping methods. “The evidence is overwhelming that WTO members have not surrendered their longstanding rights in the GATT and WTO to reject prices or costs that are not determined under market economy conditions in determining price comparability for purposes of antidumping comparisons,” the US said in the brief.


A WTO ruling that sides with China could test the Trump administration’s willingness to remain in the Geneva-based trade body, which the president has called a “disaster”. US Trade Representative Robert Lighthizer told lawmakers in June that a “bad decision” in the China-EU dispute would be “cataclysmic for the WTO”.


MALDIVES-CHINA: The Maldives will soon become the second country in South Asia, after Pakistan, to enter into a free trade agreement with China, it was reported. The bilateral deal is the first to be signed by Maldives, which signed the South Asian Free Trade agreement in 2004.


The text of the accord was concluded in September after two years and five rounds of negotiations. Maldivian President Abdulla Yameen decided about two months later to sign it. Lawmakers approved the FTA on Wednesday in an ‘emergency’ sitting. The presidential office said in a communique that the agreement would “enable exemption of duties on fisheries products exported to the world’s largest consumer market”.


PALESTINE-CHINA: Palestine and China signed a memorandum of understanding on free trade on Thursday during a ceremony at the Palestinian prime minister’s office in Ramallah. Minister of National Economy Abeer Odeh and Chinese Deputy Minister of Commerce Wang Shouwen signed the MOU in the presence of Prime Minister Rami Hamdallah and China’s ambassador to Palestine, Chen Xingzhong. Details of the memorandum weren’t immediately available.


CHINESE SOLAR PANELS: Trump could get up to two extra weeks to decide whether and how to impose trade barriers against Chinese solar panels, after Lighthizer on Wednesday asked the International Trade Commission for a report addressing “any unforeseen developments that led to the [panels] being imported into the United States in such increased quantities as to be a substantial cause of serious injury”. The supplementary report is needed to address concerns that could be raised by the WTO, which requires countries to address “unforeseen developments” that lead to injury under trade rules.


The ITC has 30 days to respond to Lighthizer’s request, and then Trump gets another 30 days after that to decide whether to impose tariffs, quotas or a combination of both on the imports. If the ITC takes the full 30 days to respond, Trump’s deadline to decide moves from 12 January to 26 January.


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