The U.S. Senate Finance Committee will hold a hearing on March 14th to consider the nomination of Robert Lighthizer, of Skadden, Arps, Slate, Meagher & Flom LLP, to serve as the next U.S. Trade Representative. The U.S. Trade Representative is the head of the Office of the United States Trade Representative (USTR) and is a Cabinet member who serves as the President’s principal trade advisor.

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Lighthizer, who has focused his career on trade litigation and policy, was a deputy trade representative during the Reagan administration, and he was chief of staff for the Senate Committee on Finance. Lighthizer is a vocal advocate for an enforcement-focused U.S. trade policy.

Former King & Spalding LLP attorney Stephen Vaughn, who worked with Lighthizer at Skadden, is the current trade representative, on an interim basis.

The selection of Lighthizer as President Trump’s pick to serve as the new U.S. Trade Representative has not been as controversial as other recent Cabinet nominees. However, Lighthizer’s status as an advocate for the Brazilian government in a 1985 trade case appears to require a waiver before he can serve as the U.S. Trade Representative.

President Trump has promised to renegotiate international trade deals like the North American Free Trade Agreement (NAFTA) and punish companies that ship work overseas, and it appears that the selection of Lighthizer is consistent with this approach. President Trump said in announcing Lighthizer as his choice for the U.S. Trade Representative that Lighthizer would help “fight for good trade deals that put the American worker first.”

The USTR is an agency that negotiates directly with foreign governments to create trade agreements to resolve disputes and participate in global trade policy organizations. The USTR is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries. The USTR works closely with Congress and specifically with the House Committee on Ways and Means and the Senate Committee on Finance, the two Committees with principle responsibility for international trade issues.

February 22, 2017 marked a major milestone for global trade.  The Trade Facilitation Agreement (TFA) entered into force on February 22nd after the World Trade Organization (WTO) obtained the needed acceptance from two-thirds of its 164 members.  Rwanda, Oman, Chad and Jordan submitted their instruments of acceptance to WTO Director-General Roberto Azevêdo, which brought the total number of ratifications over the required threshold for the TFA to take effect.  This is the most significant multilateral deal that has been concluded in the 21 year history of the WTO.

The TFA seeks to expedite the movement, release and clearance of goods across borders. The TFA also aims to simplify and clarify international import and export procedures and to make trade-related administration easier and less costly. The WTO forecasts that the TFA will create a significant boost for the multilateral trading system.

Implementation of the TFA is predicted to benefit all members and should slash members’ trade costs by an average of 14.3 percent.  Developing countries potentially have the most to gain from the implementation of the TFA.  The TFA is predicted to increase the number of new products exported by developing countries by as much as 20 percent, with least developed countries likely to see an increase of up to 35 percent, according to the study by WTO economists in 2015.

While the critical mass has now been reached, allowing the TFA to become effective, there are several remaining WTO members that may still ratify the TFA.

US President-elect Trump has promised to abandon the Trans-Pacific Partnership (TPP) trade deal as soon as he takes office. Trump has promised to leave the TPP, which took the Obama administration seven years to negotiate, and instead “negotiate fair bilateral trade deals that bring jobs and industry back on to American shores.”

The TPP is an agreement between 12 nations reached in October, 2015. The TPP sets forth a comprehensive trade framework covering goods and services, cross-border investments, intellectual property, the environment and many other topics of critical importance to companies engaged in international trade. The TPP aims to deepen economic ties between the member nations, cut tariffs and foster trade to boost economic growth.

The member nations are the US, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

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The text of the TPP still has to be signed and then ratified by all 12 signatories and then implemented by the individual nations’ legislatures. To take effect, the deal has to be ratified by February 2018 by at least six countries that account for 85% of the group’s economic output. This means that Japan and the US will need to be on board.

Earlier this month the TPP cleared its main hurdle in Japan’s parliament, but approval by the US is much less certain. It is likely that after the transition from President Obama to President-elect Trump, the US will no longer continue to work toward implementing the TPP.

Click here to learn more about the TPP.

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In the past two days, two more countries – Peru and Saudi Arabia – ratified the World Trade Organization’s Trade Facilitation Agreement (TFA).  Their ratification followed Mexico and Hondurus, who ratified the TFA earlier this month.

The submission of instruments of acceptance from Peru and Saudi Arabia means that more than 80 percent of the ratifications needed for the TFA to take effect have been obtained.   The TFA will enter into force once two-thirds of the WTO membership formally accepts it.  Now that Peru and Saudi Arabia have accepted the TFA, there are a total of 89 ratifications.

The TFA requires its members to establish and maintain a national committee on trade facilitation to facilitate implementation of the TFA.  Earlier this year, on June 8th, the WTO hosted an experience-sharing event to help members of the WTO identify best practices and the challenges faced by WTO members in establishing or maintaining national trade facilitation committees.

The TFA contains provisions for improving the movement, release and clearance of goods and increasing global merchandise exports.  According to the WTO, the TFA could add USD 1 trillion per year to global trade.  For a brief summary of the TFA, see our earlier post here.  The World Trade Report 2015 is available here.

Copyright: cmcderm1 / 123RF Stock Photo
Copyright: cmcderm1 / 123RF Stock Photo

Turkey ratified the Trade Facilitation Agreement (TFA), and presented its instrument of acceptance to the World Trade Organization (WTO) Deputy Director General Yi Xiaozhun on March 16, 2016.

Turkey is the 71st member of the WTO to ratify the TFA.  The TFA will enter into force once two-thirds of the WTO countries ratify a Protocol of Amendment and notify the WTO of their acceptance of the TFA.

Turkey has already begun to take steps to increase and facilitate trade with its neighboring countries. For example, the WTO noted in its recent Trade Policy Review of Turkey, that Turkey has launched a pilot project at a border gate with neighboring Bulgaria to reduce customs processing delays through coordination of customs procedures. A similar project is proposed to be launched at the border of Turkey and Georgia.

The implementation of the TFA has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the WTO’s flagship World Trade Report 2015.  For a brief summary of the TFA, see our earlier post here.

In addition to Turkey, the following WTO members have also accepted the TFA: Hong Kong China, Singapore, the United States, Mauritius, Malaysia, Japan, Australia, Botswana, Trinidad and Tobago, the Republic of Korea, Nicaragua, Niger, Belize, Switzerland, Chinese Taipei, China, Liechtenstein, Lao PDR, New Zealand, Togo, Thailand, the European Union (on behalf of its 28 member states), the former Yugoslav Republic of Macedonia, Pakistan, Panama, Guyana, Côte d’Ivoire, Grenada, Saint Lucia, Kenya, Myanmar, Norway, Vietnam, Brunei, Ukraine, Zambia, Lesotho, Georgia, Seychelles, Jamaica, Mali, Cambodia and Paraguay.

spirits4The European Union (EU) has requested consultations, a World Trade Organization (WTO) dispute proceeding, with Colombia to address what it believes are discriminatory practices against spirits being imported from the EU into Colombia. The EU says that Colombian authorities treat imported alcoholic beverages from the EU in a manner that is inconsistent with the WTO.

The EU spirits face higher taxes than local brand spirits, and Colombia’s regional authorities impose market-access restrictions for imported spirits. The EU believes this creates a competitive disadvantage against EU spirits and is inconsistent with the non-discrimination obligations of the WTO rules.  Because the EU is the number one exporter of spirits into Colombia, it is most impacted by these discriminatory practices.

The EU and Colombia signed a comprehensive free trade agreement in 2013. The trade agreement aims at opening up both markets and committed Colombia to creating a level market for imported and local goods.  The August 2015 deadline has passed for these arrangements to come into effect, which has spurred the EU to initiate the consultations.

The objective of the consultations is for the parties to resolve the dispute themselves, without litigation. The bilateral consultation is the first step in the settlement process.  If the consultations fail, and the parties are unable to resolve the dispute within 60 days, the EU can request adjudication by a panel to rule on the compatibility of Colombia’s trade practices with the WTO rules.

Ostensibly, Investor-State Dispute Settlement (ISDS) provisions in international trade agreements create a necessary judicial mechanism which empowers international investors to bring actions against host states who act arbitrarily, to the detriment of the international investment.  ISDS has, however, long been criticized as a non-transparent, privately run judicial system through which wealthy investment entities can extract substantial judgments from hosts states who change their national policies.

A recent article in the Canadian Bar Association’s National Magazine, traces these these historic tensions in North America and Europe ,as well a growing number of states which are pushing on the use of ISDS after being burned by significant judgments.

As new international trade agreements, such as the Trans-Pacific Partnership, are discussed and debated is important that investors understand what recourse they may have when investing abroad and whether the protections they have historically enjoyed will still exists in the coming years and decades.

The Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) is a trade agreement between 12 Pacific Rim countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam), which among other things, contains measures to lower trade barriers such as tariffs.

For more information about the TPP see our previous post, Fox Guide to the Trans-Pacific Partnership.

The Report

U.S. Secretary of Commerce Penny Pritzker released the Opportunities for the U.S. Service Sector Report, which highlights the positive impact of the TPP.

Secretary Pritzker’s report emphasized that the TPP will expand investment opportunities for U.S. services, including those in the telecommunications, software, retail, entertainment and delivery.

“The Trans-Pacific Partnership strengthens our nation’s standing as the world’s leading services exporter,” Secretary Pritzker said.  She further emphasized the positive impact on the service sector, by stating: “With TPP, we can grow our $233.1 billion trade surplus in services and support even more high-paying American jobs.”

Benefit for U.S. Service Suppliers

According to the Office of the United States Trade Representative, services industries account for four out of five U.S. jobs and also represent a significant and growing share of jobs in other TPP countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam).  The TPP will benefit U.S. service suppliers, both small and large, seeking to do business in TPP markets.

The report lists TPP commitments that will directly benefit U.S. services suppliers, including removing unnecessary barriers that reduce efficiency of trade in the global supply chain and increased transparency in licensing and qualification regulations and procedures for service suppliers.

To learn more about the opportunities for the U.S. service sector related to the TPP, visit http://trade.gov/fta/tpp/industries/pdfs/service.pdf.

The Story

Asia-Pacific Region
Copyright: kgtoh / 123RF Stock Photo

After many years of negotiations, the 12 countries making up the Trans-Pacific Partnership (TPP) (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam) finally reached a trade agreement on October 4, 2015.  Note that the deal still needs to be approved by Congress (after the President gives Congress a 90 day advance notice that he intends to sign it).

Why Does it Matter?

The deal opens up trade and promotes regional integration among 12 countries that collectively produce almost half of the world’s products and services. This can have a huge impact on the global economy.

The goals of the deal are to promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty; and promote transparency, good governance, and enhanced labor and environmental protections.  Geopolitical reasons of establishing a strong partnership in Asia to challenge China’s stronghold in the region is also certainly a motivating factor.

Key Features Of The Deal

  1. Comprehensive market access. The TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services, to create new opportunities and benefits for businesses, workers, and consumers.
  2. Regional approach to commitments. The TPP facilitates the development of production and supply chains, and seamless trade, enhancing efficiency and supporting the goal of creating and supporting jobs, raising living standards, enhancing conservation efforts, and facilitating cross-border integration, as well as opening domestic markets.
  3. Addressing new trade challenges. The TPP promotes innovation, productivity, and competitiveness by addressing new issues, including the development of the digital economy, and the role of state-owned enterprises in the global economy.
  4. Inclusive trade. The TPP includes commitments to help small- and medium-sized businesses understand the Agreement and take advantage of its opportunities.  It also includes commitments on trade capacity building, to ensure that all Parties are able to meet the commitments in the Agreement and take full advantage of its benefits.
  5. Platform for regional integration. The TPP is intended as a platform for regional economic integration and designed to include additional economies across the Asia-Pacific region.

What Does the Deal Mean for US Businesses?

  1. The deal reduces tariffs for American products traded in the TPP region and, therefore, opens up the TPP region for American products. It also makes it cheaper for American companies to purchase products from the TPP region.
  2. Expedited customs procedures for TPP members will ensure faster and easier shipment.
  3. More transparent, non-discriminatory rules for technical regulations will mean easier compliance with trade regulations for US companies.
  4. Investment in TPP countries will become easier and more transparent.
  5. E-commerce companies doing business in the TPP region will encounter fewer restrictions.