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Erika Szyszczak31 March 2021

Erika Szyszczak is Professor Emerita and a Fellow of the UKTPO.

Trade has become a new tool of political and economic warfare.  Recent years have seen a rise in threats and the disruptive use of use tariffs, export and import bans to further political aims by the two economic superpowers, the US and China. Other countries wishing to assert greater political influence, such as Russia or Turkey, have joined the fray. Although the disputes are characterized as being between States, the real impact of trade wars is felt by businesses, workers, consumers and ordinary citizens. The impact is felt in the COVID-19 pandemic, where critical supplies of medical products or Personal Protective Equipment are essential in a health emergency.

Traditional international economic law provides procedures and institutions to address measures impacting on free trade in goods and services. But in recent times the failure of the WTO Appellate Body to function and the bureaucracy surrounding the creation of dispute settlement mechanisms under free trade agreements reveals the need for States and economic trade blocs, such as the EU, to think about more effective ways to deter threats to trade and to address any trade distortion measures effectively and swiftly.

Enforcement and effective remedies in international law are especially difficult. While new procedures are written into trade agreements they may take many years to address an issue and do not provide effective remedies. Tariff wars and export bans merely exacerbate the impact of a trade war. The new approaches to remedial and rebalancing remedies found in the Trade and Co-operation Agreement agreed by the EU and the UK in 2020 signify the need for tailored responses in new trade agreements.

The EU, and the UK, are squeezed in the middle. Two documents published a the end of March 2021 reveal the importance for the UK and the EU of developing effective trade remedies, but also show an emerging chasm between the wide range of legal tools deployed by the EU and the slow, limited response of the UK.

The first document, a report from the House of Commons International Trade Committee (ITC) on UK Trade Remedies Policy outlines the slow progress and comparative lack of resources in the UK as it replaces EU mechanisms to handle trade disputes. Trade remedies are dealt with by the Trade Remedies Investigations Directorate (TRID) within the Department for International Trade (DIT). The Trade Bill, currently before Parliament, proposes to create an independent Trade Remedies Authority (TRA) to investigate trade remedies cases and make recommendations on the imposition of measures. The ITC report shows that the UK was not prepared for the exit from the EU and is still conducting transition reviews. Hampered in its work by the implications of the COVID-19 measures, there has been a large turn-over of staff in the TRID. Witnesses raised concerns that the lack of experience of TRA staff will place them at a disadvantage when dealing with other more experienced stakeholders.

The model adopted in the UK trade defence regime includes an economic interest test and a public interest test, which involves an element of political judgement. The importance of understanding when to trigger a trade remedy, and what kind of trade remedy, alongside the economic and legal consequences of defensive trade measures is acknowledged from Evidence presented to the ITC, showing that the risk of legal challenges to measures taken (or not taken) is high. Concerns are expressed that any UK trade remedies will be more difficult to secure and they will be lower than the EU system.

The UK has reduced the role of trade unions in the UK trade remedies regime, defining them as contributors in the UK trade remedies regime rather than interested parties as in the EU regime. As the trade effects of leaving the EU are being felt, inevitably jobs have been lost and workers and unions will demand a say, as stakeholders, when remedies are considered by the TRA. This correlates with a need for greater involvement from a wider set of stakeholders as the future independent UK trade policy materialises.

The following day, 23 March 2021, the European Commission published a Consultation for an instrument to dissuade or offset “coercive actions by third countries that would force policy choices on the EU” by allowing for “the expeditious adoption of countermeasures triggered by such actions.”

The aim of an Anti-Coercion Instrument is wide, to protect the EU from undue foreign influence over its domestic policy. The consultation aims to collect evidence from a wide range of stakeholders of the impact of coercive threats and measures taken by third countries, in order to understand the triggers, or the circumstances, in which the EU may act. The consultation seeks advice on the countermeasures the EU should employ to tackle coercion and the likely impact of the various options.  The European Commission is able to rely on the exclusive competence of the EU in this area of trade and can act on the basis of Article 207 TFEU, allowing it to take control of the form of appropriate legal instruments adopted.

The primary aim of the proposed measure is of deterrence, but also the ability to act swiftly. The existing EU legislative framework does not provide for a single or comprehensive legal instrument with such an effect, and to date, the EU response to trade threats has been seen as naïve.  The nature of economic threats linked to political ambitions has changed the nature of threats to the EU and the Member States. The EU and its Member States have encountered direct threats, for example, the recently resolved Boeing/Airbus tariff war between the US and the EU, and the threats made by China to individual Member States attempting to ban Huawei.

As reported in The Times, The new US President has inherited the legacy left by President Trump:

“Transatlantic exports including gold necklaces, kitchen tables and chess boards could face US tariffs after Washington drew up plans to target a £236 million catalogue of British goods.

Having inherited a spat over online taxation from the Trump administration, President Biden has opted to hold Britain’s feet to the fire. His officials concluded that Britain’s unilateral digital services levy on the big technology groups was “unreasonable or discriminatory” and placed a burden on companies in the United States.

The administration is also consulting on whether to hit Austria, India, Italy, Spain and Turkey with retaliatory duties over similar digital taxes.

Additionally, the EU is experiencing the indirect undermining of existing trade deals with third parties, seen, for example, in the current trade dispute with Algeria where EU imports have been displaced by imports from China.

By creating a general and wide-ranging measure, the EU does not need to rely on specific Chapters in bilateral and multilateral trade agreements and would have a remedy where there is no trade agreement.  The EU has been adapting and widening its legal toolbox to address the weaknesses of its own and the WTO system of trade remedies. This provides flexibility, but it could be in danger of having too many overlapping legal instruments.

The EU is playing a careful game. It is committed to addressing trade disputes according to the rule of law and is making positive suggestions on the reform of the WTO. But the current reform and modernisation of EU trade remedies is based upon the premise of public international law, of which the WTO is but one part. In doing so, the EU is positioning itself as a global leader in trade remedy standard setting.

Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

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March 31st, 2021

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13 March 2021

Yohannes Ayele is Research Fellow in the Economics of Brexit, Nicolo Tamberi is Research Officer in Economics, and Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex. All are Fellows of the UKTPO.

On Friday 12 March, the Office for National Statistics (ONS) and HM Revenue and Customs (HMRC) released the UK’s trade in goods figures for January 2021, providing data for the first month following the end of the Brexit transition period. The ONS has provided their own interpretation of these data portraying a rather gloomy scene for UK trade. We have downloaded the raw data and here offer some initial thoughts on what we learn from the changes in trade flows in January 2021. (more…)

March 15th, 2021

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Michael Gasiorek15 December 2020

Michael Gasiorek is Professor of Economics at the University of Sussex and Director of the UK Trade Policy Observatory. Nicolo Tamberi is a Research Assistant in Economics for the UK Trade Policy Observatory. 

There has rightly been much talk recently about the disruption and economic damage that would result from a No Deal Brexit, and hence the economic importance of avoiding this outcome. This is on top of the economic havoc being wreaked by the Coronavirus pandemic. Despite this, we have seen the Prime Minister suggesting that No Deal would be a ‘good outcome’ for the UK and that the UK would prosper. How can this be squared? (more…)

December 15th, 2020

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22 October 2020

Dr Minako Morita-Jaeger, International Trade Policy Consultant and Fellow, UK Trade Policy Observatory at the University of Sussex.

The Japan-UK Free Trade Agreement will be signed soon, the UK’s first post-Brexit trade agreement. While the Agreement has a certain political significance, its economic impact is likely to be very small. This is because it contains very limited improvements relative to the EU-Japan Economic Partnership Agreement (EPA). While a detailed examination will only become possible once the text is put on the public domain, one of the key shortfalls in the agreement appears to be the treatment of investment. (more…)

October 22nd, 2020

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Guest blog by Emily Jones, Associate Professor in Public Policy and Director of the Global Economic Governance Programme and Anna Sands, Research Officer of the Global Economic Governance Programme both at the Blavatnik School of Government, University of Oxford.

30 September 2020

In the next few weeks Parliament will decide how much scrutiny it has over the UK’s future trade deals. The Trade Bill is currently in the House of Lords, and a series of amendments have been tabled that aim to strengthen Parliament’s role.

As things stand, Parliament’s role will be minimal. The negotiation and ratification of international trade agreements falls under the Royal Prerogative – the making of international treaties is one of the few actions that Ministers can take without the approval of Parliament. (more…)

September 30th, 2020

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14 July 2020
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Alasdair Smith ian Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory.

There were no surprises in yesterday’s government announcement of the post-Brexit ‘points-based’  immigration rules (except for those who thought that a provision for health and care might actually cover social care workers).

The government’s stated objectives are “flexibility and control over our borders”. However, an essential feature of the points-based scheme is that it is not actually operated at the border, but in the jobs market through the rules that non-UK employees must satisfy in order to take up a job offer in the UK. EU citizens will continue to have visa-free entry to the UK: the change for them is in their right to take up employment in the UK. (In all of this, Irish citizens are treated the same as UK citizens, and indeed EU citizens in Ireland can enter the UK without passport checks.) (more…)

July 14th, 2020

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8 July 2020

Dr Minako Morita-Jaeger, International Trade Policy Consultant and Fellow, UK Trade Policy Observatory at the University of Sussex.

Japan and the UK launched the Japan-UK Free Trade Agreement (FTA) negotiation on 9th June. The two governments agreed to “work quickly to make the new partnership as ambitious, high standard, and mutually beneficial as the EU-Japan Economic Partnership Agreement”.[1] As negotiations accelerate, there are three fundamental issues to consider when assessing the deal. (more…)

July 8th, 2020

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Image of Alan Winters20 May 2020

L. Alan Winters CB is Professor of Economics and Director of the Observatory, Michael Gasiorek is Professor of Economics at the University of Sussex and Julia Magntorn Garrett is a Research Officer in Economics at the University of Sussex. Both are Fellows of the UK Trade Policy Observatory. 

On Tuesday 19th May the UK’s ‘Global Tariff’ was published. These are the tariffs that will apply on any products that the UK imports on a Most Favoured Nation (MFN) basis from the end of the transition period when the UK is no longer bound by the EU’s Common External Tariff. The published tariffs come after a public consultation on the subject was held in February this year.

This note summarises how the new tariff compares to the UK’s current MFN tariffs (which are also the rates that the UK has bound in the WTO for after the transition period) and outlines what has changed since the tariff consultation. (more…)

May 20th, 2020

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14 January 2020

Dr Anna Jerzewska is a independent customs and trade consultant, an independent advisor with the UN International Trade Centre and also a trade policy and customs consultant for the British Chambers of Commerce.

The UK is due to leave the EU on the 31st January 2020. A new stage of the Brexit process is set to begin – the transition period and negotiations of the future relationship with the EU. At the same time, work on the Northern Irish border arrangements is far from over. A newly established Joint Committee will negotiate the practicalities of implementing the Withdrawal Agreement.

Under the Withdrawal Agreement (“WA”), Northern Ireland would stay in the UK’s customs territory but would at the same time continue applying EU’s customs legislation, tariffs, quotas and, partially, EU Single Market rules. This will avoid a border on the island of Ireland but will mean a de facto customs and regulatory border in the Irish Sea. As a result of this dual status, goods shipped from Great Britain (“GB”) to Northern Ireland (“NI”) will be subject to EU tariffs if they are “at risk of subsequently being moved into the Union, whether by itself or forming part of another good following processing”[1]. What that means has not been fully defined within the text of the Agreement. Article 5(2) clarifies that all goods will be considered to be “at risk”, and thus subject to EU tariffs unless it is established that they will not be subject to commercial processing in Northern Ireland or they are otherwise exempt. This is one of the areas where the Joint Committee will need to introduce practical ways of implementing the agreement. (more…)

January 14th, 2020

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Michael Gasiorek12 December 2019

Michael Gasiorek is Professor of Economics at the University of Sussex and a Fellow of the UK Trade Policy Observatory. Nicolo Tamberi is a Research Assistant in Economics for the UK Trade Policy Observatory. 

Following Brexit, and assuming the UK is no longer part of a customs union with the EU, the UK will be able to sign free trade agreements (FTAs) with third countries. Indeed, the Conservative manifesto aims to have 80% of UK trade covered by FTAs within three years. This is clearly unrealistic, because it would require signing agreements with more than 12 countries within a time-scale which has rarely been achieved for a single agreement.  The objective, however,  highlights that, post-Brexit, there will be a lot of focus on trying to sign FTAs. Other than the somewhat significant matter of signing an agreement with the EU, top of the UK’s FTA wish list is an agreement with the US. (more…)

December 12th, 2019

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