31 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.
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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Charlotte Humma March 31st, 2021
23 March 2021
Michael Gasiorek is Professor of Economics and Director of the UK Trade Policy Observatory at the University of Sussex. Suzannah Walmsley is Principal Consultant and Fisheries and Aquaculture Business Development Manager at ABPmer.
Last week the UK’s trade data for January 2021 came out and the evidence was pretty striking. It showed a dramatic decline in UK exports and imports in January, and particularly so with the EU. Now some of this will have been driven by Covid-related lockdown restrictions, and some of the dramatic fall in trade with the EU itself may have been driven by firms’ stockpiling in November and December to protect themselves against the much-publicised potential border difficulties arising from the UK’s exit from the EU and the end of the transition period.
In this blog we dig a bit deeper into those numbers and focus just on fisheries. (more…)
George Meredith March 23rd, 2021
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…)
Charlotte Humma March 15th, 2021
3 March 2021
Dr Emily Lydgate is Senior Lecturer in Environmental Law at the University of Sussex, and a Deputy Director of UKTPO. Chloe Anthony is a doctoral researcher at the University of Sussex.
This blog was first published on LSE British Politics and Policy.
Due to differences in underlying logic, there is much potential for trade and climate policy to conflict. Fundamentally, world trade rules and agreements aim to facilitate the free movement of goods and services, and restrict subsidies that distort trade. Climate policy, on the other hand, aims to support the low-carbon economy and restrict trade in high-carbon goods and services. The UK was the first country to put its climate target into law in 2008; it has met its first two interim targets for emissions reduction and is on course to meet the third in 2022. Yet analysis has shown that the first two emissions targets were met due to changes in accounting methods and the financial crisis, rather than due to effective policymaking. (more…)
George Meredith March 3rd, 2021
Tags: Climate policy
25 February 2021
Peter Holmes is a Fellow of the UKTPO. Guillermo Larbalestier is Research Assistant in International Trade at the University of Sussex.
The Government’s competition for proposals to create ten Freeports across the UK came to a close earlier this month with an announcement of the successful locations expected soon. Freeports are areas within a country that are outside its customs territory. Goods coming into the country via Freeports are exempt from paying tariffs until they enter the mainland or are shipped to another country. In the UK Freeports model these areas may also be subject to special regulatory, tax, or subsidy rules. Such features may make the terms Enterprise Zone, Special Economic Zone or, the more general, Free Trade Zone more appropriate. The full details of all bids have not been published but summary reports indicate wide variety of business cases. (more…)
George Meredith February 25th, 2021
18 February 2021
Erika Szyszczak is Professor Emerita and a Fellow of the UKTPO.
Traditionally, the legal enforcement of obligations was the Achilles heel of bilateral and multilateral international agreements. The EU has signalled that it wants to conduct international trade based upon the rule of law. The demise of the WTO Appellate body since 11 December 2019 has focused the EU into using and bolstering its own Dispute Resolution mechanisms in international trade agreements. The significance of this approach is seen in the Trade and Co-operation Agreement between the EU and the UK 2020, containing innovative procedures for rebalancing the trade elements of the TCA (and ultimately cancelling them) if one side changes its standards in ways that materially affect trade. Such rebalancing can be triggered in several circumstances, including via periodic reviews of the whole trade relationship. (more…)
George Meredith February 18th, 2021
Posted In: UK- EU
15 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…)
Charlotte Humma December 15th, 2020
Posted In: UK- EU
4 December 2020
Professor Erika Szyszczak is Fellow of the UKTPO.
The preoccupation in the final stages of the Brexit talks with an industry that contributes 0.12% to GDP and employs less than 0.1% of the UK workforce baffles commentators. Control over “our” fishing waters owes more to maintaining the British psyche rather than economic arguments. Amidst fears that the traditional UK fish and chip supper could be at risk without a fisheries deal with the EU, the UK has put in place a series of Memoranda of Understanding (MoU) with four Northern fishing nations; Greenland, Norway, Iceland and the Faroe Islands. (more…)
George Meredith December 4th, 2020
20 November 2020
Michael Gasiorek is Professor of Economics at the University of Sussex and Director of the UKTPO.
Discussions and evaluations on the future UK-EU relationship have been on-going since the referendum of June 2016, and we are close to another milestone – by the end of the year, we will either have a free trade agreement (FTA) with the EU or no-deal. Note this is a milestone and not the endgame. Whether or not there is an agreement there will still be considerable practicalities to resolve, and no doubt some areas will be open to future negotiation. There is a lot of talk in the press about sticking points (fisheries, state aid and level playing field provisions, dispute settlement) but how good the deal is for the UK will depend on the scope and the depth of what is agreed, and whether some areas are only notionally covered and need to be sorted out in future negotiations. (more…)
George Meredith November 20th, 2020
Posted In: UK- EU