International Trade Associate Zachary Simmons authored an opinion piece, “Global LGBTQ+ Rights Could Be Elevated Through Biden’s Trade Policy,” for The Advocate. The article, published on February 24, 2021, advocates for the inclusion of global LGBT rights objectives in US trade policy on various policy and political grounds. As the Biden Administration places particular emphasis on human rights considerations in crafting its policies toward the rest of the world, the article promotes the idea that Congress and the Administration should use US negotiating leverage in the context of free trade agreements to improve the conditions facing lesbian, gay, bisexual, and transgender individuals in US trading partners.
On February 25, 2021, the Senate Finance Committee held hearings on the nomination of Katherine Tai to become the next United States Trade Representative. In her opening remarks, Tai made clear that her first priority would be to help American communities emerge from the pandemic and related economic crisis. With regard to trade specifically, she discussed the importance of a worker-focused trade policy. As part of that policy, she committed to pursuing approaches that “advance the interests of all Americans . . . recognizing that people are workers and wage earners, not just consumers.” In her written responses to questions, Tai elaborated that she would “seek to determine the impact of trade policies on workers’ wages and economic security and take that impact into account as we develop new policy.”
During the hearing, Tai cited several issues as major trade priorities if she is confirmed:
- China. Developing and executing a “strategic and coherent plan for holding China accountable” to its commitments, including the Phase One Agreement, and “competing with its state-directed economic model,” while still adhering to American values and recognizing the need to work with China “to address certain global challenges”;
- USMCA. Strongly enforcing the United States-Mexico-Canada Agreement;
- Supply Chains. Working with trusted partners to build resilient supply chains;
- Multilateralism. Rebuilding U.S. alliances, re-engaging with international institutions, such as the World Trade Organization, and imparting U.S. values to shape the rules guiding global commerce; and
- Competitiveness. “[M]aking investments in the American people and U.S. infrastructure in order to enhance U.S. competitiveness, promote U.S. innovation, and build more inclusive prosperity.”
Notably, potential renewal of Trade Promotion Authority was barely mentioned, either in the hearing or in the follow-up questions from members.
On January 25, 2021, President Biden signed Executive Order (“E.O.”) 14005, “Ensuring the Future is Made in All of America by All of America’s Workers.” The E.O. establishes as policy that the US Government “use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States” and “should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America’s workers thrive.”
Under existing law, federal procurements and financial assistance are subject to an array of domestic preference rules, including the Buy American Act (“BAA”) (concerning government procurements of supplies and construction materials), the Trade Agreements Act (“TAA”) (concerning waivers of BAA requirements in certain circumstances), and the Buy America Act (concerning non-federal transit-related procurements using federal funding).
The Biden E.O. is designed to supplement, review, and strengthen these and other applicable US laws and regulations, consistent with the policy objectives of procuring US goods and services to the maximum extent possible.
In order to ensure that the United States possesses resilient supply chains that protect national security, meet America’s needs during emergencies and keep America competitive globally, the Biden Administration has issued an executive order on “America’s Supply Chains.” The order initiates two tiers of supply chain reviews: a 100-day supply chain review of four specific U.S. industries and a year-long review of six sector-wide U.S. supply chains. These reviews will lead to the issuance of reports by relevant agencies and departments that will analyze the current conditions of the respective supply chains and recommend steps to reduce reliance on specific countries for critical goods and services, and to avoid such reliance in the future.
The executive order is notable in that it represents the first serious attempt by the U.S. government to develop a comprehensive, government-wide policy on supply chains. The fact that President Biden is taking this step during his second month in office only underscores the extent to which supply chains have become a critical issue in such a short period of time.
While the immediate cause of this increased focus may have been the pandemic, the text of the order evidences that the Administration’s concerns go beyond COVID. Indeed, the U.S. government has been working on a new regulatory structure for the Information and Communications Technology and Services (“ICTS”) supply chain for over a year, as we previously advised here.
On 1 January 2021, the Japan-UK Comprehensive Economic Partnership Agreement (Japan-UK CEPA) came into force, after only a few months of intense negotiations. Japan and the UK embarked on formal negotiations on 9 June 2020 and reached an agreement in principle on the deal on 11 September 2020. This remarkably speedy achievement reflected enormous pressure from business leaders to have a deal in place before the end of the UK-EU transition period on 31 December 2020, at which point the UK was to lose coverage under the existing Japan-EU Economic Partnership Agreement (EPA) in light of Brexit.
The Japan-UK CEPA, essentially a “rollover” of the prior Japan-EU EPA, ensures that business between the two countries avoided falling back onto minimum WTO trading terms. Indeed, early data suggest the Japan-UK CEPA accomplished its goal: according to a survey conducted by the Japan External Trade Organization in early 2021, roughly 10% of survey participants already rely on the terms of the Japan-UK CEPA. Moreover, over 80% of other survey participants are considering relying on CEPA in the future.
To fully benefit from the Japan-UK CEPA, importers as well as exporters of goods need to understand how and when they can claim preferential tariff treatment. Once preferential tariff treatment is granted, customs duties will be reduced or eliminated completely on originating goods.
The European Commission published its Communication on An Open, Sustainable and Assertive Trade Policy on 18 February 2021 (the Communication). This follows a consultation on the EU’s Trade Policy Review which closed in November 2020.
The Communication seeks to reset the course of the EU’s trade policy in the context of global uncertainty and increased competition. Its key theme is “open strategic autonomy”, a concept characterized by three main elements:
1) furthering openness and engagement by making strategic use of the size and attractiveness of the EU Single Market;
2) enhancing the resilience and sustainability of value chains. The Commission in this regard seeks as a priority to identify strategic dependencies in supply chains, also to be addressed by industrial policy reviews; and
3) demonstrating assertiveness and encouraging rules-based cooperation in the implementation of EU trade policy to further support the EU’s geopolitical interests.
In line with its overarching objective of open strategic autonomy, the Communication suggests that the EU’s trade policy will focus on three core priorities:
- support the recovery from the pandemic and the fundamental transformation of the EU economy in line with its green and digital objectives;
- shape global rules for a more sustainable and fairer globalization; and
- increase the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed. In this regard, the EU will seek appropriate means to ensure effective implementation and enforcement of provisions on sustainable development in EU trade agreements, to level-up social, labor and environmental standards globally, but also to defend itself against unfair trading practices.
Recent decisions from the U.S. Court of International Trade (“CIT”) have clarified the basis for legal challenges to the tariffs imposed by the Trump Administration on imports of steel and aluminum products on the grounds of national security. While the court has generally rejected wholesale challenges to these duties, other cases suggest that parties appealing the denial of specific exclusions to these duties might have some ability to obtain relief.
In Universal Steel Products, Inc. et al. v. the United States et al., a three-judge panel held that the duties did not violate obligations under Section 232 of the Trade Expansion Act of 1962 (“Section 232”) or the Administrative Procedure Act (“APA”). See Universal Steel Products Inc. et al. v. The United States et al., 2021 WL 401283 (C.I.T. 2021). Plaintiffs in Universal Steel Products claimed that the report issued by the Department of Commerce (“Commerce”) on steel and aluminum imports, and the subsequent presidential proclamations imposing tariffs on these products, contravened various procedural requirements. In its decision, the CIT found that the report was not reviewable under the APA as it was not a final agency decision. The court also concluded that the decision whether imports pose a national security threat under Section 232 is made at the president’s discretion and cannot be reviewed by a court. Finally, the CIT rejected arguments that the duration and timing of the tariffs imposed by the president did not comply with Section 232’s statutory provisions. This follows a decision by the CIT in 2019, where the court rejected a challenge to Section 232 as an impermissible delegation of statutory authority to the President by Congress. See American Institute for Int’l Steel, Inc. et al v. United States, 376 F.Supp.3d 1335 (C.I.T. 2019), aff’d, 806 Fed.Appx. 982 (Fed. Cir.), cert. denied, 141 S.Ct. 133 (2020).
While the court is unlikely to support broad challenges to presidential authority in this area, it has shown a willingness to review clear procedural violations. Last month, the CIT dismissed all but one of the claims in Primesource Building Products Inc. v. U.S. et al., 2021 WL 276338 (C.I.T. 2021), a case that contested the expansion of Section 232 tariffs to derivative steel products like fasteners. The CIT dismissed the plaintiff’s arguments that the proclamation broadening the tariffs was unconstitutional and unlawful under the Section 232 statute. The one claim that the CIT did not dismiss relates to whether the imposition of tariffs on downstream products after the 105-day statutory deadline triggered by the receipt of Commerce’s 232 report was lawful under Section 232. The CIT stated that it would examine whether later “assessments” made by Commerce that led to the expansion of the tariffs could be considered another report under the statute, thus extending the deadline. The court’s decision to consider limitations on the timing of any Section 232 action recalls a prior case in 2019 where the CIT struck down an increase in the duty rate from 25 percent to 50 percent specifically as to Turkish imports. In Transpacific Steel LLC v. United States, 474 F.Supp.3d 1332 (C.I.T. 2020), not only did the court find that this action violated the timeframe set forth by the Section 232 statute, it also concluded that there was no national security basis for an action that only increased tariffs with regard to Turkish imports. The CIT also held that the increase in this duty rate constituted a violation of the plaintiff’s equal protection rights under the U.S. Constitution.
Jeff Weiss, who is co-chair of Steptoe’s trade policy and negotiations group and leads Steptoe’s Supply Chain team, co-authored an article with Livia Lam titled “US Trade and Domestic Economic Policy Should Align” for Law360. The article, published on February 1, highlights the long-standing incoherence between US trade policy and domestic economic policy and the consequences of that disconnect. It then suggests a number of tools that should be integrated into US trade policy to better align the two and make US trade policy more progressive.
Jeff Weiss, who is co-chair of Steptoe’s trade policy and negotiations group and leads Steptoe’s Supply Chain team, co-authored an article titled “Effective Supply Chain Management in an Era of Decoupling” for Bloomberg Law. The article, published January 29, highlights the unstable nature of global supply chains, due to disruptions from Covid-19, China-US trade tensions, and other factors. It notes that, as a result, a significant number of efforts are already underway in the US and other countries to consider de facto policies of “de-coupling” – namely, mandating or incentivizing the replacement of traditional long and linear supply chain networks with regionally concentrated supply chain clusters to achieve health, national security, or other objectives. The article then discusses how companies can be proactive by creating an integrated, holistic approach to supply chains and manage their supply chains on their terms.
The Government of Canada intends to add certain Plastic Manufactured Items to the list of substances appearing on Schedule 1 of the Canadian Environmental Protection Act (CEPA), fulfilling the Trudeau Government’s commitment to act on plastic waste released into the Canadian environment. Importantly, the listing functions as a regulatory mechanism and necessary first step for later enacting prohibitions on certain plastic wastes, but does not, in and of itself, prohibit the sale or use of any plastic consumer or industrial products.
The Proposed Order, which is expected to become effective in 2021, amends Schedule 1 to list Plastic Manufactured Items as a class of materials considered by the Canadian Government to be toxic under CEPA, Canada’s primary environmental protection act. In support of the Proposed Order, the Canadian Government compiled a Science Assessment on Plastic Pollution, which outlines the bases for the conclusions that plastic pollution is an ongoing problem that requires mitigation under CEPA, and that such pollution poses an actual or potential risk of harm to the environment and human or animal health.
The addition of Plastic Manufactured Items to Schedule 1 authorizes the Canadian Government to propose and implement policies, consistent with CEPA, that are designed to address and mitigate plastic pollution throughout the supply chain, including: manufacturing, transportation, commerce, consumption, and disposal. Despite the Government’s actions, however, a significant amount of confusion regarding the scope and intent of future regulatory actions remains to be addressed; in the meantime, numerous industry associations have submitted comments expressing concerns over the method of regulatory action, the lack of specificity and corresponding consequences that may result from such activity, and potential commercial and international trade impacts. The provinces of Alberta and Ontario have expressed some of these same concerns.