On April 20, 2021, the US Department of Energy (“DOE”) revoked a December 2020 Prohibition Order issued by the Trump Administration which banned the acquisition, importation, transfer, or installation of certain bulk-power system (“BPS”) electric equipment manufactured or supplied by “persons owned by, controlled by, or subject to the jurisdiction or direction of the {People’s Republic of China (“China”)}.”  The Prohibition Order was issued pursuant to EO 13920, “Securing the United States Bulk-Power System” (May 1, 2020), which was promulgated to address “foreign adversary countries creating and exploiting vulnerabilities in the United States bulk-power system.”  In response to this alleged exploitation, the EO declared an emergency and authorized the Secretary of Energy to prohibit transactions involving certain BPS electric equipment sourced from “foreign adversary” countries for one year. In the recent revocation notice, DOE cited the need to “create a stable policy environment” while the Department conducts a new review of how best to apply its EO 13920 authorities.

Continue Reading US Department of Energy Revokes Trump Prohibition Order Restricting Chinese Bulk-Power System Electric Equipment and Seeks Comments on Securing US Critical Electric Infrastructure

On April 22, 2021, President Biden will host a virtual summit with 40 world leaders to discuss the global climate change crisis. The “Leaders Summit on Climate” is intended to catalyze more ambitious emissions-reduction efforts by the world’s major economies. The United States intends to lead by example with a new 2030 emissions target as its Nationally Determined Contribution (NDC) under the Paris Agreement.

The decision to convene a summit on climate change is one of many signals sent by the Biden Administration over the past few months that the U.S. approach to climate change is shifting dramatically, both at home and abroad. The Biden Administration has made clear that climate change must be part of decision-making across the entire government, including with respect to trade policy. Stronger enforcement of the environmental standards in U.S. FTAs, the integration of climate change into government procurement decisions, and strengthening U.S. supply chains for electric vehicles are all part of this shift. The United States is also pushing climate cooperation bilaterally. It recently entered into a “Competitiveness and Resilience (CoRe) Partnership” with Japan that focuses on the development and deployment of clean-energy technologies. The United States and China also recently released a Joint Statement “Addressing the Climate Crisis” that acknowledges their shared commitment to implementing the Paris Agreement.

One of the trade-related climate policies currently under consideration by the United States is “carbon border adjustments”. President Biden included carbon adjustments in his campaign plan and USTR referenced the possibility of imposing “carbon border adjustments” in its recently announced 2021 Trade Policy Agenda. Carbon border adjustments charge a fee on imported goods based on the carbon intensity of their production process in order to reduce the incentive to relocate carbon-intensive production to jurisdictions that have not yet addressed the need for carbon emitters to internalize emission costs, commonly referred to as “carbon leakage”.  They also serve to level the playing field for domestic industries that would otherwise face competition from cheaper, more carbon-intensive imports. By raising costs on imports, carbon adjustments may also incentivize other countries to adopt similar carbon pricing policies. Carbon adjustments may also rebate the cost of a domestic carbon fee on exports to help them compete in international markets.

Continue Reading Trade and Climate in the Lead Up to President Biden’s Climate Summit

On January 25, 2021, the EU-Korea Panel of Experts found that Korea had failed to uphold its labor obligations to “respect, promote, and realise” the right to freedom of association and to take concrete steps to ratify all eight fundamental conventions of the International Labor Organization (ILO). In the final report, the Panel recommended Korea to bring its domestic laws “into conformity with the principles concerning freedom of association” but recognized that Korea had “ma[de] continued and sustained efforts towards ratification of the core ILO Conventions.”[1]

This case marked the EU’s first victory in enforcing labor obligations under the trade and sustainable development (TSD) chapter of the EU’s “new generation” of Free Trade Agreements (FTAs).[2]  The EU adopts the TSD provisions as tools to improve and reinforce the labor and environmental standards of its trading partners – a key policy objective the EU has recently adopted.[3]  Within the last two years, the EU has increased enforcement of TSD obligations in its trade agreements, requesting 3 other TSD consultations,[4] and successfully securing a win against Ukraine for the violation of the TSD environmental obligations under the EU-Ukraine Association Agreement.[5]

Although labor and environmental provisions are not unique to the EU’s “new generation” FTAs, EU-style TSD provisions impose additional and higher obligations, beyond those commonly provided for in the labor and environmental provisions of other model FTAs.  The following example compares the labor provisions of the EU-Korea FTA and the Korea-US (KORUS) FTA to demonstrate the differences in labor standards between these two agreements.

Continue Reading The EU-Korea FTA Labor Dispute: Comparing Labor Provisions Under the EU-Korea FTA and the KORUS FTA

On February 18, 2021, the European Commission (the Commission) published its Communication on an Open, Sustainable and Assertive Trade Policy which we previously analyzed in our blog post. Below, we look into the Communication’s Annex on Reforming the WTO: Towards a Sustainable and Effective Multilateral Trading System.

The Commission in its Trade Policy Review listed reforming the World Trade Organization (WTO) as a clear European Union (EU) priority. The Commission notes in the Annex that “Not only is trade vital for our economy; promoting rules-based international cooperation is the very essence of the European project. The EU must therefore play a leading role in creating momentum for meaningful WTO reform.”  Achieving this goal clearly will require engagement with other WTO members. In particular, the Commission calls on the United States’ support to unblock the current Appellate Body impasse and to cooperate closely on reforming all aspects of the WTO.  The Commission will also organize consultations with China and India to better align their WTO commitments with the size of their respective economies.

Continue Reading The EU’s Approach to Reforming the WTO Towards a Sustainable and Effective Multilateral Trading System

As the Biden Administration settles into its second month in office some signals have emerged that have offered insights into the potential direction of US trade policy. Key trade officials, including United States Trade Representative (USTR) Katherine Tai and Commerce Secretary Gina Raimondo, have testified before the Senate as part of their confirmation processes.  The testimonies and responses of both nominees, in combination with the recently released USTR “2021 Presidential Trade Policy Agenda” report, have provided an early blueprint of the President Biden Administration’s position on current trade issues — including USMCA, potential free-trade agreements, US policy towards China, and the climate agenda – and possible new directions.

The international community has been watching these early indicators closely in order to gauge the likely track of US trade policy.   Professionals from Steptoe’s trade group who practice in major jurisdictions around the world weigh in with their take on how those jurisdictions are reacting to these early signals from the US.

Continue Reading International Responses to President Biden’s Trade Policy Positions

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.

The Advocate – Global LGBTQ+ Rights Could Be Elevated Through Biden’s Trade Policy 

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.

Continue Reading Highlights from USTR-Nominee Katherine Tai’s Senate Confirmation Hearing

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.

Continue Reading Biden’s Made in America Executive Order: Key Takeaways and What Comes Next

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.

Continue Reading President Biden Signs Executive Order on US Supply Chains

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.

Continue Reading Rules of Origin Under the Japan-UK Comprehensive Economic Partnership Agreement