On May 27, 2021, the U.S. Department of Commerce (Commerce) issued its affirmative final determination in the countervailing duty (CVD) investigation of Passenger Vehicle and Light Truck Tires (PVLT) from Vietnam, in which it concluded that the Vietnamese Dong (VND) was undervalued, and that this undervaluation constituted a countervailable subsidy under U.S. trade law. This is only the second CVD investigation in which currency undervaluation, as a form of countervailable subsidy, has been at issue (the other case being certain twist ties from China, see here), and is the first instance where Commerce made a final substantive decision as to the currency undervaluation issue.  For that reason, PVLT from Vietnam establishes new law in several important areas, and is likely to be used as a template for future Commerce decisions in this area.

Continue Reading Currency Undervaluation as a Countervailable Subsidy: The United States Takes Its First Step

This week Steptoe launched “Supply Chain University,” a series of short videos in which we dive into the legal, policy, and advocacy issues involving supply chains. As events over the past 18 months have shown, now more than ever, companies around the world are being forced to navigate challenges that threaten the operation—or, in some cases, the fundamental viability—of their supply chains, and some of these developments are reshaping the landscape of global trade.

As part of the series, Steptoe partner Jeff Weiss speaks with industry and legal professionals, as well as academics, about trending supply chain topics ranging from the Biden administration’s executive order on supply chains to artificial intelligence to cybersecurity issues, and much more. We are taking a critical look at how supply chain issues intersect with almost every industry and impact your business, and the trade implications of new policy developments.

Visit the Supply Chain University page here.

Recent events at the World Trade Organization (WTO) illustrate how decision-making activities of its Dispute Settlement Body (DSB) can easily be derailed, notably by political frictions spilling over into its meetings.  However, the rarity of instances in which the DSB found itself paralysed underlines the extent to which the WTO has developed coping mechanisms which should enable it to keep such frictions at bay and thus minimize disruptions to its continued functioning.

The penultimate DSB meeting, scheduled for March 26, 2021 was suspended due to the lack of consensus required for the adoption of its agenda.  Rules applicable to DSB meetings require that its proposed agenda be adopted by consensus before a meeting can take place.  The proposed agenda circulated ahead of the March 26, 2021 DSB meeting included a request by Venezuela for the establishment of a dispute settlement panel in respect of U.S. measures.

The United States objected to the inclusion of what it perceived to be an illegitimate panel request, on the grounds that representatives of the Nicolás Maduro regime do not speak on behalf of the Venezuelan people, and that this was a misuse of the WTO aimed at challenging U.S. sanctions that sought to restore human rights and democracy to Venezuela.  As a result of the U.S. objection, the agenda could not be adopted and the DSB meeting could not take place.  All remaining items for consideration at that DSB meeting could not move forward as long as that DSB meeting remained suspended.  These included a request for the establishment of a dispute settlement panel by Australia regarding measures adopted by China in relation to barley from Australia.

Continue Reading A Bumpy Road Ahead? How International Standoffs Periodically Hold the WTO Dispute Settlement System Hostage

On 29 April 2021, the UK’s long-proposed Trade Bill finally received royal assent and became the Trade Act 2021 (the Act).  While the Bill had been introduced in November 2017 by the government of Prime Minister Theresa May and re-introduced in March 2020 by the government of Prime Minister Boris Johnson, its adoption had been delayed because of numerous amendments to the bill and the change of government in 2019. One of the purposes of the Act is to establish a Trade Remedies Authority (the TRA) as an independent, arm’s length body from the UK Government.  The TRA’s purpose will be to carry out trade remedy investigations and to make recommendation to the Secretary of State for the Department for International Trade (DIT).  Since the UK’s official departure from the EU in late January 2020, trade remedy investigations have been undertaken by DIT itself, through its Trade Remedies Investigations Directorate (the TRID). These functions will now be transferred to the TRA.

In practice, despite the transfer of responsibility from the TRID to the TRA, much will remain the same. Ongoing investigations will be unaffected by the change.  Some of the underlying legislation will now change to reflect the TRA’s assumption of investigative responsibilities. The TRA’s official planned launch date TRA is 1 June 2021.  To mark its establishment, the TRA is hosting an online event during which it will provide an introduction to the UK’s trade remedies regime (the registration link is here).

In parallel with this development, parties in the UK currently await release of the statement of facts from the UK transition review in ‘Welded tubes and pipes’ from the Republic of Belarus, the Peoples Republic of China and the Russian Federation (TD0001). This will be the first full statement of facts for a completed UK transition review.  As the statement likely will provide important insight into how the UK will approach dumping cases, we will be following up with a report in the near future regarding its contents.

On 5 May 2021, the European Commission proposed a Regulation which lays down rules and procedures for investigating foreign subsidies that distort the EU internal market, and with a view to creating a level playing field as between EU and non-EU market actors in the Single Market (the Proposal). Following its White Paper on foreign subsidies in the Single Market published on 17 June 2020, the European Commission proposed this new instrument with the intention of filling a regulatory gap in the existing EU toolbox.  The latter already includes State aid disciplines, merger control and antitrust, public procurement and trade defense instruments.  However, none of these EU tools aim at dealing with foreign (non-EU) government subsidies provided to  foreign service providers who are active in the EU market, or with such subsidies otherwise facilitating acquisitions of EU companies or assets, or aimed at securing a competitive advantage in public contract tender procedures.

The Proposal, which lies at the intersection of competition and trade law, seeks to help implement  the updated EU Industrial Strategy.  The Industrial Strategy has as its objective  promoting a fair and competitive Single Market by ensuring the development of appropriate  conditions for European industry to thrive.

Continue Reading EU Commission Proposed Regulation to Address Distortions Caused by Foreign Subsidies in the Single Market

US and Mexican labor unions and, separately, the US Government, have filed the first labor cases under the Rapid Response Mechanism (“RRM”) of the United States-Mexico-Canada Agreement (“USMCA”).  The RRM was a relatively late addition to the USMCA – the result of negotiations between the Trump Administration and House Democrats – and provides for facility-specific review by an independent panel, and remedies, in response to allegations of a “denial of rights” of free association and collective bargaining.  The USMCA is currently the only US free trade agreement to include a mechanism to address alleged labor rights violations at specific facilities in the territories of the Parties.

On May 10, 2021, the American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), Service Employees International Union (“SEIU”), Sindicato Nacional Independiente de Trabajadores de Industrias y de Servicios Movimiento 20/32 (“SNITIS”), and Public Citizen announced that they filed the first labor case under the RRM.  The petition alleges that auto parts manufacturer Tridonex, a subsidiary of Philadelphia-based Cardone Industries, has engaged in the following labor violations, including with respect to the current SITPME union that is active as the Tridonex facility:

  • “Tridonex has denied its workers the opportunity to read or obtain copies of the collective bargaining agreement with SITPME.  Tridonex has failed to deposit its CBAs with the Federal Conciliation and Arbitration Board, as required by the Mexican Constitution.”
  • “Tridonex and the SITPME union, acting as an agent of Tridonex, have jointly denied the Tridonex workers the opportunity to ratify their CBA, in violation of Art. 400 Bis of the Federal Labor Law.”
  • “Tridonex and SITPME, acting as an agent of Tridonex, have jointly denied members of SITPME at Tridonex the right to elect their union leaders by personal, free, direct and secret vote, in violation of Art. 358.II of the Federal Labor Law.”
  • “SITPME, acting as an agent of Tridonex, has failed to provide its members with legally-required financial information reports under Art. 373 and Art. 358.IV of the Federal Labor Law.”
  • “Tridonex retaliated against workers who signed petitions to the Local CAB by firing more than 600 workers and compelling them to sign “voluntary” resignations in order to receive severance pay, in violation of Article 47 of the Federal Labor Law, and by denying other workers benefits agreed on through the CBA, in violation of Article 396 of the Federal Labor Law.”

Continue Reading US and Mexican Unions, Followed by US Government, File First Labor Cases Under USMCA “Rapid Response” Mechanism

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