2021 was an eventful year for international trade law and policy in the EU, with developments in several key areas.

The EU strengthens its trade policy toolbox

In the light of the recent ongoing problems with multilateralism and the continuing rise of China, the EU focused hard on strengthening its trade enforcement toolbox in a wide variety of trade related areas. This includes the use of recent tools and proposals for new instruments:

  • The Amended Trade Enforcement Regulation entered into force on 13 February 2021. This greatly expands the EU’s capacity to adopt trade countermeasures against third countries. It can now do so even before dispute settlement proceedings at the WTO or under other international agreements have been concluded if these are blocked by the other party. This would include, for instance, situations where a trading partner appeals an adverse panel report “into the void” to the non-functioning Appellate Body at the WTO, as well as in relation to a broader range of violations. The Commission is due to undertake a review of the Trade Enforcement Regulation, to consider additional commercial policy measures in the field of trade-related aspects of intellectual property rights, by 13 February 2022.
  • The FDI Screening Regulation, which has been in force since the end of 2020, has led to a growing number of FDI mechanisms notified or updated by Member States to the European Commission throughout 2021 (see here). For the EU, which did not have a role in FDI screening prior to this, this mechanism is starting to become a game-changer. In November 2021, the Commission published its first annual report on the screening of foreign direct investments into the EU. Of the 265 cases notified to the Commission between 11 October 2020 and 30 June 2021, 80% were closed by the Commission in Phase 1, whereas 14% of cases proceeded to Phase 2, with additional information being requested from the notifying Member State (the remaining 6% were still under assessment on 30 June 2021). The Commission issued an opinion, with recommended measures, in less than 3% of the notified cases. Actual prohibitions of investments by Member States appear to be limited for the moment, although there have been such instances (like Italy’s prohibition of the proposed acquisition of control in LPE, an Italian semiconductor equipment company, by a Chinese company). Moreover, parties sometimes abandon envisaged transactions prior to a formal prohibition. The imposition of conditions appears more common.
  • On 5 May 2021, the Commission published its proposal for a new Regulation to address distortions by foreign subsidies. The Regulation introduces three new instruments that would give the Commission the power to investigate foreign subsidies granted to companies active in the EU and identify whether they are causing distortions in the EU single market. Should the Commission identify distortive foreign subsidies, it could impose redressive measures to counteract their effects (see our blog post describing the Commission’s proposal here). If adopted, which currently appears likely, it would give the Commission far-reaching new powers. The Committee on International Trade, the leading committee in charge of the file within the European Parliament, has released its draft report on the proposal on 17 December 2021, generally supporting the new instruments and suggesting additional protections against home-market monopoly advantages and known future subsidies.
  • On 8 December 2021, the Commission published a proposal for a new anti-coercion instrument. The aim of this instrument would be to deter and, if necessary, retaliate against third countries exerting economic coercion against the EU or its Member States in order to influence their political decisions and policy choices (see our blog post describing the Commission’s proposal here). This is another example of a novel instrument in the field of trade that would grant the Commission with robust powers to address trade policy issues.
  • Negotiations on a proposed new International Procurement Instrument have also progressed in 2021. This instrument would enable the EU to limit, on a case-by-case basis, access to its public procurement market by companies from third countries which restrict access to their own procurement markets by EU businesses. This would represent a significant overhaul of the EU’s current public procurement system, which is currently one of the more open ones globally.


Continue Reading EU Trade: 2021 Takeaways, 2022 and Beyond – What to Expect

2022 is shaping up to be a critical year for the Biden Administration regarding U.S. international trade policy.  In 2021, the Biden Administration made headway in resolving some of the challenges with United States’ allies that arose during the last Administration, and trying to build bridges in important regions that had perhaps had been neglected.  But in a number of other critical areas, and arguably in the most significant areas, the Biden Administration made little tangible progress over the past year.  The discussion below offers a look back at the key developments in 2021 with respect to U.S. trade relations with the EU, China, the rest of Asia and North America, and a look ahead at what could come in 2022.

Continue Reading The US International Trade Agenda: A Look Back, A Look Ahead

The United States has imposed trade restrictions on imports of solar cells and panels starting in 2012, and since then, the number and nature of these restrictions has grown.  The last several weeks have seen a potential for further increase and/or extension of these measures, further complicating trade in this critical component of alternative energy.

First, on September 2, 2021, a World Trade Organization (“WTO”) panel circulated its report in United States – Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products (DS562), upholding the Section 201 safeguard tariffs imposed by the United States on crystalline silicon photovoltaic cells (“solar safeguard”).  The solar safeguard is a 2.5GW tariff-rate quota that was imposed by the United States in 2018 on imports of solar cells from most countries.  The tariff was initially set at 30 percent, and was scheduled to be reduced by five percentage points each year in the subsequent three years (lasting for a total of four years).  China challenged the solar safeguard at the WTO, arguing that the U.S. International Trade Commission (“ITC”) failed to comply with the 1994 General Agreement on Tariffs and Trade (“GATT”) and the Agreement on Safeguards when conducting its safeguard investigation.  China argued that the ITC had failed to demonstrate that imports of products increased “as a result of unforeseen developments,” as required by the GATT, while also attacking the ITC’s analysis regarding the link between increased imports and serious injury.  The WTO dispute settlement body has historically been skeptical of safeguard actions, often finding them inconsistent with members’ obligations.  However, in this instance, the panel rejected all of China’s claims, and affirmed the reasoning of the ITC.


Continue Reading U.S. Imports of Solar Products Face Increased Restrictions

Economists from the Federal Reserve Bank of New York recently published a report analyzing the US-China trade deficit after the imposition of Section 301 tariffs on imports from China in 2018. They concluded that the trade deficit narrowed, but attributed a significant part of this narrowing to duty evasion on the part of Chinese exporters

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

On January 13, 2021 the US Department of Homeland Security’s Customs and Border Protection (CBP) announced that, effective immediately, all cotton and tomato products imported from China’s Xinjiang Uyghur Autonomous Region (XUAR) will be barred from entering the United States. The ban, officially called a Withhold Release Order (WRO), is “based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor” according to CBP. This region-wide order joins a growing list of WROs targeting alleged forced labor in China.

Under this WRO, all cotton or tomato products originating from XUAR will be detained at all US ports of entry pending the submission to CBP within three months of entry of satisfactory proof that the products were not produced with forced labor. If CBP is unsatisfied with the provided evidence the products will be seized and potential civil and criminal investigations and penalties could occur. This particular WRO also includes apparel, textiles, tomato seeds, canned tomatoes, tomato sauce and other goods made with either cotton or tomatoes from XUAR. CBO has clarified that the WRO “applies to cotton and tomatoes grown in that region and to all products made in whole or in part using this cotton or these tomatoes, regardless of where the downstream products are produced.” Importers of record are responsible for ensuring no part of their product has cotton or tomato inputs that were harvested or produced at any point in their supply chain via forced labor from XUAR.


Continue Reading US Announces Region-Wide Ban on Cotton and Tomato Imports from Xinjiang

On November 24, 2020, the U.S. Department of Commerce (“Commerce”) issued a preliminary affirmative determination in the countervailing duty (“CVD”) investigation of twist ties from China. What is particularly noteworthy about this preliminary determination is Commerce’s decision to countervail the undervaluation of China’s currency, the Renminbi (“RMB”). This marks only the second occasion – following the investigation of Passenger Vehicle and Light Truck (“PVLT”) Tires from Vietnam earlier this year – that Commerce has countervailed a country’s undervalued currency, and the first time it has done so against China. As discussed further below, Commerce’s determination relied on an analysis of the RMB from the U.S. Department of the Treasury (“Treasury”) which differed in meaningful respects from Treasury’s analysis of the Vietnamese Dong (“Dong”) in the investigation of PVLT Tires from Vietnam, suggesting that a less objective, more qualitative analysis may be applied against the RMB in future cases.

Under U.S. law, a subsidy program is countervailable when it meets three criteria. Specifically, the program must constitute (a) a financial contribution provided by a government authority or public body, (b) to a specific firm or industry, that (c) yielded a benefit to the recipient.

The currency undervaluation allegations examined in the PVLT Tires from Vietnam and Twist Ties from China investigations were based on regulations issued by Commerce earlier this year to interpret these terms in the context of currency undervaluation. Regarding the requirement of specificity, Commerce’s new rule provides that enterprises that buy or sell goods internationally (i.e., enterprises in the traded goods sector) may comprise a “group” of enterprises for specificity purposes.


Continue Reading Commerce Takes Action Against Allegedly Undervalued Currencies