In October 2021, President Biden announced the United States’ intention to pursue an “Indo-Pacific Economic Framework” (IPEF) as a means of strengthening U.S. ties in the Asian region.  Substantive discussions on the IPEF have not yet begun, and indeed, there has not yet been an announcement how the negotiations will be conducted or which nations will be involved.  Nevertheless, enough about this proposed framework of agreements has been announced that companies in the region can begin to prepare for the process.  This article will discuss what is known about the IPEF, why the current administration is taking this approach, and how countries in the Asian region may be affected by this new agreement.

By way of background, in February 2016, after years of negotiations, the Trans-Pacific Partnership (TPP) was signed.  The TPP covered 12 countries, including the United States, and was described as a high-standard “21st Century” trade agreement.  However, one of then-President Trump’s first actions in office was to withdraw the United States from the TPP.  The remaining TPP countries renegotiated the agreement without the United States (essentially removing certain elements of the agreement the United States alone had backed), and ultimately entered into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).  Since President Biden’s inauguration in January 2021, pressure has been building for the United States to reengage with Asia on economic and commercial matters.  The IPEF is the United States’ current policy response.Continue Reading The Indo-Pacific Economic Framework: How the United States Intends to Re-Engage with Asia on Trade

In the last quarter of 2021, the United States, the European Union, and the United Kingdom introduced or adopted measures aimed at eliminating illegal deforestation throughout the world.  All three measures recognize the harmful effects of deforestation with regard to climate change and seek to address such effects by prohibiting certain commodities produced on (illegally) deforested land from being placed on their respective markets.  However, there are significant differences among the measures that warrant closer examination as they could have market access implications for companies.

This article sets out the key similarities and differences across the US, EU, and UK anti-deforestation measures, building on Steptoe’s previous posts on the proposed Fostering Overseas Rule of Law and Environmentally Sound Trade Act of 2021 (“FOREST Act”) in the United States, the European Union’s Proposal for a Regulation on Deforestation-free Products (“Proposed Regulation”), and the United Kingdom’s Environment Act 2021 (“Environment Act”).  A more comprehensive analysis of each measure can be found here: US, EU, UK.Continue Reading Comparing Recent Deforestation Measures of the United States, European Union, and United Kingdom

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

On 17 November 2021, in the wake of the Glasgow Climate Change Conference (COP26), the European Commission (“Commission”) presented its Proposal for a Regulation that aims to curb deforestation and forest degradation driven by European Union (“EU”) consumption and production (“Proposed Regulation”). The wider goal of the rule is to reduce greenhouse gas (“GHG”) emissions and global diversity loss, by minimising the consumption of products from supply chains associated with deforestation or forest degradation.

Already announced in 2019, the Proposed Regulation fits in the wider context of the European Green Deal, the Commission’s flagship initiative to transform the EU from a high- to a low-carbon economy. It follows similar initiatives in the United States (“U.S.”) and United Kingdom (“UK”), as discussed in more detail here.

The Proposed Regulation complements and expands on existing EU legislation, such as the EU Timber Regulation (“EUTR”) and the Forest law Enforcement, Governance and Trade Regulation (“FLEGT Regulation”), and would be complementary to the Commission’s legislative initiative on Sustainable Corporate Governance (“SCG”). Of note, it would integrate and improve the framework created by the EUTR, which would be repealed by the adoption of the Proposed Regulation.Continue Reading The European Commission’s Proposed Ban on Products Driving Deforestation and Forest Degradation

On September 6, 2021, the International Chamber of Shipping (ICS) announced that it had proposed a global carbon levy on carbon emissions from ships for consideration by the International Maritime Organization (IMO) to “accelerate the uptake and deployment of zero-carbon fuels.”  The International Association of Dry Cargo Shipowners (INTERCARGO) co-sponsored the proposal.

ICS, which represents national shipowner associations and over 80% of the world merchant fleet,  explained in its announcement that the carbon levy “would be based on mandatory contributions by ships trading globally, exceeding 5,000 gross tonnage, for each tonne of CO2 emitted.”  Funds generated by the levy “would go into an ‘IMO Climate Fund’ which, as well as closing the price gap between zero-carbon and conventional fuels, would be used to deploy the bunkering infrastructure required in ports throughout the world to supply fuels such as hydrogen and ammonia, ensuring consistency in the industry’s green transition for both developed and developing economies.”

In this article, we review the developments leading up to this proposal and its prospects, and consider the implications for the shipping industry and supply chains more generally if a global maritime carbon levy were to be adopted by the IMO.Continue Reading Is a Global Maritime Carbon Levy on the Horizon? Why Companies Should be Paying Attention to the IMO Proposals and Preparing for Potential Supply Chain Disruption

This November, the United Kingdom will host the 26th UN Climate Change Conference (COP26) in Glasgow, from October 31 to November 12, 2021.  As part of its preparations, the UK Parliament International Trade Committee recently launched an inquiry on COP26 and international trade.  The Committee will be accepting submissions until September 7, 2021 on the series of questions that make up its call for evidence.  One of those questions asks,

What discussions, if any, are planned to develop a multilateral approach to carbon pricing systems (including border adjustment mechanisms), green subsidies and investment funds, the curbing of fossil fuel subsidies, a circular economy and sustainable supply chains?

A multilateral approach on most of these issues seems very unlikely, notably border adjustment mechanisms.  As discussed in a previous post, the European Union is pursuing its Carbon Border Adjustment Mechanism unilaterally.  The United States and others may follow suit.  This post explores the possibility of reaching a multilateral agreement on curbing fossil fuel subsidies, which could have serious implications for producers and downstream purchasers.Continue Reading Phasing Out Fossil Fuel Subsidies: Any Prospect for Meaningful Multilateral Action?

The European Commission’s recently released proposal for a Carbon Border Adjustment Mechanism (CBAM) forms a critical part of the European Union’s Fit for 55 Package, discussed in a previous blog.  The proposed EU CBAM will require importers of certain products into the EU to pay for the tons of carbon emissions embedded in those products in the form of CBAM certificates, the price of which would be tied to the price of emissions allowances under the EU Emissions Trading System (ETS).  The CBAM is expected to be phased in gradually from 2023 in the form of detailed emissions reporting requirements, transitioning to full implementation by 2026.  Although the EU CBAM has yet to be approved and details of the mechanism remain to be fleshed out via implementing acts, companies would benefit by evaluating their potential exposure now, not just to the EU CBAM but also to the measures that may be implemented in response by other countries, including the United States.
Continue Reading The EU CBAM: What the Proposed Regulation Covers, What Happens Next, and What Companies Should be Thinking About Now

Yesterday, the European Commission published the long-awaited “Fit for 55” Package designed to drive forward the EU’s objective to radically reduce dependence on fossil fuels. As European Commission President von der Leyen stated in the press conference, the “fossil fuel economy has reached its limits”. Consisting of over a dozen initiatives, including both new and revised proposals, it aims to ensure that the European Green Deal’s objective of reducing carbon emissions by at least 55% below 1990 levels is met by 2030, ahead of the 2050 climate neutrality objective.

 
Continue Reading The European Commission Proposes to Raise Climate Targets Across Sectors Under the Fit for 55 Package to Further Decarbonize the Economy

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,[1] 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.[2]  In support of the Proposed Order, the Canadian Government compiled a Science Assessment on Plastic Pollution,[3] 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.[4]Continue Reading Grasping at Straws: Regulatory and Trade Considerations Regarding Canada’s Proposed Single Use Plastics Policy