On 14 December 2022, the Council of the EU (“Council”) and the European Parliament (“Parliament”) adopted Regulation (EU) 2022/2560 of the European Parliament and of the Council on foreign subsidies distorting the internal market (the “Foreign Subsidies Regulation” or “FSR”), which was published in the EU’s Official Journal on 23 December 2022. The FSR gives the European Commission (“Commission”) substantial new powers to investigate “financial contributions” granted by non-EU governments to companies operating in the EU and, where necessary, take measures to redress their distortive effects. Specifically, the Commission will be able to conduct such investigations through three new tools: two notification-based tools to investigate concentrations and bids in public procurements above certain thresholds and a general tool to investigate all other market situations and lower-value mergers and public procurement procedures.
The United States, the European Union, and the United Kingdom are increasingly using trade policy tools as a means to promote certain sustainability goals related to human rights and the environment. For instance, Steptoe covered in a previous post the trade restrictions proposed at the end of 2021 aimed at illegally deforested products. More recently, amidst increasing concerns regarding forced labor in certain regions, the EU has proposed legislation which would ban making available within the EU, and exporting from the EU, products made with forced labor – resembling, to some extent, the forced labor ban that is in place in the US. Meanwhile, the UK has adopted a more piecemeal and geographically targeted approach through the adaptation of existing legislation focused on export controls and the prevention of modern slavery.…
On September 19, 2022, the European Commission (“Commission”) presented the Single Market Emergency Instrument (“SMEI”), a crisis management framework designed to secure supply chains of “identified, strategically important goods and services” within the European Union (“EU”) during times of emergency. The SMEI was introduced as a response to the significant structural issues in the EU’s supply chain of critical goods and services, which were highlighted by the COVID-19 pandemic. Comments on the Proposed Regulation are currently due on December 17, 2022.…
The much anticipated proposal for a Regulation prohibiting products made with forced labor on the EU market was published by the European Commission (“Commission”) on 14 September 2022, one year after the initiative was first announced by Commission President Ursula von der Leyen in her 2021 State of the Union speech. The proposed forced labor instrument has the potential to significantly impact the supply chains of not only EU companies, but also of any non-EU company that sells products into the EU. The instrument would apply to any company that exports products from the EU or that sells products on the EU market, irrespective of where those companies are based, to which products they are selling, and to which countries and suppliers they source from.
Continue Reading The Proposed EU Ban on Goods Made With Forced Labor
On 29 August 2022, the European Union’s (“EU”) International Procurement Instrument (“IPI”) will enter into force. The IPI was adopted on 23 June 2022 after more than a decade of legislative preparations and discussions. It provides for a new trade policy tool which is designed to address the perceived lack of a level playing field in global procurement markets.
The IPI will enable the European Commission (“Commission”) to impose measures limiting non-EU companies’ access to the EU public procurement market if these companies’ governments do not offer similar access to EU businesses. Specifically, the IPI envisages two types of measures that can be applied: i) a “score adjustment” penalty on tenders submitted by suppliers from the targeted third country; or ii) the exclusion of such tenders from the procurement process. Such IPI measures would be applied following an investigation by the Commission, and after consultations with the country concerned.
Continue Reading EU’s International Procurement Instrument to Enter into Force at the End of August
It is generally known that EU anti-dumping and anti-subsidy measures are usually imposed for a period of five years, and that they can be (and usually are) extended for further five-year periods further to expiry review investigations. Similarly, operators facing trade defense measures will typically be aware that the repeal or the reduction of the duties can be obtained with interim review investigations or duty refund procedures. It is instead far less known that there is another, temporary, and, until very recently, long unexploited solution available to EU importers and end-users to ease the pressure of EU trade defense measures, namely the suspension thereof. This tool can be particularly relevant to EU importers and end-users of goods that are currently suffering from supply chain disruptions.
Continue Reading Duty Suspension: An Interim Relief from EU Trade Defense Measures
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.…
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.
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 December 8, the European Commission (Commission) published a proposal for a new anti-coercion instrument (ACI) to deter and, if necessary, retaliate against third countries seeking to change the course of EU or EU Member State policy by exerting economic coercion against the EU or its Member States. Third country coercion is understood broadly and may range from using explicit coercion and trade defense tools, to selective border or food safety checks on goods from a given EU country, to boycotts of goods of a certain origin. Essentially, the draft Regulation’s aim is to preserve the EU and its Member States’ ability to make political decisions and policy choices without undue foreign interference.
The proposal builds on a Joint Declaration in favor of such an instrument, signed by the Commission, the Council of the EU and the European Parliament. Stakeholders have also recognized the problem of economic intimidation and coercion against EU interests in the Commission’s consultation, thereby supporting an EU-level instrument. As stated by MEP Bernd Lange (rapporteur on the new EU anti-coercion instrument, INTA Chair, S&D, Germany) the EU is operating in an “increasingly harsh geopolitical landscape”, and is increasingly the target of economic pressure.…