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 Of note, it would integrate and improve the framework created by the EUTR, which would be repealed by the adoption of the Proposed Regulation.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 October 30, 2021, the United States and the European Union (“EU”) reached an agreement to replace the tariffs imposed under Section 232 of the Trade Expansion Act of 1962  (“Section 232”) on EU imports of steel and aluminum with a tariff-rate quota (“TRQ”) that is scheduled to take effect on January 1, 2022.  The deal allows a certain volume of EU steel and aluminum to enter the United States each year without the application of Section 232 tariffs.  Imports over that volume will be subject to Section 232 tariffs, which are currently 25 percent for steel imports, and 10 percent for aluminum imports.

According to details released by the Department of Commerce (“Commerce”), the TRQ is based on historical import values and will be allocated by product and by EU Member State.  For steel, the TRQ will be broken down into 54 product categories, with the total annual amount set at 3.3 million metric tons per year, starting in 2022.  The annual amount for the aluminum TRQ will be 18,000 metric tons for unwrought aluminum and 366,000 metric tons for semi-finished (wrought) aluminum.  The quota levels for unwrought aluminum will be subdivided into two product categories, and the quota levels for semi-finished aluminum will be subdivided into fourteen product categories. The United States will conduct annual reviews to adjust the steel TRQ amount based on US demand using data from the World Steel Association, but at this point there is no similar provision to adjust the levels of the aluminum TRQ.


Continue Reading Client Alert: US and EU Reach Agreement Regarding Section 232 Tariffs on Steel and Aluminum Imports

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

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

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

The European Commission published its Communication on An Open, Sustainable and Assertive Trade Policy on 18 February 2021 (the Communication). This follows a consultation on the EU’s Trade Policy Review which closed in November 2020.

The Communication seeks to reset the course of the EU’s trade policy in the context of global uncertainty and increased competition. Its key theme is “open strategic autonomy”, a concept characterized by three main elements:

1) furthering openness and engagement by making strategic use of the size and attractiveness of the EU Single Market;

2) enhancing the resilience and sustainability of value chains. The Commission in this regard seeks as a priority to identify strategic dependencies in supply chains, also to be addressed by industrial policy reviews; and

3) demonstrating assertiveness and encouraging rules-based cooperation in the implementation of EU trade policy to further support the EU’s geopolitical interests.

In line with its overarching objective of open strategic autonomy, the Communication suggests that the EU’s trade policy will focus on three core priorities:

  1. support the recovery from the pandemic and the fundamental transformation of the EU economy in line with its green and digital objectives;
  2. shape global rules for a more sustainable and fairer globalization; and
  3. increase the EU’s capacity to pursue its interests and enforce its rights, including autonomously where needed. In this regard, the EU will seek appropriate means to ensure effective implementation and enforcement of provisions on sustainable development in EU trade agreements, to level-up social, labor and environmental standards globally, but also to defend itself against unfair trading practices.


Continue Reading The European Commission’s Communication on an Open, Sustainable and Assertive Trade Policy

Since 1 January 2021, the United Kingdom of Great Britain and North Ireland (the UK) has ceased to be part of the Single Market of the European Union (EU).[1]  This date marked the end of the transition period provided for under the Withdrawal Agreement of 31 January 2020 between the UK and the EU.[2] During the transition period, the UK remained in the EU customs territory and thus continued to be integrated into EU trade policy and enforcement actions, including trade remedies. The UK’s departure from the EU at the start of 2021 will have multiple consequences for EU trade remedy investigations and for the EU’s approach to trade remedy measures more generally going forward.

In light of these changes, the EU published a notice on 18 January 2021, laying down some of the practical implications of the UK’s departure.[3]

One immediate consequence of UK’s exit from the EU customs territory is that all trade remedy measures (anti-dumping, countervailing and safeguards) in force on 1 January 2021 will apply going forward only to imports into the 27 member states of the EU from third party States. This will include EU imports of UK originating steel products that are subject to EU steel safeguard measures.[4] Likewise, any new trade remedy measures the EU may adopt after 1 January 2021 following an investigation initiated before or after that date will only affect imports into the EU-27, i.e. excluding the UK.

One complication is imports into Northern Ireland.  Pursuant to Part Three of the Withdrawal Agreement, though theoretically no long part of customs territory of the EU, after 1 January 2021, Northern Ireland will continue to be subject to EU customs procedures and rules, in order to maintain borderless trade flows on the island of Ireland.  EU trade remedy measures will therefore be applicable to goods entering Northern Ireland from outside the EU unless it can be proven that their final sales destination of sales is Northern Ireland. This includes goods entering into Northern Ireland from Great Britain, subject to any future amendments to the rules. The EU will soon make available a separate notice concerning the technical details in this respect.


Continue Reading Practical Implications of Brexit to EU Trade Remedy Investigations and Measures

On 30 December 2020, the European Union and the United Kingdom signed the “EU-UK Trade and Cooperation Agreement” (EU-UK TCA or the Agreement) setting out the terms for their future economic and commercial relations after the UK definitively leaves the EU Single Market and Customs Union on January 1, 2021.

The British Parliament approved the deal by a large majority on the same day. The EU will provisionally apply the Agreement until the European Parliament delivers its approval sometime in February or March.

The Agreement comes after a year of fractious and often acrimonious negotiations. Unsurprisingly, given the context and the premises for the negotiations set down by the UK from the start, the deal is more a divorce agreement than a springboard for closer economic ties.

The latter ambition would be typical in any other trade negotiation: the usual point of trade deals is to facilitate greater fluidity of exchange, and therefore greater economic integration, between two hitherto relatively separate economic spaces.

Yet here, the parties took as a starting point 45 years of deep economic, legal and social integration between the UK and the rest of the EU. Political events in the UK having precipitated its withdrawal from the EU, the EU-UK TCA is the trade equivalent of a separation agreement between an old married couple. The legacy of economic, social and security arrangements going back decades dictate that the “leaving” party cannot make an entirely clean break with its former partner. For its part, the other party seeks to protect its interests, including putting in place mechanisms to manage relations with  its former partner going forward. All of these elements are reflected in the terms of this Great Divorce. And, as is typical of divorce, the immediate effect is likely to leave both parties worse off.


Continue Reading The Brexit Agreement: the Great Divorce