Trade Deals across the World: April Edition
The COVID-19 crisis is the number one topic in the world. Negotiations on trade deals are not the main priority for most governments. Still, enough happened in March to share with you about trade agreements.
The United Kingdom and the European Union
The Brexit negotiations have become more complicated due to the coronavirus outbreak. The main players have even been infected. Boris Johnson is even hospitalized but continues working from there. Still, the process continues, via video and audio connections. Other than the increasingly louder call for an extension of the transition period that we reported on last month, there is nothing new on the Brexit front. Read more on Brexit via the Brexit Support page.
The United Kingdom and the United States
One of the bigger trade deals that Boris Johnson needs to agree on, next to the one with the European Union, is the free trade agreement with the United States. The United Kingdom has published its objectives for those negotiations at the beginning of March.
In language that may upset U.S. negotiators and farm groups, the policy also says that the United Kingdom will “build on existing international obligations,” including “not compromising high environmental, animal welfare and food standards,” and will recognize “geographical origins.”
Saying that “business across the economy and the country will benefit from an FTA,” the document lists “Food and farming” and states “With growing demand for U.K. food and drink products in the U.S., there are opportunities such as lowering high tariffs on U.K. products like cheddar cheese where tariffs can be as high as 17.6%. Our high-quality meat also represents an opportunity, in particular removing barriers and increasing access to the U.S. market.”
More details here.
The United States and The United Kingdom
CNN Business reports on the effects of a trade deal between the United States and the United Kingdom:
A free trade deal with the United States could add just $4.3 billion to the UK economy over the next 15 years, the British government estimated Monday. The modest potential windfall underscores the difficulty of replacing the economic benefits of membership in the European Union.
Reaching a deal with America could prove difficult, however, because Washington lacks a big incentive: US companies already export more to the United Kingdom than the other way round.
What matters most to the United Kingdom, according to trade experts, is the outcome of negotiations between Britain and the European Union over the terms of future trade.
Read the full article here.
The United States and Kenya
For 2020 the Trump administration will focus on trade agreements with the European Union, the United Kingdom and Kenya. It is not yet clear what the impact of coronavirus is on these plans.
The Trump administration notified Congress on March 17 that it would begin trade agreement negotiations with the East African country of Kenya.
Top U.S. exports to Kenya in 2019 included aircraft ($59 million), plastics ($58 million), machinery ($41 million), and cereals (wheat) ($27 million), while U.S. imports of Kenyan products last year consisted of mostly apparel ($454 million), fruit and nuts ($55 million), titanium ores and concentrates ($52 million), and coffee ($34 million), USTR said.
Read more in the article by American Shipper here.
The United States and China, and the consequences for the European Union
Coronavirus also has an impact on existing trade deals. Recently the United States and China agreed on a First Phase Trade Deal. Although the start has been good, implementation of that deal may now be delayed. The Hill reports:
Several weeks have passed since the U.S.-China Phase One trade agreement entered into force, but already there is good news on implementation. China has taken the actions specified in the agreement according to required timeframes, and in some cases has even been ahead of schedule.
While the “rules” provisions of the agreement are being faithfully implemented, China undoubtedly will find it difficult to meet its purchasing commitments of $200 billion dollars above its 2017 levels over the next two years of U.S. manufacturing, agriculture, energy and services exports. Even in the best of circumstances, reaching these targets seemed like a stretch. With the economic impact of the coronavirus unfolding, what was considered a stretch is looking more and more like a bridge too far.
Read the full article here.
A recent study has found that the U.S.-China Trade Deal has negative consequences for the European Union. $11 billion in consequences, as reported by the Journal of Commerce:
The “phase one” trade agreement signed in January between the United States and China will cut demand for nearly $11 billion in European goods, with the German and French manufacturing sectors particularly hard hit, according to a new study from the US Chamber of Commerce (AmCham).
Following the signing of the phase one deal, and the ratifying of the United States-Mexico-Canada Agreement (USMCA) by the US Congress, the crosshairs of Washington trade negotiators have lined up on Europe. A threat of US tariffs on European-made autos is pending, on top of the World Trade Organization (WTO)-authorized tariffs already being imposed on the EU’s finished aircraft, French wine, Italian cheese, and other goods stemming from the Airbus subsidy trade dispute. The Trump administration last month said it would increase existing US tariffs on EU aerospace products from 10 percent to 15 percent because of European subsidies paid to Airbus.
AmCham believes the underlying strength of the trans-Atlantic economy is sturdy enough to weather the coronavirus storm, but that would largely depend on the ability of the US and Europe to address the rising trade tensions and avoid continuing down the current protectionist path.
Read the full article on JOC here.
The United States and India
And finally the Trade Agreement between the United States and India. Negotiations on that deal went south last month. The Washington Post reports:
Here’s what didn’t happen: The United States and India failed to produce a trade agreement, although there were repeated hints that the two sides were racing to complete the deal. Despite Trump’s assurance that negotiators are working on “the big deal for later on,” the absence of even a limited trade agreement reveals the difficulties inherent in trading with India.
In the absence of pro-trade voices, the Modi government has increasingly turned to protectionist barriers and import substitution to spur domestic industry and manufacturing.
Modi’s impulses aren’t that dissimilar from Trump’s domestic imperatives, but they directly clash with India’s WTO commitments. And Modi’s trade objectives are at odds with the Trump administration’s zero-sum view of international trade.
Read about the next steps in the full article here.
The African Continental Free Trade Area
The brand new African Continental Free Trade Agreement (AfCTA) is scheduled to go into effect on July 1st. Still, a lot needs to be done.
This ambitious initiative creates a single market for goods and services and a customs union with free movement of capital and business travellers–the world’s largest given Africa’s 1.2 billion population and combined GDP of over $2.5 trillion...if the continental trade agreement is successfully implemented, Africa will have a combined consumer and business spending of $6.7 trillion by 2030.
This article on The EastAfrican outlines what needs to be done before July 1st to make this agreement a success. One of the issues is that the rules for the Origin of Goods, which have caused problems in many smaller trade agreements, need to be discussed.
There are also voices calling for a second U.S.A.: the United States of Africa because Africa is made up of many groups of regional states, instead of strong nation-states. Read more about this here.