Posts Tagged ‘World Trade Organization’

China Warns U.S. on Trade — U.S. claims China uses market access restrictions or other tools to compel foreign companies to hand over technology

January 11, 2018

By JOE McDONALD, AP Business Writer

BEIJING (AP) — China warned Washington on Thursday it will “resolutely safeguard” its interests ahead of a possible decision in an investigation into whether Beijing improperly pressures foreign companies to hand over technology.

The United States is disrupting the international trading order by carrying out the “Section 301” investigation under its own laws instead of through the World Trade Organization, said Commerce Ministry spokesman Gao Feng.

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Trump ordered U.S. trade officials in August to investigate whether Beijing uses market access restrictions or other tools to compel foreign companies to hand over technology. A decision is expected as early as this month, though American officials have set no date.

“If the United States insists on unilateral and protectionist practices that will undermine the interests of China, we will take all necessary measures and resolutely safeguard the legitimate rights and interests of China,” Gao said at a regular briefing.

If the investigation concludes Beijing acted improperly, Washington could seek remedies either through the WTO or outside of it.

Gao gave no indication of how Beijing might respond but Chinese law gives regulators broad discretion over what foreign companies can do in China.

Gao also criticized the United States for using “so-called national security” as a reason to block a Chinese billionaire’s acquisition of money transfer service MoneyGram.

The proposed purchase by e-commerce tycoon Jack Ma’s Ant Financial Group was a “normal commercial investment,” said Gao.

Jack Ma

The deal was called off last week after failing to win approval from a U.S. government panel that reviews proposed acquisitions of American companies for possible threats to national security.

“We regret to note that normal commercial investment and mergers and acquisitions conducted by Chinese enterprises in the United States are once again hindered by so-called ‘national security’,” said Gao.

Gao said Beijing has no objection to a “normal security review” but worries other governments use them as an excuse to set up barriers to unfairly stop unwanted activity.

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China Can Expect More State Control In 2018, Debt Growth

December 27, 2017

Bloomberg
By Christopher Balding

Balancing debt and growth isn’t easy.

 Photographer: Goh Chai Hin/AFP/Getty Images

As 2017 wraps up and 2018 beckons, it’s worth reviewing what we forecast for China in the year now ending, and to cast ahead for what themes might play out over the next 12 months. After this week’s meeting of Communist Party leaders at the Central Economic Work Conference, we can expect their targets and objectives for 2018. And these meetings have great import: It was the 2015 meeting that started the ongoing “supply-side reform” campaign.

Last year we focused on a couple of points. First, watch the data, not the New Year’s resolutions. While China touts deleveraging efforts, the data is mixed. The debt-to-GDP ratio in China is only up slightly from 2016 to 260 percent, though it is expected to top out at 327 percent in 2022. The moderation was due not to slowing debt growth, but a jump in commodity prices that pushed up nominal gross domestic product. Watch debt growth in 2018: Prices are expected to fall again, raising debt-to-GDP. China still has not given up its debt habit.

Second, the Federal Reserve rate hikes last year were likely to play a big role in Chinese policy. In retrospect, they did and did not. Interest rates in China are up sharply, with even interbank rates over one month up 1.5 percent since January 2017. Money market rates are up to 6.39 percent for 14-day repurchases. Rate increases are putting pressure on Chinese corporate bonds given the overwhelmingly short-term nature of borrowing, which constantly resets rates. Oddly, even as U.S. interest rates increased, the dollar fell, with indexes down 9 percent. Though it is unclear why the dollar fell, if the Fed hikes four times as predicted by Goldman Sachs, this could cause the currency to reverse course. A strong dollar and rising U.S. rates will pressure China.

Third, heading into the National Congress, I said watch out for Chinese politics. Though Premier Li Keqiang remains in office, Beijing clearly swept away any vestiges of market adherence. The installation of Party committees over the board of directors in foreign firms and major state-owned enterprises laid bare Beijing’s ambition. Communist Party strength would take priority over everything.

As we look into 2018, some of these themes carry forward, but with a twist. Beijing is solidifying its control over all aspects of the economy. The Party released new rules on overseas investments by firms and has enforced rules mandating that banks balance their foreign exchange transactions. After the Fed recently raised rates by 0.25 percent, the People’s Bank of China followed with a hike of only 0.05 percent, confident it can tame any potential outflows. If the Fed hikes another three times and the dollar does not drop another 10 percent, this would push interest rates in China for debt over six months close to an intolerable 8 percent and reduce foreign exchange reserves beneath the $3 trillion level.

Politics matter for the Chinese economy this year, but more in international terms. The closed Chinese market, which for instance refused to allow foreign self-driving cars on grounds of national security, has come under harsh criticism. The European Union and the United States are teaming up against China at the World Trade Organization, attacking its closed market and state subsidies. President Donald Trump has labeled China a strategic competitor, with fundamental national security implications, after repeated attempts to improve market access. With domestic politics resolved, the biggest potential source of financial or economic risk to China will be external.

Finally, we need to watch the dual deleveraging and supply-side reform campaigns. Corporate debt has moderated, but household and other forms of debt have picked up. Unless China curbs these other categories, it will soon find every sector of the economy is excessively indebted. While Beijing has indicated it wants to slow total debt growth, its ability to maintain growth while restraining debt has not been tested in more than a decade.

Even the supply-side reform campaign has had mixed results. Although some capacity has been removed from steel, coal and other heavy industry, fixed asset investment levels remain relatively high, thereby adding new capacity. Though prices for raw input commodity prices jumped, debt-to-equity ratios only slightly improved and profit margins remain tiny. Any drop or even flattening of these commodity prices will have a big impact on Beijing’s plans to transform the economy. With robots flooding into light manufacturing, Beijing will have to find jobs for displaced workers, and heavy industry seems to be the new unemployment government program.

The pressures facing Beijing in 2018 carry some similarities from previous year — except nothing has fundamentally improved. Debt growth has moderated but is expected to worsen with foreign exchange and political concerns on the horizon. That will make for a challenging year ahead.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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EU, Japan and US to ramp up trade pressure on China

December 12, 2017

Three economies will target ‘severe excess capacity’ in sectors like steel

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U.S. Trade Representative Robert Lighthizer
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By Shawn Donnan in Buenos Aires
FT (Financial Times)
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The EU, Japan and the US are set to announce a new alliance to take on China more aggressively over trade issues such as overcapacity in steel and forced technology transfers, in a rare effort at international economic co-operation by the Trump administration.

In a statement due to be issued on Tuesday on the sidelines of a World Trade Organization meeting, the three economies will target the “severe excess capacity” in important sectors like steel and the role of illegal subsidies, state financing and state-owned enterprises in fuelling it, according to a draft read to the Financial Times.

Also targeted are the rules in countries such as China that require foreign investors to hand over important proprietary technologies or house content and data on local servers.

The statement will not name China. But it reflects all three economies’ growing angst about its continuing economic rise, officials said. It also addresses two of the Trump administration’s main complaints against China — its flooding of global markets with cheap steel, aluminium and other commodities and the way it is using intellectual property rules to acquire strategic technologies.

Mr Trump and his aides have lashed out at China and revived US trade statutes to launch controversial investigations that could lead to punitive tariffs and other trade sanctions.

But the EU and Japan have been seeking to talk the administration out of unilateral action, arguing that co-operating with the EU and countries like Japan would better serve US interests and do more to raise pressure on Beijing.

The goal is to stave off a feared surge in protectionism. A new study due to be released on Tuesday by Simon Evenett, a researcher at St Gallen University in Switzerland, is set to show that protectionist measures introduced since the 2008 global financial crisis have caused the growth of EU exports to stall.

Subsidies, Mr Evenett said, have been a major component of that. “This isn’t the protectionist mix our forefathers would have recognised and reflects the holes in the WTO’s rule book, especially as they relate to subsidies,” he said.

EU officials are also keen to convince the Trump administration to embrace the WTO as a venue for fighting its trade battles rather than going it alone. Tuesday’s statement is due to call for “enhancing trilateral co-operation in the WTO”, according to one EU official.

The move comes amid a combative biennial meeting of ministers from the WTO’s 164 member countries in Buenos Aires. Many see the Trump administration’s assault on the institution as casting a dark cloud.

Addressing his fellow ministers on Monday, US trade representative Robert Lighthizer said the WTO faced “serious challenges” including “losing its essential focus on negotiation and becoming a litigation-centred organisation”. He called for the WTO to do more to focus on issues like chronic industrial overcapacity and the role of state-owned enterprises in distorting global trade.

He also complained about WTO rules that allow China and other major emerging economies special treatment that exempts them from certain requirements.

“If in the opinion of a vast majority of members playing by current WTO rules makes it harder to achieve economic growth, then clearly serious reflection is needed,” he said.

Mr Lighthizer did not mention a US bid to force change in a WTO dispute-settlement arm that it sees as too interventionist.

Because the US is now blocking the filling of vacancies on its appellate body as members’ terms run out, one of the main subjects of discussion on the sidelines in Buenos Aires has been what many fear is a US bid to dismantle the dispute system. Monday marked the final day of a Belgian member’s four-year term, leaving the appellate panel with just four of its seven judges in place.

In meetings with fellow ministers Mr Lighthizer has continued to lay out the US’s complaints about the dispute system. But he has not offered any potential solutions, officials say.
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https://www.ft.com/content/5f0aad90-deae-11e7-a8a4-0a1e63a52f9c

Europe Set to Award China `Holy Grail’ With Tariff-Rules Revamp

December 3, 2017

Bloomberg

By Jonathan Stearns

  • European industries face greater onus in winning import duties
  • Biggest change to EU trade regime to take effect in December

European industries from steel to solar are bracing for a new set of tariff rules that may make it harder to fend off low-cost imports from China and other foreign countries.

 Image result for china imports to europe, by ship, photos

European Union governments are due on Monday to rubber-stamp the biggest revamp of the bloc’s method for calculating duties aimed at countering below-cost — or “dumped” — imports. The move is a response to longstanding Chinese government demands for more favorable treatment while stopping short of saying those shipments are fairly priced.

The overhaul will end an EU presumption that Chinese exporters and those in nine other members of the World Trade Organization operate in non-market conditions. That approach, which has allowed for higher European anti-dumping duties, is being replaced by a more opaque procedure for determining whether imports unfairly undercut domestic producers.

“There’s going to be much more work for European industries to make their dumping cases,’’ said Laurent Ruessmann, a partner and trade expert in the Brussels office of law firm Fieldfisher LLP. “There’s a lot of discretion for EU trade authorities in the new system. The question is how that discretion is used and what the political influence will be.’’

 Image result for china imports to europe, by ship, photos

Political, Economic Rewards

The EU carrot to China comes as both seek to claim a global leadership role in trade amid U.S. President Donald Trump’s protectionist stance, which has shaken the post-World War II commercial order. The U.S. has taken a different tack from the EU, rejecting China’s claim of market-economy status and refusing to alter how it calculates anti-dumping duties.

Europe is offering political and economic rewards to Beijing by removing China from the European list of non-market-economy countries in dumping investigations. While being the EU’s No. 2 trade partner behind the U.S., China is grouped with the likes of Belarus and North Korea in lacking market-economy designation by Europe and faces more European anti-dumping duties than any other country.

To read more about trade tension between the U.S. and China, click here

Such EU levies cover billions of euros of Chinese exports such as reinforcing steel, solar panels, aluminum foil, bicycles, screws, paper, kitchenware and ironing boards, curbing competition for producers across the 28-nation bloc.

“China has coveted market-economy status as the ultimate recognition from the West,” said Hosuk Lee-Makiyama, director of the European Centre of International Political Economy in Brussels. “It’s their holy grail.”

European Protection

The EU has traditionally used other nations’ figures to calculate anti-dumping levies against China on the grounds that Chinese state intervention artificially lowers domestic prices and makes them an unreliable indicator of a good’s “normal value.” This practice, known as the analogue-country model, has resulted in higher EU duty rates against Chinese exporters and — by extension — more protection for European manufacturers.

China’s agreement on joining the WTO 16 years ago made it harder for the EU to justify using the analogue-country model against Chinese exporters after a specific provision expired in December 2016. To drive home the point, Beijing filed a complaint the same month against the EU at the Geneva-based global trade arbiter, hastening European deliberations over an overhaul of anti-dumping rules.

EU legislators negotiated a deal in October and the full European Parliament offered its endorsement the following month, leaving national governments to give their final approval on Dec. 4.

The legislation, due to be published on Dec. 18, features elements of compromise between free-trade governments in northern Europe allied with China and more protectionist member countries in the south.

‘An Elegant Solution’

“It’s quite an elegant solution,” said Lee-Makiyama. “The EU has found a near-impossible compromise between the demands of European industry that thinks China is the enemy and the bloc’s legal obligations under the WTO. There remains plenty of scope to defend manufacturers in Europe because, in a way, Europe is abolishing the diploma just as China graduates.”

To ease the impact of the new system on European manufacturers, the EU will have recourse to a special formula for calculating anti-dumping duties against countries whose markets are deemed to have “significant distortions’’ resulting from state intervention. Under the new rules, the EU will be able to construct the normal value of a good in an exporting country using undistorted costs.

In a sign of the balance that the new system strikes, the Chinese government is sending out skeptical signals about the EU changes.

The Ministry of Commerce in Beijing said in mid-November the notion of significant market distortions will cause “serious damage” to the WTO’s anti-dumping legal system. The ministry also said “China reserves its rights under the WTO dispute-settlement mechanism and will take the necessary measures to protect the rights of Chinese companies.”

https://www.bloomberg.com/news/articles/2017-12-03/europe-set-to-award-china-holy-grail-with-tariff-rules-revamp

U.S. Tax Overhaul Raises Alarms Among Foreign Executives — Stock-market highs worry foeigners

November 30, 2017

Excise and base-erosion taxes create a border-based system that would be difficult for multinationals to navigate

Tax overhaul proposals winding their way through Congress may look great for U.S. corporations. For foreign firms, not so much.

A lot will change between what is currently contained in separate drafts in the House and Senate and whatever ends up on President Donald Trump’s desk—if anything at all. But Republican senators and representatives are coalescing around the broad strokes of a plan that many expect will be a big tax boon to American business. Recent momentum on a deal has fueled successive days of stock-market highs.

The legislative proposals could slash American firms’ headline corporate tax, from 35% to 20%, though the Senate Wednesday considered a more modest reduction. The proposals also simplify rules governing tax provisions and write-offs that are expected to help dozens of industries, including big U.S. multinationals that do lots of cross-border trade and tech firms with piles of cash overseas.

All that is potentially good news for international companies that pay U.S. taxes, too. But a lot of the fine print included in the two bills is also raising alarm among foreign executives.

“I suspect that most foreign groups doing business in the U.S. will be negatively affected,” said Stef van Weeghel, global tax policy leader at accounting firm PricewaterhouseCoopers LLP.

For most foreign multinationals, the U.S. still represents one of the world’s biggest, most important markets—so tax hits there can have outsize impact on global profit. Here’s a rundown of the elements of the tax rewrite being watched most closely by foreign executives:

Excise Tax

The House version would impose an excise tax of as much as 20% on goods or services a foreign company sells in the U.S. via its local subsidiary. Companies would be able to choose to avoid the excise tax on their U.S. unit. But in return all income from U.S. sales would be taxed stateside, in addition to accruing tax, in some cases, in a company’s home jurisdiction.

The measures—if they make it into law—could conflict with bilateral tax agreements and contravene World Trade Organization rules, tax experts say.

Foreign auto makers could take a big hit, said Albert Liguori, a tax expert at law firm Alvarez & Marsal Taxand LLC. Some of that would be mitigated by all the new plants European and Asian firms have built in the U.S.

“It depends on how much import versus export they have,” he said. The German Association of the Automotive Industry notes its members have big plants in the U.S. “If the U.S. introduced import duties or other trade barriers, it would be shooting itself in the foot,” it said in a statement. The lobby group said it would wait until final legislation emerges before passing judgment on how it impacts car makers.

“Base Erosion”

In the Senate version, payments to foreign parents or affiliates could trigger a minimum tax of 10%.  Proponents say that would help raise money from foreign firms that the U.S. is giving away in other tax cuts, and it also helps make domestic suppliers more competitive, they say.

The excise and base-erosion taxes introduce a border-based taxation system that would be a big new navigational hazard for multinational companies. “No other country has something like that,” said Christian Kaeser, global head of tax at German conglomerate Siemens AG and chair of the International Chamber of Commerce Commission on Taxation.

Tax Deductions for U.S. Units

The Senate version includes language that would curb the tax deductions multinationals can now take on debt carried by their U.S. affiliates. That would water down a current incentive to load American units up with debt. U.S. companies wouldn’t face such a constraint on the tax deduction of interest payments.

Foreign Airlines

Sen. Johnny Isakson (R., Ga.) has proposed an amendment to the Senate version that could raise costs from some foreign airlines flying to the U.S. Airlines generally pay tax at home and aren’t subject to U.S. income tax even for their American activities. The amendment, if enacted, would eliminate that exclusion for foreign airlines whose own markets aren’t served by significant flights by U.S. carriers.

Abu Dhabi-based Etihad Airways said the proposed amendment “is widely agreed to be inappropriate under U.S. law and contrary to several international agreements.”

Repatriation Holiday

Both chambers propose a one-time tax break for U.S. companies to repatriate profits earned overseas. Currently, American firms have hoarded cash offshore, eager to avoid the high U.S. corporate tax they would incur if they brought it home. Apple Inc., for instance, has about $252 billion in cash abroad.

The House version proposes a one-time corporate tax rate of 14% for repatriated cash, while the Senate is proposing 10%. The tax would also apply if the cash is kept abroad.

While foreign firms aren’t directly hit by this, they are suddenly at a big—albeit temporary—competitive disadvantage to their American competitors, who will suddenly have unfettered access to an infusion of new funds at low tax rates.

Write to Robert Wall at robert.wall@wsj.com, Nina Trentmann at Nina.Trentmann@wsj.com and Natalia Drozdiak at natalia.drozdiak@wsj.com

U.S. Rejects China’s Bid for ‘Market Economy’ Status

November 30, 2017

Trump administration’s decision gives the U.S. wider discretion to impose higher duties on Chinese exports

WASHINGTON—The Trump administration has formally rejected China’s demand that it be treated as a “market economy” under global trading rules, a move likely to heighten tensions between the world’s two largest economies.

The U.S. submitted its decision to the World Trade Organization in Geneva in mid-November and made it public on Thursday. Trump aides have long signaled their stance on the issue, but the filing marks the first time the U.S. government has publicly declared its position and explained its reasoning.

The fight’s stakes are high. The trading partners of a country branded a “nonmarket economy” have wider discretion to impose higher duties on its exports on the theory that distortions from state intervention give its producers unfair advantages. Economists have estimated that the decisions by the U.S. and European Union to treat China as a nonmarket economy have cost Chinese producers billions of dollars in exports, with some of their goods facing tariffs well above 100%.

In a recent speech, Wang Hejun from China’s Ministry of Commerce said the continuing refusal by the U.S. to grant China market-economy status “undermines the seriousness and authority of multilateral rules.” He said Beijing “will take will take necessary measures to protect legitimate benefits of Chinese enterprises.”

The disputes pitting China against both the U.S. and the EU date to December. Beijing argued at the WTO that the 2001 agreement granting its WTO membership required other members automatically treat China as a market economy by the 15th anniversary of its joining the organization. The U.S., Europe, and others say their promise to grant China that status was contingent on Beijing implementing market liberalization measures that have yet to be carried out.

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  • China Economic Data Exceeds Estimates

China filed complaints late last year against both the U.S. and the EU with the WTO trade court demanding that the U.S. and EU grant it market status. The U.S. case has since stalled, but the complaint against Europe is moving forward toward hearings. What the U.S. revealed on Thursday was a brief supporting Europe in its case. That, officials say, shows that Washington will take a similar stance when its own case proceeds.

“The evidence is overwhelming that WTO members have not surrendered their longstanding rights…to reject prices or costs that are not determined under market economy conditions,” the U.S. brief concludes.

Under President Donald Trump’s “America First” economic policy, tensions have risen between the U.S. and various American trading partners over Mr. Trump’s vows to cancel existing trade accords and take more aggressive action to curb imports from all over the world, including from allies like Europe.

But in the battle over China at the WTO, the U.S., Europe, and others appear to be coordinating closely to present a united front against Beijing.

“We’ve been talking to the Europeans…there is a common understanding that we’ve reached,” said a senior U.S. official involved in preparing the filing. Such cooperation, he added “is really quite unusual, to have us all on the same side of this issue.”

Mr. Trump and his aides have over the past year been openly skeptical about the WTO and their views about its ability to govern the global trading system, particularly China. And they have said they see the market-economy cases as a litmus test for how they judge the body.

“This is without question the most serious litigation matter we have at the WTO right now,” Robert Lighthizer, Mr. Trump’s U.S. trade representative, told Congress in June. A China victory, he added, “would be cataclysmic for the WTO.”

—Yifan Xie in Shanghai contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com

https://www.wsj.com/articles/u-s-rejects-chinas-bid-for-market-economy-status-1512018002

EU Brexit chief preparing for ‘possible’ failure

November 12, 2017

AFP

© AFP/File / by Gina DOGGETT | EU Brexit chief Michel Barnier said it was “vital” for Britain to increase its offer on its exit bill

PARIS (AFP) – EU Brexit chief Michel Barnier said Sunday that he is making contingency plans for the “possible” failure of divorce talks with Britain, which he has given two weeks to reach preliminary agreement on key issues.

“It’s not my (preferred) option,” he told French weekly Le Journal du Dimanche (JDD). “But it’s a possibility. Everyone needs to plan for it, member states and businesses alike. We too are preparing for it technically.”

He recalled that without a deal on post-Brexit trade terms the EU and Britain would revert to World Trade Organization (WTO) tariffs, with trade ties “like those we have with China”.

On Friday Barnier gave Britain a two-week ultimatum to make concessions on a divorce agreement if it wants to unlock the next phase of talks in December.

He said it was “vital” for Britain to increase its offer on its exit bill — which a figure senior EU officials put at up to 60 billion euros ($70 billion) — to open up talks on a future trade deal.

– Fate of Northern Ireland –

EU leaders decided at their last summit in October that there was insufficient progress on the exit bill as well as two other main issues — Northern Ireland and the rights of three million Europeans living in Britain.

They said they hoped to open talks on future relations and a post-Brexit transition period at their next meeting on December 14-15, but officials have warned that could now slip to February or March.

The fate of the border between British-ruled Northern Ireland and the Republic of Ireland has thrown an unexpected spanner into the works.

British negotiator David Davis insisted that any Brexit deal cannot create a frontier between Northern Ireland and the rest of the United Kingdom.

But the EU called at talks in Brussels last week for Northern Ireland to effectively stay in a customs union with the bloc to prevent a hard border with Ireland.

The open border helped underpin the 1998 peace deal that ended decades of sectarian unrest.

“The tragic conflict between the Protestants and the Catholics was not that long ago,” Barnier, a former French foreign minister, told JDD. “I won’t do anything that could weaken” the 1998 accord.

If a deal is reached by Barnier’s December 1 deadline, the next phase of talks could open in January towards a “new treaty, which would take at least two years to take effect,” he said.

Legal Intricacies Complicate May’s Two-Year Brexit Transition Period

October 12, 2017

Need to quickly devise sweeping agreements suggests it might be easier to extend the breakup deadline beyond 2019

It cannot be emphasized enough that the European Union is not really a political project so much as a legal one.

Of course, the EU tries to find political solutions to its members states’ common political problems. But those solutions have to comply with the EU’s legal order, which is based on the EU treaties. Sometimes, the only solution is to change the treaties themselves—but that process is complicated, and even then any changes need to be consistent with the rest of the legal order. That can sometimes make it impossible to find a political solution even when the solution may seem obvious or the consequences of failing to do so stark. Just ask David Cameron, whose failure to secure significant curbs on the free movement of EU citizens is blamed by some for Brexit.

Now Mr. Cameron’s successor is making her own demands for a political solution to the problems caused by Brexit. Prime Minister Theresa May wants a transition deal—what she calls an “implementation period”—to enable the U.K. to continue to trade with the EU “on current terms” for around two years after the U.K. quits the EU in March 2019 while the UK’s new trading relationship with the EU is agreed to and arrangements put in place. The EU also needs time to prepare for the change. Yet devising a legally watertight way for the U.K. to continue to trade with the EU “on current terms” while no longer an EU member is likely to prove fiendishly difficult—some would argue impossible. Both British and EU officials acknowledge that they are at an early stage of grappling with the complexities.

The first challenge is that to preserve frictionless trade, the transition deal will need to find a way to replicate the UK’s existing commercial relationship with the EU in its entirety. That means that the U.K. will not only need to negotiate a temporary customs union with the EU that matches the existing customs union, but also a new regulatory relationship that allows full mutual recognition of testing and enforcement processes across all sectors, says Peter Holmes, reader in economics at the University of Sussex. The moment exceptions are introduced, there will need to be border checks, whether for customs or regulatory purposes. That could be tricky because there are some sectors where the U.K. may want to exempt itself from EU rules immediately. For example, environment minister Michael Gove says he wants to take back control of U.K. fisheries to avoid remaining subject to annual EU quotas set by Brussels. Yet if fisheries are excluded, “then every lorry will face random risk-based checks to see if there is a fish in it,” says Mr. Holmes.

A second issue concerns the 40 free trade agreements the EU has with third countries. These also need to be replicated in their entirety to avoid new barriers to trade. (Again any divergence from the EU’s commercial policy will lead to new trade barriers.) Yet rolling over these agreements, as the U.K. says it wants to do, isn’t straightforward. The problem is that once the U.K. itself becomes a third country, British goods containing substantial EU components may no longer count as British under the complicated rules of origin that govern world trade—and vice versa.

To change these rules to enable pan-European supply chains to remain in tact will require a three-way negotiation involving the U.K., EU and each of the countries with which the EU now has an free-trade agreement. As the U.K. is already discovering after running into opposition from the U.S., New Zealand and others over a deal reached with the EU at the World Trade Organization to divide up current EU agricultural quotas, other countries will robustly defend their interests.

A third issue is that whatever the EU offers to the U.K. by way of a temporary treaty also risks creating a precedent. In the British public debate, there is an assumption that the EU wants to punish the U.K. to deter others from leaving. But the EU is equally concerned that whatever it offers the U.K. doesn’t lead to demands from other non-EU countries for similar terms. The EU-Korea trade agreement contains a most-favored-nation clause that obliges each side to offer each other the same terms on access to their services markets that they offer in future trade deals to other third countries. A transition deal that allowed the U.K. full access to its financial-services market could become the basis for a demand for similar treatment from Korea.

The reality is that the only legally watertight transition deal that is guaranteed to enable trade to continue on “current terms” is an agreement to extend the Article 50 deadline. This can be done by unanimous decision of the member states. Of course, extending the UK’s EU membership beyond 2019 would be politically fatal for the current government, though it’s possible a majority would support it in parliament. It would also be politically toxic in the EU: There is a growing consensus that this is a bad marriage that just needs to end, says one senior EU diplomat. And extending Article 50 raises serious practical issues, including whether the U.K. would participate in EU parliamentary elections in 2019 and the next EU budget.

But those obstacles may yet prove easier to overcome than devising a way to replicate in full the EU customs union, the single market and 40 free-trade agreements from scratch in one year.

China Delays Deadline for Implementing Food Import Rules After Industry Pushback

September 26, 2017
 

Image result for A salesman arranges milk products imported from Australia at a supermarket inside IAPM mall in Shanghai, China, August 15, 2015. REUTERS/Aly Song/File Photo

FILE PHOTO: A salesman arranges milk products imported from Australia at a supermarket inside IAPM mall in Shanghai, China, August 15, 2015. REUTERS/Aly Song/File Photo

BEIJING — China plans to delay a deadline for implementing new food import regulations by two years until October 2019, a senior EU official said on Tuesday, following a lobbying effort by Europe and the United States amid concerns about disruption to trade.

The extension comes just days before the new rules, which are part of a drive by China to boost oversight of its sprawling food supply chain, were due to come into force.

Jerome Lepeintre, minister counsellor for health and food safety at the European Union delegation in Beijing, said he received official documents on Monday night confirming the decision to delay had been logged with the World Trade Organization (WTO), as required by global trade rules.

Lepeintre said the move was “very positive” and would give exporters time to comply with the regulations, which were announced in April 2016 and require all food imports to carry health certificates, even if the product is deemed low-risk.

European and U.S. government and trade officials have warned the rules would hamper billions of dollars of shipments to the world’s No. 2 economy of everything from pasta to coffee and biscuits.

China asked for the change to be circulated by the WTO in a Sept. 22 communication to the organisation, a document published on WTO’s website showed.

“The General Administration of Quality Supervision, Inspection and Quarantine of China is currently studying the comments from relevant countries/regions,” said the notification.

“According to the comments and application received, we hereby decide to provide a transitional period of 2 years: from 1 October 2017 to 30 September 2019,” added the agency, which oversees the safety of all imports into China.

AQSIQ did not respond to a fax requesting comment from Reuters.

China has delayed enforcing other tough new trade regulations this year, including rules on the cross-border retail market and cyber security, after industry pushback.

(Reporting by Dominique Patton; additional reporting by Tony Munroe; Editing by Richard Pullin)

China Vows to Resist U.S. Trade Probe by ‘All Means Necessary’

August 25, 2017

 China's imports from North Korea slowed in July while its exports to the sanctions-hit country dwindled after surging in recent months, according to official Chinese statistics.

Photo AFP/ Nicolas Asfouri

“We are strongly discontented with this unilateralism and protectionism, and will take all means necessary to resolutely defend the legitimate rights and interests of the Chinese side and Chinese enterprises,” trade ministry spokesman Gao Feng said at a news conference Thursday, according to the Washington Post.

China has been pushing back against the U.S. this week after the Trump administration said it would launch an investigation of Chinese theft of intellectual property. That investigation could lead to trade sanctions against China.

On Monday, the Chinese Commerce Ministry said the trade investigation was “irresponsible” and claimed it ignored the rules of the World Trade Organization.

The U.S. Treasury imposed sanctions Tuesday on ten companies and six people from China and Russia for allegedly conducting business with North Korea in ways that helped the country’s nuclear weapons strategy. China responded by demanding that the U.S. immediately withdraw the sanctions. The Global Times, backed by the Chinese Communist Party, said the U.S. will “pay for the unjust ban on Chinese firms” and accused the U.S. of violating international law. The U.S. actions, the Global Times said, were an attempt to “tarnish the international image of China.”

http://www.breitbart.com/economics/2017/08/24/china-vows-resist-u-s-trade-probe-all-means-necessary/