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Home Articles posted by David A. Gantz

The Scorecard of the Phase One Trade Agreement

Published on February 14, 2020        Author: , and

 

The United States President and the Chinese Vice Prime Minister signed a deal dubbed as the “Phase One Trade Agreement” (“the Agreement”) on January 15, 2020. The Agreement withholds further escalation of the on-and-off trade war, which has dragged on for over 18 months between the US and China. The Agreement will likely lay a foundation for the handling of managing the fierce competition between the U.S. and China moving forward, at least for the next several years. But as we discuss below, key issues such as Chinese government subsidies, disagreements over Huawei’s selling of 5G telecommunications equipment and U.S. export controls on high-tech goods were left unaddressed.

The 96-page Agreement contains eight chapters, covering intellectual property protection, technology transfer, trade in food and agriculture products, financial services, macroeconomic policies and currency, expanding trade, dispute resolution, and final provisions. The Agreement primarily focuses on addressing certain Chinese behaviors that have long been concerns for the U.S. and corporate America and aims at lifting the standards of conduct closer to those followed (at least in theory) by the United States. One of the most noticeable features of this Agreement is the obligations and structural changes China agrees to undertake: The phrase “China shall” appears 97 times in the text whereas the phrase “[t]he United States shall” only appears five times, two of which relate to promises undertaken by both China and the U.S. In certain areas, e.g., pharmaceutical-related IP rights and patent rights more broadly, China’s undertakings exceed those the U.S. secured from partners in other commercial treaties such as the United States-Mexico-Canada Free Trade Agreement (“USMCA”).

Hence the success of this agreement largely depends upon its implementation and enforcement by China, which has already generated doubts in several areas. Moreover, concerns have been raised over the Agreement’s consistency with the World Trade Organization (“WTO”). Some questions also arise regarding what exactly has been agreed upon given the vagueness of some of the language, particularly regarding China’s commitments to import more U.S. goods and services. Read the rest of this entry…

Filed under: WTO
 
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The Scorecard of the USMCA Protocol of Amendment

Published on December 23, 2019        Author:  and

 

 

The U.S. House of Representatives approved December 19 the United States-Mexico-Canada Agreement (USMCA) by an overwhelming margin of 385-41. The Senate is expected to do the same in mid-January. As everyone knows by now, USMCA is a revision and replacement for the 25-year-old North American Free Trade Agreement (NAFTA), a regional trade agreement that has generated over $1.3 billion in annual goods and services trade among the three nations. USMCA mostly follows NAFTA but makes significant changes or additions inter aliain automotive rules of origin, investor-state dispute settlement, intellectual property protection, digital trade, “sunset” provisions and protection of labor rights and the environment.

Whether USMCA overall is better or worse overall than the original NAFTA will not be fully clear until USMCA has been in force for some time, and different stakeholders (e.g., automotive producers versus labor unions, the United States v. Mexico) may vary in their assessments. What is perhaps most significant for the three NAFTA Parties and their stakeholders is that the USMCA assures that duty-free, quota-free trade within North America will continue for at least 16 years, more than long enough to outlast the Trump Administration. However, tighter automotive rules of origin and other regional content requirements may adversely affect industrial production, especially in the vehicle sector. Other changes affecting trade in goods are not highly significant, and agricultural trade is largely unaffected except for a modest opening for the United States of the Canadian milk solids market (about 3.6% of demand is promised for U.S. exports). Investor-state dispute settlement is reduced in scope with regard to U.S.-Mexico investment and eliminated entirely for U.S.-Canada investment disputes (Mexico and Canada remain part of the Transpacific Partnership Agreement (TPP), which included ISDS).

The USMCA would not have been approved by the House without a series of significant modifications. These changes were negotiated between the Trump Administration’s U.S. Trade Representative Robert Lighthizer, House leadership in the persons of Speaker Nancy Pelosi and Ways and Means Committee Chairman Richard Neal and, in the early weeks of December, Mexican Undersecretary for Foreign Affairs Jesus Seade. The USMCA Protocol of Amendment signed December 10 is the focus of this post. Read the rest of this entry…