In this edition of Trade Talking Points, we provide updates on the UK’s consultation for a carbon border adjustment mechanism, the EU’s Free Trade Agreements, US trade remedies, the latest WTO meetings and a new Chinese dispute against the US over electric vehicles subsidies.
UK carbon border adjustment mechanism (CBAM) consultation
The UK Government has launched a consultation on the scope, design and administration of the future UK CBAM regime, which is due to come into force from 1 January 2027. Businesses have until 13 June 2024 to respond. The main areas of the consultation include:
What the CBAM will apply to: this includes the proposed sectoral and product scope, and exemptions. The UK Government has included a list of proposed HS codes covering aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel
How the CBAM liability will be calculated: the UK Government has invited comments on principles they have set out for the calculation of embodied emissions and consideration of the price of carbon paid overseas
How the CBAM will operate: addressing the administration, payment and compliance of the UK CBAM regime
Businesses wishing to discuss the above developments in more detail or requiring any assistance in responding to the consultation should get in touch with George Riddell or their regular EY point of contact.
Updates on the EU’s Free Trade Agreements (FTA)
The EU’s FTA agenda has seen several significant updates including:
Chile: The EU has concluded the internal ratification process of the Interim Agreement on Trade (ITA) with Chile, paving the way for its entry into force, while the broader Advanced Framework Agreement awaits ratification by the individual EU member states. The ITA focuses on trade and investment liberalisation and aims to strengthen political and economic relations between the jurisdictions. EU companies will benefit from the removal of 99.9% of Chilean tariffs, improved access to the Chile’s government procurement opportunities and equal treatment for investors.
New Zealand: Following the completion of New Zealand’s ratification process, the EU-New Zealand FTA is set to enter into force on 1 May 2024.
Philippines: The EU and the Philippines announced the resumption of FTA negotiations on 25 March, aiming to put sustainability at the centre, in line with the EU’s ambition to conclude greener deals. The EU is seeking a comprehensive FTA including ambitious market access commitments for goods, services, investment and government procurement, and an enforceable sustainable development chapter, while removing barriers to digital trade and trade in energy and raw materials. A first round of resumed talks is expected later this year.
Switzerland: On 12 March, the Council of the EU authorised the Commission to negotiate a broad package of measures with Switzerland as the basis for future EU-Switzerland relations, and further approved the corresponding directives. The Commission will now be able to engage in formal negotiations with Switzerland on this package of measures. Negotiations are expected to commence in the coming weeks.
Canada: On 21 March, the Bill on the economic and trade aspects of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) were rejected by a large majority of the French Senate. While the agreement has provisionally been in force since 2017, approval of all 27 EU member states is required for CETA to be fully ratified for the investment-related aspects of CETA to enter into force.
Businesses will shortly be able to take advantage of the benefits and opportunities the EU-Chile ITA and the EU-New Zealand deal.
US trade remedies
On 25 March 2024, the US Commerce Department announced updates to its trade remedies regulations on Anti-Dumping and Countervailing Duties. The final regulations were announced following the Commerce publication of proposed regulatory changes in the Federal Register in May 2023, and the evaluation of subsequent stakeholder comments. The updated regulations, taking effect on 24 April, include modifications to:
Strengthen the Commerce Department’s ability to counter transnational subsidies
Address additional market distortions
Include measures to address labour, environmental, human rights or intellectual property protection concerns of US producers
How the regulatory amendment will be reflected in the US trade remedy policy and operational approach to investigations is yet to be determined. Businesses trading with goods frequently subject to remedies, e.g. steel, aluminium, products produced thereof, or technology enabled hardware, should consider how a potential increase in trade remedy related US tariffs could impact their operations and supply chains.
Updates on the WTO
At the formal meeting of the WTO’s General Council on 21 March 2024, WTO Director General Ngozi Okonjo-Iweala urged Members to continue work on the long list of issues which were left unfinished at MC13 including on agriculture, WTO dispute settlement reform, fisheries subsidies, e-commerce work programme and development.
Following MC13, during a meeting of the WTO Committee on Technical Barriers to Trade (TBT) on 13-15 March 2024, WTO members adopted guidelines to support regulators in the choice and design of conformity assessment procedures, which help determine whether products comply with relevant technical regulations or standards. Members further agreed guidelines to follow when notifying of any measures put in place to implement the TBT Agreement.
US-China electric vehicles WTO dispute
On 27 March, China requested dispute consultations with the US concerning tax credits provided under the Inflation Reduction Act. The concerned tax credits aim to promote the production of electric vehicles and renewable energy in the US. China claims that the tax credits led to a breach of the US commitment to national treatment by discriminating against goods of Chinese origin, thus favouring domestic over imported products. The US Trade Representative Katherine Tai responded to say that the US Government is “carefully reviewing” the consultation request but that the US will “continue to work with allies and partners to address the PRC’s unfair, non-market policies and practices.”
We also publish the following UK tax newsletters which can be subscribed to below: EY VAT News for indirect tax news, Midweek Tax News for corporate tax news and People Advisory Services Weekly News Round Up for employment, reward and mobility news.
If you would like to discuss any of the articles in this week's edition ofTrade Talking Points, please contact the individuals listed below, or your usual EY contact. Sally Jones (+44 20 7951 7728) George Riddell(+44 20 7951 9741) Margarethe Taucher(+44 20 7783 0232)
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