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July 18, 2024 Trade Talking Points | Latest insights from EY's Trade Strategy team (June 2024)
Executive summary This edition of Trade Talking Points includes updates regarding:
European Commission announces duties on Chinese battery electric vehicles Following the European Commission's investigation into government subsidies provided by China to its electric vehicle (EV) manufacturers, and bilateral consultations, the EU has published the provisional duties on imports of Chinese EVs. As of Friday, 5 July 2024, the EU has implemented duties of up to 37.6%. Since June, the duties have been revised slightly downwards specific duties raging between 17.4% and 37.6%. Companies that did not cooperate with the EU's investigation will also be subject to a 37.6% duty, while those that cooperated will face a 20.8% duty. EU Member States have until 2 November 2024 to vote on whether to make the duties final. Canada's plans tariffs for Chinese electric vehicles Canada has announced that it will launch a 30-day consultation from 2 July 2024 on its response to what it terms "unfair trade practices" to prevent trade diversion resulting from recent action taken by the United States and European Union. The consultations will seek views on potential actions, including a surtax under section 53 of the Canadian Customs Tariff and possible additional measures, such as adjustments to the federal Incentives for Zero-Emission Vehicles (iZEV) program and investment restrictions. The consultation will also seek comments on cyber and data security concerns. EU-Australia Critical Minerals Memorandum of Understanding On 28 May 2024, the EU and Australia signed a Memorandum of Understanding (MoU) for a bilateral partnership on cooperation in critical and strategic minerals. The partnership aims to diversify the EU's supply of materials required for a transition to a greener and digital economy, and to develop Australia's critical minerals industry. The entire critical minerals value chain is covered by the partnership, from extraction to waste processing. The intent of the MoU is to improve the integration of Australia's and the EU's sustainable raw materials value chains, increase cooperation on research and innovation, and adhere to high environmental, social and governance (ESG) standards. A roadmap is set to be released detailing the tangible actions to be taken to put the Strategic Partnership in place. The EU and Australia are currently negotiating a free trade agreement. US and EU trade relations with Kenya Kenya's President Ruto visited President Biden in the US on 23 May 2024. The leaders released a joint statement reinforcing their commitment to bolster their bilateral relationship, including a commitment to conclude the US-Kenya Strategic Trade and Investment Partnership (STIP) by the end of 2024. Negotiations under the STIP are ongoing — the latest negotiating round was held from 3-7 June 2024, where the US and Kenya exchanged views on the texts concerning agriculture, trade facilitation, regulatory best practices, workers' rights and more. Several new joint initiatives between the US and Kenya have also been announced, such as the bilateral Semiconductor and Technology Partnership, allowing Kenya access to funding from the US CHIPS Act, making it the first African country to be eligible. Separately, on 30 May 2024, the Council of the EU adopted a decision on the conclusion of the EU-Kenya Economic Partnership Agreement (EPA). This was the final step required to allow implementation of the EPA. Upon entry into force, the agreement will enable all exports from Kenya to benefit from duty-free and quota-free access to the EU market, and the Kenyan market will gradually be opened up to imports from the EU. The agreement also includes provisions on trade and sustainable development, including environmental protection and a dispute resolution mechanism, comprising the most ambitious economic partnership agreement that the EU will have with a developing country with regard to sustainability provisions. The EPA will enter into force on the first day of the second month following the date on which the EU and Kenya notify each other of the completion of their respective domestic procedures. IPEF Ministerial meeting The 14 Indo-Pacific Economic Framework (IPEF) partners met at the IPEF Ministerial meeting on 6 June 2024 in Singapore, and signed the Clean Economy Agreement, the Fair Economy Agreement, and the overarching Agreement on IPEF, all of which were substantially concluded in November 2023. IPEF Ministers will continue to assess further progress and concrete outcomes of these three IPEF agreements at the next meeting, which will be held virtually in September 2024. IPEF partners also advanced progress on the Supply Chain Agreement, which entered into force in February 2024, and welcomed the work that has been undertaken to operationalize the agreement. This includes identifying the IPEF Supply Chain Agreement's Supply Chain Council terms of reference and candidates for chairs and senior government officials of the Supply Chain Council. The IPEF Clean Economy Investor Forum was launched on 6 June 2024, where IPEF partners announced US$23b of projects to accelerate the development of sustainable infrastructure in IPEF economies. G7's Leaders Summit The G7 Leaders met in Italy on 13-14 June 2024 and issued the G7 Apulia Leaders' Communique. On trade, the Leaders focused on China's policies and practices and what they deem to be industrial overcapacity, and they expressed concerns about the impact on their domestic economies, saying that they recognize the importance of China in global trade. They are committed to advancing free and fair trade, a level playing field, and balanced economic relations, while updating and strengthening the multilateral rule-based trading system with the World Trade Organization (WTO) at its core. However, they express concerns about China's non-market policies and practices that are leading to global spillovers, market distortions and overcapacity in a growing range of sectors, undermining our workers, industries, and economic resilience and security. They also covered building new partnerships with African countries, strengthening cooperation on export controls, reforming the WTO and building resilient supply chains. OECD services report The OECD has published a new report entitled Revitalising services trade for global growth. The report examines 10 years of evidence from the OECD's Services Trade Restrictiveness Index and finds that barriers to services trade remain high, particularly for digitally enabled services, which saw barriers rise by 25% between 2014 and 2023. Underlying the findings is a call for governments around the world to reengage with services trade reform and bring down barriers, which the OECD estimates could bring annual trade cost savings in the range of US$1t. US supply chain resilience On 14 June 2024, President Biden issued an Executive Order ordering the White House Council on Supply Chain Resilience to conduct a quadrennial supply chain review of industries critical to national or economic security, including the processes in place to monitor supply chains and the timeliness of the associated data. The review is also set to look at federal incentives and procurement practices as well as develop a strategic plan for international engagement.
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