tariffs

The Devilishly Hard Job of Defining an Environmental Good

The Devilishly Hard Job of Defining an Environmental Good

What explains this apparent paradox of accelerating focus on taking steps to tackle climate change with limited forward progress in crafting trade policies that are responsive to climate-friendly objectives?  The Asian Trade Centre’s newest Policy Brief looks in detail at the difficulties of defining environmental goods.  [This Talking Trade post merely highlights some of the issues explored in the Brief—be sure to read the whole thing!] Policymakers in search of answers zeroed in on challenges in moving environmentally-friendly products across borders.  They were able to identify one specific issue: potentially high levels of tariffs applied to certain goods at the borders.  These tariffs were acting as a brake, impeding the flow of goods and driving up costs. Hence, one early and sensible idea was to consider how to reduce tariffs on environmentally friendly goods.  If tariffs are leading to lower utilization of climate-friendly products, the reduction or elimination of tariffs on these products should lead to their greater use. APEC members intended to have signatories agree to reduce tariffs on listed products to less than five percent within three years.  There would be “real world” consequences to inclusion/exclusion from APEC’s list of environmental goods (EGs).  Items on the list would have tariffs reduced or eliminated while those not included would not. Getting to the final set of 54 EG products, released in 2012, was not an easy process.  Understanding why it was so hard highlights the difficulties that are likely to affect a range of policy responses ahead.

CPTPP: Moving to Entry Into Force for the UK

CPTPP: Moving to Entry Into Force for the UK

While the UK signature on the concluded accession protocol is to be welcomed, it does not mean that firms should expect to receive benefits from CPTPP expansion just yet.  First, the agreement has pass domestic UK approval procedures, which includes Parliamentary votes.  The protocol will also need to be approved by existing CPTPP members, using whatever domestic procedures are in place for managing this process.  In some members, domestic approvals might also require Parliamentary approval. The UK accession protocol will only enter into force (EIF) once the UK and at least 6 existing members have completed their internal processes and 60 days pass.  Members appear to be targeting approval within 15 months. Of course, these procedures could be shorter or longer than anticipated.  When the original CPTPP was moving towards ratification and approval, members were targeting a start date of January 1, 2019.  However, timing can be difficult to get quite right.  Several members wanted to be among the first 6 members to ratify the deal.  The Vietnamese were working hard to hit the January 1 deadline.  Several existing members moved slightly faster than anticipated and the 6th instrument of ratification was deposited in time to launch entry into force on December 30, 2018, instead of January 1.  This meant that the whole agreement came into force sooner than expected, with the first round of tariff cuts taking place on December 30 and the second “year” of tariff cuts starting just three days later on January 1.[1] The Vietnamese had an unexpected delay, which meant CPTPP did not come into force for Vietnam until January 14, 2019, when it joined Australia, Canada, Japan, Mexico, New Zealand, and Singapore.  Peru was not a full member until September 19, 2021, Malaysia on November 29, 2022, Chile on February 20, 2023, and Brunei finally joined just last week, on July 12, 2023.[2] [Photo courtesy Photo: RNZ / Giles Dexter]

Biden’s Trade Policy: Modern American Industrial Strategy

Biden’s Trade Policy: Modern American Industrial Strategy

One way to interpret much of Sullivan’s speech is that it attempts to make lemonade out of lemons.  Given that the White House has had little cooperation with Congress, much of the economic agenda outlined by Sullivan will have to be enacted through Executive Orders.  Having foreign policy driven by this process severely limits the scope of the possible.  For example, while Sullivan rails in the speech about a focus on tariffs in the past, this is also an area of Congressional responsibility.  Unless and until Congress is prepared to address tariffs, the topic cannot be added to any negotiated trade agenda.  Declaring that tariffs are the root of all evil is a handy way of avoiding doing anything about them. Something similar is likely for a wide range of potential foreign economic topics which require or are enhanced by Congressional support.  Absent endorsement from Congress, it is necessary to come up with a complicated and complex agenda that allows the US to engage on economic issues with potential friends in Asia and elsewhere. Even within topics, the scope of commitments can be constrained by self-imposed negotiating limits on potential American actions.  This includes, as Talking Trade noted earlier, funding to support an IPEF or broader trade agenda, unless resources have been allocated elsewhere and can be readily redeployed.

The Year Ahead: 2023 for Asian Trade

The Year Ahead: 2023 for Asian Trade

It’s that time of year again—ready to gaze into a crystal ball and guess the 2023 future of trade in Asia?  The overall picture looks mixed, with continuing disruptions which may be offset by new opportunities. 

Continuing Covid impact: while much of the world (and probably all Talking Trade readers) seem eager to put the Covid-19 pandemic in the rear-view mirror, the virus is likely to continue to affect trade in Asia for much of 2023.  Disruptions will be caused by individuals that are continuing to get sick and are unable to report for work.  Fluctuating staffing levels can make it difficult for companies to deliver goods and services on time as intended.  These delays will continue to reverberate across the region and create continuing headaches for supply chain managers, particularly in the first half of the year.  As with the earlier waves of Covid, government reactions and responses to potentially rising infection levels are also important.  While complete border shutdowns may be a thing of the past, governments have shown a new willingness to make rapid adjustments to policies that can catch firms by surprise.  

Inflation and recession worries:  The jury remains out on whether inflationary pressures are going to sharply or modestly moderate in the near term, but there is a growing consensus that several major economies are still poised for recession.  Given the importance of key markets in the US and Europe to most Asian economies, even a mild recession in either can be quite damaging.  Inflation and rising interest rates are also posing new challenges to domestic firms and consumers. 

Uncertain supply and demand:  Firms in Asia are also grappling with continuing uncertainty about the supply and demand for goods and services in the near term.  Many of the economic patterns developed during covid, such as working from home or extensive shopping online, will change in 2023.  But the “new normal” is also unlikely to snap back to pre-covid times.  This leaves firms and supply chain managers facing a set of forecasts that are probably obsolete and few clear answers on what sorts of supply and demand pressures might be most relevant now.  High levels of uncertainty make it all too easy for firms to over or undershoot expectations, leading to mountains of unsold inventory, staffing levels which are not right sized, or an inability to deliver at volumes.

The Launch of RCEP

The Launch of RCEP

Apart from tariff benefits, RCEP members (and even non-members) can benefit from more streamlined customs procedures to facilitate trade. Building on existing ASEAN+1 agreements, RCEP introduces additional guidelines on the issue of advance rulings and on the release of goods at customs that improves certainty and reduces likelihood of shipment delays at the customs. The Chapter on Customs Procedures and Trade Facilitation also includes a scheme for authorised operators to benefit from reduced paperwork requirements, faster clearance of goods, and deferred payments or clearance at the premises of the authorized provider. While the assessment of benefits of FTAs are often fixated on tariff reductions for goods, it is equally important to recognize services and investment opportunities that RCEP offers to services providers and investors in Asia. RCEP provides further liberalization to services sectors such as legal services, accounting, architecture, computer services, wholesale trade and insurance, that can go well beyond existing ASEAN+1 agreements. This includes better market access, reduced limitations, and terms and conditions for the provision of services or the establishment of commercial presence in RCEP markets. For most service sectors, RCEP allows foreign service providers to deliver services across the border without requiring a local presence in the domestic market.