13 December 2024 Trade Talking Points | Latest insights from EY's Trade Strategy team (December 2024)
The European Union's new executive, led by European Commission President Ursula von der Leyen, took office on 1 December 2024 with a focus on improving European competitiveness. The Commission reportedly plans to present a Competitiveness Compact on 15 January 2025, with plans to boost EU competitiveness and cut foreign dependencies in follow up to the Draghi report issued in September 2024. In February, the Commission will also issue a Clean Industrial Deal to simplify regulations and boost investment in sustainable energy supplies and raw materials to keep European industries competitive. Maroš Šefcovic has been appointed Commissioner for Trade, with responsibility expanded to cover Economic Security and tasked with implementing a free and fair-trade policy that enables Europe to achieve its competitiveness, security and sustainability goals. He will lead the work on the European Green Deal and a Clean Industrial Plan. On 6 December 2024, the EU and the four of the MERCOSUR countries — Argentina, Brazil, Paraguay and Uruguay — finalized a partnership agreement, following decades of negotiations. The trade agreement will remove more than 90% of tariffs on goods exchanged between the two blocs, allowing EU exporters to save more than €4b in tariffs per annum. It is further expected to simplify customs procedures, facilitate exports, allow EU firms to bid for public contracts on equal terms with MERCOSUR companies, and provide exclusive preferential access to some critical raw materials and green goods. Along with tariff reduction, the trade parties have claimed that the deal aims to promote joint values, such as increased sustainable development and environmental protection, while upholding high food safety standards. Although the deal has been agreed to in principle, it must now undergo a legal review and translation. Once this has been completed it will be voted on by the Council of the EU and the European Parliament. The MERCOSUR countries must ratify the agreement through their respective legislative processes. Businesses should review the agreement and evaluate their supply chains and distribution channels to identify new market opportunities across agreement partners. Businesses should also consider leveraging tariff reductions and revising relevant pricing strategies to improve their competitiveness across these markets. EU's General Product Safety Regulation to replace General Product Safety and Food Imitating Product Directives From 13 December 2024, the EU's General Product Safety Regulation (GPSR) will replace both the current General Product Safety Directive and Food Imitating Product Directive and will apply directly in Northern Ireland. The GPSR applies to non-food products across sales channels and has been in force since June 2023, becoming a new key instrument in the EU's legal framework for product safety. The aim of the Regulation is to ensure products placed into circulation in the EU's Single Market are safe. It places considerably stricter requirements and expanded obligations on manufacturers, importers and distributors, while facilitating enforcement and market surveillance. Key requirements for producers and traders include maintaining detailed technical documentation, ensuring clear product labeling and promptly notifying authorities of any safety risks for any products placed on the Union market. For example, manufacturers must conduct risk assessments and keep records for 10 years, while online marketplaces must designate contact points for safety issues and comply with removal orders for dangerous products within three days. Businesses selling to the EU must designate a representative located in the EU who will be a point of contact for customers and liaise with regulatory bodies. Businesses placing consumer products on the Union market should identify the extent to which their goods are within scope of the GPSR and the specific obligations they must meet to ensure compliance. The first agreement under the US-Taiwan 21st Century Trade Initiative took effect on 10 December 2024. The agreement was initially signed on 1 June 2023 by representatives of the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States and has now undergone the required procedural steps to enter into force. The deal includes commitments on several important areas, such as fighting corruption, good regulatory practices, regulating domestic services, customs administration and trade facilitation, and supporting small and medium-sized enterprises. Negotiations for a second agreement between the US and Taiwan covering additional trade areas, including labor, environment and agriculture, are ongoing. On 2 December 2024, the US Department of Commerce's Bureau of Industry and Security (BIS) released a package of rules to reinforce export controls on China regarding advanced semiconductors and semiconductor manufacturing equipment. The new controls include restrictions on equipment and software, High-Bandwidth Memory (HBM), and the addition of 140 Chinese companies to the Entity List, along with modifications to 14 others. In response, China has put in place export bans on shipments of key materials to the US, relating to minerals and metals integral to certain dual-use goods. These materials include gallium, germanium, antimony and superhard materials. Additionally, stricter export controls were imposed on items related to graphite — used to build semiconductors, batteries, advanced electronics and solar panels. A range of considerable developments regarding the UK and the US trade remedies landscapes have been announced. In the UK, the Trade Remedies Authority (TRA) has announced the initiation of a transition review into countervailing measures on biodiesel from Indonesia. Additionally, an amendment to the UK tax authority's (His Majesty's Revenue and Customs or HMRC) customs rules announced on 3 December 2024 enables HMRC to repay import duty amounts to businesses where this is appropriate following a TRA trade remedy review.
Businesses trading with or processing goods affected by trade remedy investigations should assess their supply chains and exposure to potential remedy measures. Impacted traders should engage with relevant authorities in ongoing investigations and develop mitigation responses to arising trade risks.
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