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Europe

UK-EU trade talks begin this week as officials race to seal a Brexit deal

EU and U.K. officials are about to start what’s meant to be the final round of Brexit trade negotiations before a self-imposed deadline of Oct. 15. Talks have been stalled over competition rules and fishing quotas for months now, but British officials have signaled there may have been some “positive” developments in the last few days.

“The question is really whether or not they can come up with some agreement on (a) level playing field,” Kallum Pickering, a chief U.K. economist at Berenberg, told CNBC’s “Squawk Box Europe.”

“I don’t think a deal is going to be lost on fisheries,” he added.

The U.K. and the EU have been working toward new trade arrangements since March after the former exited the bloc in January. However, Britain stated that talks would only run until December — after which the current zero-tariff regime will come to an end.

In order to get parliamentary approval for any new trade regime before that deadline, both sides have said they would need to seal a deal in October. The Internal Market Bill — the legislation that would grant powers to any U.K. government to ignore what’s already been agreed with the EU on state aid — will move to the House of Lords Wednesday. The upper chamber in the U.K. Parliament could ask for changes to the bill in a way that, if approved, could overcome the standoff with Brussels.Michael Gove, a member of the U.K. government, is meeting European officials in Brussels at 12 p.m. local time Monday, to discuss where this controversial legislation stands.The EU has made it clear that it will not accept the Bill in its current form for breaching laws that both sides of the English Channel signed earlier this year.France’s Europe Affairs Minister Clement Beaune said over the weekend the chances of a trade deal stand “slightly” above 50%.

[CNBC]

European Council president reaffirms sanctions relief on Iran to continue

European Council President Charles Michel on Friday said that sanctions relief under the Iran nuclear deal would continue to be effective, days after Washington’s unilateral claim that UN sanctions against Tehran had been restored.

“The agreement endorsed by UN Security Council Resolution 2231 remains in place and for us there is no doubt that the sanctions lifting commitments under the agreement continue to apply,” Michel said during his remarks at the general debate of the 75th session of the UN General Assembly.

He noted that the Iran nuclear deal remains critical for global non-proliferation and regional security. “It is therefore essential to preserve the JCPOA (Joint Comprehensive Plan of Action) and for all parties to fully implement it.”

“While we strongly support the preservation of the Iran deal, we continue to firmly address other concerns, such as the domestic and the regional situation,” he added.

The United States unilaterally claimed on Saturday that all pre-2015 UN sanctions against Iran had been restored according to the “snapback” mechanism under Security Council Resolution 2231, a unilateral effort ignored by the international community.

The overwhelming majority of Security Council members, however, asserted that the United States has no right to invoke the “snapback” mechanism as the country is no longer a participant following its withdrawal from the Iran nuclear deal in May 2018.

[Xinhuanet]

ECJ rejects Rosneft sanctions appeal

The European Court of Justice has rejected an appeal brought by Rosneft against the General Court’s decision (here) to uphold its 2014 EU listing. The judgment is C-732/18 P (17 September 2020). See post and post for case history.

The ECJ said the General Court was right to say that the measures are not manifestly inappropriate to the Council’s aims. Given the importance of the oil sector to the Russian economy, there was a rational connection between the restrictions on exports and access to capital markets and the objective of the sanctions, which was to put pressure on the government and to increase the costs of Russia’s actions in Ukraine.

The ECJ rejected Rosneft’s arguments that it was disproportionate to preclude Rosneft from being able to procure performance of a transaction, contract or services prohibited under EU sanctions, or to obtain a remedy for non-performance.

[EU Sanctions]

 

Commission launches initiative for more sustainable cocoa production

The European Commission today kicks off an initiative to improve sustainability in the cocoa sector. A new multi-stakeholder dialogue brings together representatives of Côte d’Ivoire and Ghana – the two main cocoa producing countries accounting for 70% of global cocoa production – as well as representatives of the European Parliament, EU Member States, cocoa growers and civil society. The dialogue aims to deliver concrete recommendations to advance sustainability across the cocoa supply chain through collective action and partnerships. The new dialogue will be supported by technical assistance for cocoa producing countries.

Executive Vice-President and acting Trade Commissioner Valdis Dombrovskis said: “The cocoa sector is important for the EU and our trading partners. Today’s launch of the multi-stakeholder dialogue for sustainable cocoa will help to guide the sector’s recovery from Covid-19, while also finding solutions to existing sustainability challenges. We plan to develop concrete recommendations on sustainable cocoa as trade is not only about growth and profits, but also the social and environmental impact of our policies.”

“When we talk about cocoa, sustainability is key” said Jutta Urpilainen, Commissioner for International Partnerships. “Lifting up the three pillars of sustainable development in one go – social, economic and environmental – is possible. We stand ready to act as an honest broker to create the foundation of a new international framework for sustainable cocoa.”

A series of thematic groups set under the multi-stakeholder dialogue will meet between October 2020 and July 2021 to:

  • discuss ways to encourage responsible practices of EU businesses involved in cocoa supply chains;
  • feed into other relevant ongoing Commission initiatives, including on due diligence and deforestation;
  • feed into the policy discussions between the EU and the involved cocoa producing countries: Côte d’Ivoire and Ghana;
  • guide the European Commission in the design and deployment of support projects on sustainable cocoa production

A plenary session in autumn 2021 will take stock of progress and a public report will review progress on the recommendations and lay out further steps to be taken. The dialogue corresponds to the EU’s political priorities under the Green Deal and the Commission’s ‘zero tolerance’ approach to child labour. It also builds on Côte d’Ivoire and Ghana’s joint initiative of June 2019 on a minimum price for cocoa on the world market and the Living Income Differential that they put in place with representatives of the cocoa and chocolate industry to ensure decent revenue for local farmers.

The new initiative for sustainable cocoa is part of a broader set of the European Commission’s measures to address sustainability issues horizontally and within the sector. They include a policy dialogue with Côte d’Ivoire and Ghana to make sure that increase of prices is linked to actions halting deforestation and eliminating child labour in cocoa supply chains.

[European Commission]

Customs Union: New Action Plan to further support EU customs in their vital role of protecting EU revenues, prosperity and security

The European Commission has launched today (28 September 2020) a new Customs Union Action Plan setting out a series of measures to make EU customs smarter, more innovative and more efficient over the next four years. The announced measures will strengthen the Customs Union as a cornerstone of the Single Market. They also confirm its major role in protecting EU revenues and the security, health and prosperity of EU citizens and businesses.

In her political guidelines, President von der Leyen announced that the Customs Union needed to be taken to the next level, in particular, by ensuring an integrated European approach to customs risk management, which supports effective controls by EU Member States. Today’s Action Plan does just that.

Paolo Gentiloni, Commissioner for Economy, said: “The EU Customs Union was one of the first concrete achievements of European integration and for more than five decades it has helped to protect Europeans and keep trade flowing across our borders – which are only as strong as their weakest link. Today, new challenges mean that we need to make our customs rules smarter and ensure they work better for Member States, citizens and legitimate businesses. This calls for improved use of data, better tools and equipment, and more cooperation within the EU and with customs authorities of partner countries. It also requires better foresight, so that EU customs can face the future with confidence. Today, we set out how we will take our Customs Union to the next level.”

Today’s Action Plan includes a number of initiatives in areas such as risk management, managing e-commerce, the promotion of compliance and customs authorities acting as one:

Risk management: the Action Plan focuses in particular on ensuring greater availability and use of data and data analysis for customs purposes. It calls for intelligent, risk-based supervision of supply chains and for establishing a new analytics hub within the Commission for collecting, analysing and sharing customs data that can inform critical decisions, help customs authorities identify weak points at the EU’s external borders and manage future crises.

Managing e-commerce: in this regard, and in order to tackle the new challenges of e-commerce, obligations on payment service providers and online sales platforms will be strengthened to help fight customs duty and tax fraud in e-commerce.

Promotion of compliance: the upcoming ‘Single Window’ initiative will make it easier for legitimate businesses to complete their border formalities in one single portal. It will allow for more collaborative processing, sharing and exchange of information and better risk assessment for customs authorities.

Customs authorities acting as one: the Action Plan details the roll-out of modern and reliable customs equipment under the next EU budget. A new reflection group formed of Member States and business representatives will be set up to help prepare for future crises and challenges such as unanticipated global developments and future business models.

The EU Customs Union

The EU Customs Union – which in 2018 celebrated its 50th anniversary – forms a single territory for customs purposes, where a common set of rules are applied. Within the EU Customs Union, EU Member States’ customs authorities are responsible for performing a wide and increasing range of controls.

Therefore, EU customs have an important role to play in supporting the EU’s economy and future growth. Customs need to facilitate increasing amounts of legitimate trade as quickly and seamlessly as possible. At the same time, authorities are continuously engaged in fighting growing levels of fraud and smuggling of illicit or unsafe goods. Customs are also playing a vital role in our recovery from an unprecedented health crisis. Since the start of the coronavirus pandemic, EU customs authorities and officials have been at the heart of essential tasks such as facilitating imports of protective equipment, while weeding out counterfeit products like fake masks and counterfeit medicines at the EU’s external borders.

It has become apparent in recent years that Member States’ customs authorities are struggling with the challenges of performing their various roles. Major challenges such as the current public health emergency, the consequences of the UK’s departure from the EU’s Single Market and Customs Union, and the rise of digitalisation and e-commerce will continue and may even increase. To make their full contribution to the wellbeing of all EU citizens and trade facilitation, our customs authorities must be equipped with cutting-edge technical equipment and analytical capacities that allow customs to better predict risky imports and exports. Enhanced customs cooperation with major international trade partners such as China will support our efforts to facilitate trade and, at the same time, ensure effective controls.

Background

The EU’s Customs Union has developed into a cornerstone of our Single Market, keeping EU borders safe, protecting our citizens from prohibited and dangerous goods such as weapons, drugs and environmentally harmful products, while facilitating EU trade with the rest of the world. It also provides revenues for the EU budget. But recently it has become clear that smarter ways of working are needed to allow customs authorities to manage their long and growing list of responsibilities.

The Action Plan benefited from an innovative foresight project on “The Future of Customs in the EU 2040” that worked to create a shared and strategic understanding among key stakeholders of ways to deal with current and future challenges for customs and to generate a vision for how EU customs should look in 2040.

[European Commission]

Middle East

Egypt, Alexandria’s new multi-purpose terminal to be operational early 2022

The new port will have a capacity to handle 1.5mln containers.

Egypt’s Minister of Transport, Kamel El-Wazir, expected that the new multi-purpose terminal in the port of Alexandria would be operational by early 2022 as the progress rate reached 27.7%.

The estimated EGP 7 billion project will extend for an area of more than 500,000 million square metres, according to a statement on Sunday 27th September.

The new port will have a capacity to handle 1.5 million containers, 2 million tonnes of general goods, and 100,000 cars at a total capacity of 12 million tonnes per year.

The project will create more than 1,500 direct jobs and 2,500 indirect jobs.

[Zawya]

Africa

US-Africa trade relations: Why is AGOA better than a bilateral free trade agreement?

In recent months, the U.S. began negotiations for a bilateral free trade agreement with Kenya. These negotiations are aligned with the current administration’s vision for trade reciprocity rather than unilateral trade preference programs. Although these negotiations could produce the first bilateral trade agreement between the U.S. and a sub-Saharan African country, a shift from regional preferential trade agreements to bilateral free trade agreements could undermine the growth of smaller countries, who may not be of enough economic interest to the United States. Bilateral agreements could also undermine efforts to create a regional economic bloc through the African Continental Free Trade Area (AfCFTA).

When President Bill Clinton signed the African Growth and Opportunity Act (AGOA) in 2000, African countries were given a competitive edge by providing unilateral duty-free exports for 6,500 products from Africa to the United States. Twenty years after AGOA was first adopted, we see that it has created long-term, sustainable growth by stimulating the private sector and creating jobs in a region where many countries are battling high unemployment, thereby addressing structural challenges the region faces. Additionally, in choosing a regional approach for the trade agreement, Clinton empowered both big players like South Africa and smaller players like Lesotho. In many ways, this approach aligns with the “trade not aid” mantra.

Although AGOA has been extended twice, most recently until 2025, it has come under threats over the last four years, as tariffs were imposed on key steel and aluminum products and duty-free access was suspended for apparel imports from Rwanda. Any further disruptions to AGOA could devastate the region, particularly in the medium to long term as economies seek to recover from the impact of COVID-19.

In South Africa, AGOA has contributed to substantially increasing export-led job creation in many sectors, including automobiles and agriculture ($553 million and $364 million, respectively, in 2019). AGOA has boosted South African agricultural exports such as wine and citrus, the latter of which is one of the agriculture sector’s most labor-intensive sectors. An analysis by the University of South Africa found that in 2017, the U.S. imported roughly $59 million—or 10 percent—of its wine from South Africa, which is a sizable share given global competition. A partial equilibrium simulation showed that in the short run, South Africa would lose a wine-products market of approximately $8.1 million if AGOA benefits were replaced with reciprocal tariffs through the Most Favored Nation (MFN) tariff system. This would mean a loss of 14 percent of wine export revenue, which would have a direct impact on the industry that provides 300,000 direct and indirect jobs.

But small countries have benefited immensely too. Although Lesotho’s textile and apparel industry was first established in the late 1980s, exports skyrocketed after AGOA . The industry grew from having a handful of factories in the 1990s to becoming the largest private-sector employer (43 percent), providing 40,000 jobs, which directly and indirectly benefit 13 percent of Lesotho’s population. Lesotho exports approximately $250 million in garments to U.S. brands such as Levi’s, Walmart, and Old Navy.

The duty-free access afforded by AGOA is important for increasing the competitiveness of the African garment industry, which isn’t covered by the Generalized System of Preferences (GSP), another preferential trade program. Some of this competitive edge was lost in 2005 when the World Trade Organization’s Multi-Fiber Agreement expired, which ended export quotas and increased competition from China and other Asian garment producers (Figure 2). Still the duty-free access has allowed sub-Saharan Africa to grow the textile and apparel sector, which is a large-scale employer of low-skilled labor.

The benefit of preferential trade agreements is that they can create sustainable structural changes. After 18 years of benefiting from AGOA, a computable general equilibrium analysis by the World Bank in 2018 showed that if AGOA was terminated, it would lead to a 1 percent loss in income by 2020 and a 16 percent decline in textile and apparel. But simulations also showed that trade facilitation measures that decrease average trade costs by 2 percent per year would eliminate the adverse income effects that result from the elimination of AGOA. The infant industry protection provided by AGOA allowed the industry to develop and flourish, such that decreasing trade costs by just 2 percent would allow Lesotho to maintain its competitiveness.

While Lesotho has benefited from AGOA for two decades, other industries and sectors are just starting to benefit. Namibia has a large livestock sector with over 7.7 million cattle, sheep, and goats. In 2019, Namibia became the first country in Africa to export beef to the United States after 15 years of working to satisfy safety regulations and logistics, and is set to export 860 tons of beef to the U.S. in 2020, rising to 5,000 tons by 2025. Exporting to the U.S. is a big market opportunity for Namibia—the U.S. is the largest consumer of red meat with Americans consuming an average of 120 kilograms of meat per person annually, according to the U.S. Department of Agriculture. Namibia’s Meatco benefited from duty-free access to the U.S. market through AGOA—given the infancy of the beef export relationship with the U.S., a disruption to AGOA could risk its sustainability and undermine capital investments within the sector.

U.S.-Africa trade relations are currently being reshaped—and if AGOA is further disrupted or replaced by bilateral free trade agreements, it could be a blow to a number of economies in the region.

[Brookings]