Trade deals around the world - March 2021 edition

Trade Deals Around The World - March 2021 Edition

Martijn Rijk
Martijn Rijk
Marketing Manager

Trade Deals Around the World is our monthly recurring update, which gives you a quick and easy overview of what has been happening in the many trade deal negotiations going on around the world.

In this edition, the main players are the European Unions, the United Kingdom, the United States and China. 

The United Kingdom and the European Union 

We are a little over 2 months into Brexit and things are not going as well as most businesses were hoping for. The New York Times reports on several areas where the European Union and the United Kingdom are clashing: 

“The trade agreement was less a springboard for future cooperation than a bare-bones severance deal that left many issues, including the future of London’s mighty finance industry, to be thrashed out later. 

In a sign of the battles to come, the Bank of England’s governor, Andrew Bailey, warned last week of a “serious escalation” in tensions between London and Brussels if the European Union tried to force banks to move the clearance of euro-denominated derivatives trading from London to the continent.” 

Another area where the parties don’t see eye to eye is the border between the United Kingdom and Northern Ireland. Reuters writes: 

“The European Union on Wednesday rebuffed a British demand to extend a grace period for checks on goods going from Britain to Northern Ireland, saying the post-Brexit trade treaty gave London enough tools to solve the problems. 

But it agreed to “work intensively” with Britain to resolve difficulties that have already impeded deliveries of goods, notably food, from other parts of the United Kingdom and caused shortages in supermarkets, even with a grace period still in force. 

The dispute, which stems from Britain’s exit from the EU’s orbit on Jan. 1, threatens to reopen a rift that bedevilled years of Brexit talks and further strain relations between the EU and its former member.” 

The United Kingdom and CPTPP 

We already wrote about this in last month’s edition. The United Kingdom has officially made a request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Reuters reports: 

“Britain argues that the principal economic benefit of leaving the EU is the freedom to strike trade deals around the world, and is trying to position itself as the leading advocate of free global trade after a period of increased nationalism. 

… 

The CPTPP removes 95% of tariffs between its members: Japan, Canada, Australia, Vietnam, New Zealand, Singapore, Mexico, Peru, Brunei, Chile and Malaysia. 

Unlike the EU it does not impose laws on its members, it does not aim to create a single market or a customs union, and it does not seek wider political integration. Britain’s application was welcomed by members, including the current chair, Japan. 

But few see the agreement as generating a surge in trade: access is expected to take more than a year to negotiate and Britain already has or is close to reaching, trade agreements with its largest members.” 

The United Kingdom and Other Trade Deals 

The United Kingdom also struck trade deals with Ghana and Albania

Qrius has published an article that gives a summary of UK trade deals so far and discusses some of the deals still under negotiation. The overview is dated February 15, so the deal with Albania is still mentioned as being under negotiation. For an official overview of trade deals that have been closed by the United Kingdom after January 1st 2021 visit this page

The United States and China 

The Trade War between the United States and China has still not been resolved yet. While President Biden has a more lenient stance on bilateral trade with China, he will not rush into any new trade deal with China, reports Reuters

“The United States is asserting its presence in Asia-Pacific with alternate arrangements, including “the quad” - an informal grouping of Australia, India and Japan and Washington - to counter China’s political, commercial and military influence in the region.

… 

To discourage its partners in the agreement from working with China, the Biden administration was expected to quickly state its intent to rejoin the CPTPP, said Chris Rogers, research analyst at S&P Global Market Intelligence unit Panjiva. 

The CPTPP was central to former President Barack Obama’s strategic pivot to Asia, linking 11 countries across the Pacific. Trump withdrew the United States from the pact in 2017 before it was signed.” 

China did not meet many of the goals that were set out for it in the “Phase One” trade agreement. Fortune writes more about this: 

“U.S. exports to China missed the mark for a number of reasons. For instance, China’s crude oil exports reached only 45% of the trade deal commitment. That shortfall was likely the result of 2020s unprecedentedly low oil prices and the U.S. oil industry’s inadequate production capacity. China’s imports of U.S.-made goods such as autos and trucks, agricultural goods, and coal and crude oil missed their targets too. But not every sector came up short: The pandemic pushed U.S. medical product sales to China to 111% of the trade deal goal.” 

Other China Trade Deals 

While China is struggling with its trade deal with the United States it is more successful in cooperating with other countries. China Daily published an infographic about the trade agreement between China and New Zealand. Bloomberg wrote about a deal in the making between China and the United Kingdom, and on the website of the World Economic Forum, I found an interesting article about the trade agreement between China and Mauritius and why that deal is so important. China is first looking at non-EU countries, as a trade deal with the European Union is very complex. Another thing to keep in mind is that China usually agrees to a trade deal with smaller states first, before starting a negotiation about a larger regional trade policy. 

The European Union and the United States 

With a new President in office, Germany is keen to see much closer cooperation between the United States and the European Union. Reuters writes: 

“Germany wants Europe and the United States to strengthen transatlantic ties with a trade deal to abolish industrial tariffs, a WTO reform to increase pressure on China and a joint carbon-emission trading system to protect the climate.” 

The European Union and Mercosur 

The trade agreement between the European Union and Mercosur is still in trouble after several EU member states expressed doubt about the deal. One of the main points is about sustainability. Reuters writes: 

“The free-trade treaty reached between the European Union and the South American bloc Mercosur will not get signed if Brazil does not show concrete steps toward reducing deforestation in the Amazon, European ambassadors said…

In a breakthrough against protectionism, the EU agreed in June 2019 to create a free-trade area of 700 million people with South American trade bloc Mercosur, which is made up of Argentina, Brazil, Paraguay and Uruguay. 

But France and the European Parliament have since led the opposition to finalize the treaty, saying Mercosur must do more to meet its climate commitments under the Paris Agreement and that Brazil is failing to combat Amazon deforestation.” 

The European Union and China 

The European Union and China agreed on a trade agreement at the end of 2020 called the Comprehensive Agreement on Investment. JDSupra writes: 

“On 30 December 2020, the leaders of China and the European Union jointly announced the completion of the negotiation of the EU-China Comprehensive Agreement on Investment (CAI) as scheduled. Following the post-Brexit trade agreement with the United Kingdom, the European Union is finalizing an extremely important agreement at the last minute of the scheduled deadline. The enactment remains subject to the consent of the member states and the European Parliament.” 

The European Union and the Rest of the World 

Countries or trade alliances that want to negotiate a trade deal with the European Union moving forward are in for a tougher negotiation moving forward. CNBC reports: 

“The European Union will take a new approach to international trade, recognizing that it’s time to stand up for itself after challenging times with countries like the U.S."

The European Commission, which negotiates trade deals on behalf of the 27 member states, proposed on Thursday new tools to become a more “assertive” player in global trade. The region is a top trading partner for 74 nations around the world and two-way trade accounts for about 43% of its total GDP growth, according to data from the commission.