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Goods Council considers EU plans for carbon taxes on certain imports

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06/23/2020 | 11:37am EDT

The Russian Federation, supported by China, Paraguay, Uruguay and the United States, sought assurances from the European Union that its European Green Deal, an initiative announced in December 2019 that would involve charging a price corresponding to the carbon footprint of an import from outside the EU, would be consistent with WTO rules against discrimination. Members sought more information on implementation timeframes and affected products and said they would be closely following the issue. They asked the EU to be transparent in its development of the mechanism and ensure that resulting measures would not constitute an unjustifiable barrier to trade.

The EU said its plans to achieve carbon neutrality by 2050 include a directive that carbon leakage initiatives be designed in a way compatible with WTO rules. It said that the Green Deal aims to address the risk of carbon leakage, occurring when companies in countries with ambitious plans for climate action transfer their production to countries that are less strict about carbon emissions. The EU said that the carbon border adjustment mechanism for selected sectors would be announced in 2021 following a series of public consultations this year. The EU said it is committed to be transparent on the issue.

The Council also heard requests from 14 members for more clarity from the European Union and the United Kingdom on the allocation of tariff rate quotas with third countries with roughly six months left until the end of the Brexit transition period. Several members also questioned the UK's proposed farm subsidy entitlements. The EU responded that negotiations with WTO members will continue and that they aim to make progress. The UK said it aims to maintain the existing balance of trade concessions.

Members also expressed continuing concerns with the EU's regulation of pesticides in crops, reiterating the impact to farmers particularly from tropical climates and the need for consistency with international standards. EU regulations for trade remedies, particularly safeguard measures on imported steel, was also discussed. The EU said it remained committed to continuing discussions with members on these issues.

US restrictions on bulk power and ICT

China questioned the United States' new policy prohibiting the use of certain foreign components in the US power grid. China noted that the 'Executive Order on Securing the United States Bulk-Power System', issued on 1 May, prohibits the use of certain bulk power equipment and parts with origins in a foreign 'adversary' that poses a risk to US national security. China also expressed its concerns with the US restrictions on information and communication technology (ICT), saying unimpeded trade flows for the sector are particularly critical during the COVID-19 crisis. China asked the US how it defines foreign adversaries in these restrictions and sought US assurance that the measures will not lead to interference in normal business activities. China also asked how the US will ensure that the measures will not lead to an abuse of the national security exception in WTO rules.

The United States said that the Goods Council is not the appropriate forum to discuss these issues related to national security.

China also reiterated its concern over the prohibition of Chinese suppliers in Australia's 4G and 5G telecommunications roll out. Australia said its policies are consistent with WTO rules and that it will continue to engage constructively with China on this issue.

Revised transparency proposal

The United States introduced the latest revisions to a proposal to enhance members' compliance with transparency obligations. The proposal is co-sponsored by ten other members, with Israel as the latest member to sign on.

The US noted that least-developed countries (LDCs) would no longer be covered by the proposed penalties for those who fail to submit required information on trade measures and other policies to the WTO on time. This exemption is provided on the condition that LDCs formally request assistance and capacity building to address their notification difficulties. In contrast, developing countries who request technical assistance would get a two-year grace period after a notification deadline has passed. The US also highlighted other revisions having to do with an extended deadline for agricultural subsidy notifications and caps on the fines members will face for each delayed notification.

The United Kingdom said it intends to sign on as a co-sponsor of the proposal. Burkina Faso, speaking on behalf of the LDC Group which had previously opposed punitive measures, said it will consult further with respective capitals. Paraguay and Mexico said they remain unable to support the proposed extended deadline for certain agricultural subsidy notifications, which they find important for agricultural negotiations. South Africa, Thailand, Bangladesh, Senegal, China, India and Cote d'Ivoire signalled their continued opposition to the use of punitive measures for delayed notifications.

Dedicated COVID discussions

Nine members (Canada; Colombia; Costa Rica; Hong Kong, China; New Zealand; Norway; Singapore; Switzerland; and Uruguay) requested a discussion on trade measures related to COVID-19 as a dedicated item in the meeting agenda of the Goods Council in the months ahead during the pandemic. They also asked the WTO Secretariat to prepare a factual report on the trade measures' impact, and that subsidiary committees of the Goods Council have dedicated discussions on the issue. These will allow WTO members to have a better overview of the measures in place, they said in their communication.

Several members supported the suggestion and highlighted the importance of enhanced transparency during the pandemic. Other members, however, noted that this would only duplicate existing WTO trade monitoring efforts while some said there should be no further notification commitments.

Other trade concerns and discussions

The European Union called on the United States to issue the long-awaited notice that would allow for the import of EU apples and pears into the US, given that the US had finalised its scientific risk assessment in a satisfactory manner several years ago. The US said it is in the final step of publishing the notice for such procedures and plans to do this soon.

Five members (Canada, Costa Rica, European Union, Guatemala and the United States) raised issue with Mexico's new requirement for 'front warning labels' on food products that are high in calories, sugars, saturated fats and sodium. They said the measures appeared to be more restrictive than necessary to meet Mexico's legitimate health objectives and that manufacturers needed more time to comply, particularly amid COVID-19 disruptions. The US said the measure could affect USD 3.4 billion in US-Mexico trade.

The United States raised issue again with China's import restrictions on recyclable materials, this time highlighting China's April approval of a revised law on solid waste management. The US said the law sets out different requirements for foreign and domestic commodities, which runs counter to WTO rules on non-discrimination. China's ban leaves the world with a decline in prices for recyclable materials, higher risks that the scrap will end up in landfills and seas, and runs counter to China's position favouring a circular economy, the US said. Canada, the European Union and New Zealand, while recognizing that countries have the right to protect their environment, also expressed concern. China reiterated its response from previous meetings that disposal activities and their residue have polluted its environment. Furthermore, every country has the obligation to shoulder the responsibility of managing its solid waste, China said.

Australia, Canada, the European Union, the Russian Federation, Ukraine and the United States again called on India to lift its import restrictions on peas, lentils, beans and other pulses. The US noted with disappointment that India had extended quantitative restrictions on pulses up to 31 March 2021. The EU said that, with extensions totalling three years, this was not a temporary measure. Ukraine noted, in particular, that the quota for yellow peas for the 2021 fiscal year is zero. Members asked India to explain how the measure conforms with WTO rules. India responded that the measure was intended to secure the livelihood of farmers amid domestic surplus. The government continues to review the market situation, India said.

Korea introduced its proposal for an authoritative interpretation (under Article IX:2 of the WTO Agreement) of the 'Enabling Clause,' a WTO decision that provides an exemption to the non-discrimination principle to make way for preferential trade arrangements for developing and least-developed countries. Burkina Faso, speaking on behalf of the LDC Group, said members should consider applying the Enabling Clause also for non-reciprocal tariff preferences granted by developing, and not only developed, countries to LDCs, instead of renewing every 10 years the 1999 waiver that provided developing countries with such means. Turkey, however, said that the current practice works. China and India said that they had supported the waiver extension in June and July 2019 and that they will consider this new proposal as a different approach to granting such preferences. Other members said they would need to consult further with their respective capitals.

On the regular agenda item about the work programme on electronic commerce, South Africa said it was important to work towards rethinking the extension of the moratorium related to customs duties on electronic transmissions and thoroughly examine its scope and implications, noting that the 12th Ministerial Conference would be an opportune landmark to do so. The scope of the moratorium, such as what types of electronic transmissions would be covered, is currently undecided and members have different views on what it applies to, South Africa said. Burkina Faso, on behalf of the LDC Group, urged the Council to intensify discussions to reinvigorate the WTO work programme on e-commerce, noting its increased importance during the pandemic. Other LDCs expressed their support for this and for further discussions to make the digital economy more inclusive.

Members took up other issues and trade concerns on the 40-item meeting agenda, including those raised in previous meetings. The full agenda of the meeting is available here.

New chair

The Goods Council elected Ambassador Mikael Anzén of Sweden as its new chair, following a 3 March meeting of the WTO General Council where the consensus on new chairpersons for WTO bodies was noted.

There was no consensus yet to approve the chair's proposed slate of names of new chairpersons for the subsidiary bodies of the Goods Council. The outgoing chair will hold consultations with members to ensure the continuity of work.

Next meeting

The next Goods Council meeting is provisionally scheduled for 25-26 November.

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Disclaimer

WTO - World Trade Organization published this content on 11 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 June 2020 15:36:00 UTC

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