Preferential Trade updates May 2023

Brazil hopes for conclusion to EU-Mercosur trade deal this year

Brazil hopes the Mercosur trade deal with the European Union (EU) will be concluded this year, a government official said on Sunday, ending years of delay and opening the way to increased trade between the two regions. The EU and the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay completed negotiations in 2019 but the deal has been on hold due to concerns, particularly in France, about Amazon deforestation and Brazil’s commitment to climate change action. Brazil’s President Luiz Inacio Lula da Silva has promised to overhaul his country’s climate policy. While Germany has pushed for a swift conclusion, France has said it is waiting to see progress in Brazil.

EU Rules of Origin

Notwithstanding Article 29 of Protocol No 1 (exemptions from proof of origin), as from 1 July 2023, imports into the EU of products originating in Seychelles shall benefit from the preferential tariff treatment provided for in the interim Economic Partnership Agreement, exclusively upon submission of invoice declarations made out:

• by exporters from Seychelles registered in the EU’s REX system; or
• by any exporter for any consignment whose total value of originating products does not exceed EUR 6 000.
• From 1 July 2023, movement certificates EUR.1 issued by Seychelles and invoice declarations made out by approved exporters will no longer be accepted.

Ecuador is 4th Latin American country to sign China trade deal

Ecuador became the fourth Latin American country to sign a trade agreement with China, which since last year displaced the United States as its main non-oil trading partner. After a negotiation of 10 months, the country joined Chile, Peru and Costa Rica, the other three nations that already had a free trade agreement with Beijing. With this agreement, Ecuador hopes to catapult trade with China after bilateral trade between the two countries increased in recent years to reach $12.29 billion in 2022. While Ecuadorian exports to China reached $ 5.84 billion in 2022, Chinese sales to Ecuador amounted to $ 6.45 billion.  The document was signed by Ecuadorian Trade Minister Julio Jose Prado and Chinese Commerce Minister Wang Wentao, in a ceremony held simultaneously in Quito and in Beijing via video call.

EU mulls partial exit from energy treaty over climate concerns

The European Union is considering a proposal to quit an international energy treaty that has become mired in climate change concerns, but leave an option for individual countries to stay in an updated version of the accord, a document showed. The 1998 Energy Charter Treaty lets energy companies sue governments over policies that damage their investments, a system initially designed to support investments in the sector. But in recent years it has been used to challenge climate policies that require fossil fuel projects to shut - raising concerns that the treaty is undermining efforts to address global warming.

European Commission reports on eleventh negotiation round with five Eastern and Southern African countries to deepen existing Economic Partnership Agreement

The European Commission published the report summarising progress made during the latest negotiation round to deepen the existing Economic Partnership Agreement (EPA) with five Eastern and Southern African partners. As part of its transparency commitment, the Commission has published the report summarising progress made during the latest negotiation round to deepen the existing EPA with five Eastern and Southern African (ESA5) partners: Comoros, Madagascar, Mauritius, Seychelles, and Zimbabwe. The round was hosted by Zimbabwe in Victoria Falls from 27-31 March 2023. It included discussions on ten out of the thirteen thematic parts covered by these negotiations.

The chapters that were not discussed were the Chapter on Sanitary and Phytosanitary Measures and the Protocol on Mutual Administrative Assistance in Customs Matters, which have already been provisionally concluded, and the Economic and Development Cooperation Chapter, which will be discussed in the 12th round. The talks were held in a positive and constructive atmosphere and allowed further progress on the legal texts to be made. The next round is scheduled to take place in Brussels from 26-30 June 2023.

India-UK FTA Round 9 concludes with ’detailed’ policy discussions

The ninth round of India-UK free trade agreement (FTA) negotiations concluded with detailed discussions across a range of policy areas. A joint outcome statement issued by the Department for Business and Trade (DBT) revealed that Round 9 of the ongoing talks took place between April 24 and 28 in a hybrid format, with some Indian officials travelling to London and others attending virtually. There is no date set for the 10th round of negotiations, which is likely to be hosted by New Delhi, also in a hybrid format. India and the UK have been negotiating an FTA since January last year, with a goal towards a comprehensive pact that is expected to significantly enhance the bilateral trading relationship worth an estimated GBP 34 billion in 2022.

India, EFTA nations discuss prospects of resuming FTA negotiations

India and the European Free Trade Association (EFTA), comprising four nations of Iceland, Switzerland, Norway, and Liechtenstein, on Wednesday discussed the prospects of resuming their negotiations towards a trade deal — Trade and Economic Partnership Agreement — a joint statement said. The development comes against the backdrop of a meeting between high-level delegations from India and EFTA to boost bilateral trade and economic partnership. During the meeting, both sides exchanged views on the state of play of their negotiations and explored ways to ‘advance the talks’. “The participants acknowledged the challenges posed by the current global economic and trade environment, as well as the need to address the bilateral trade and economic partnership issues constructively and pragmatically. Both sides agreed to continue their efforts to resolve all outstanding issues and work towards deepening and strengthening the economic partnership while contributing to a more inclusive global trading system. India and EFTA nations launched negotiations on a broad-based trade and investment agreement over 15 years ago. Thirteen rounds of negotiations were held, after which talks were put on hold in 2013-end. Thereafter, talks resumed in 2016 and four more rounds took place. 

Israel, China hold first direct talks on free-trade agreement since 2019

Israel and China participated in the first direct talks on a free-trade agreement at the end of March since November 2019 and the eighth round since 2016. The Ministry of Foreign Affairs of the People’s Republic of China confirmed that the talks between representatives from the two countries took place and that issues related to free trade were discussed, including the transportation of goods and customs procedures.

China is Israel’s second-largest trading partner by country after the United States, with the value of trade increasing last year by 11.6% to $24.45 billion. Israel’s exports to China in 2022 were valued at $4.68 billion, second to the United States. The most recent free-trade agreement involving Israel was the United Arab Emirates. It was signed on May 31, 2022—less than two years after the signing of the Abraham Accords in the fall of 2020—and went into force on April 1 of this year. Before that, Israel signed a free-trade agreement with South Korea on May 12, 2021, which went into force on the first of this year.

Kenya, US advance talks on trade and investment partnership

Kenya and the United States of America have successfully completed the second round of negotiations on Strategic Trade and Investment Partnership (STIP), an agreement that aims to strengthen the two countries’ bilateral and investment relations. Ministry of Investment, Trade, and Industry Cabinet Secretary Moses Kuria said a lot of progress has been made in the negotiations, an indication that both states are committed to enhancing trade between the two countries. The CS said the areas of focus will help to create a more conducive environment for trade and investment thereby boosting economies in both countries.

Pakistan-China Economic Partnership stalled

The recent imposition of a USD 2.48 million fine by a Pakistan civil court on China National Petroleum Corporation for allegedly violating the contract signed with the Petroleum Exploration (Pvt.) Ltd. has again brought forth the increasing economic mistrust between the two countries accentuated by the financial crisis in Pakistan. Already many projects under the CPEC, like the Main Line1 (ML-I) — railway line between Karachi and Peshawar — and the Karachi Circular Railway (KCR), have been stalled and have become financial liabilities. There have also been unresolved differences between the two governments, which have stalled many projects. China has reportedly slowed investments in large infrastructure projects as these projects are vulnerable to local politics and returns on investment are delayed. The differences though not new, have been kept behind closed doors. 

Terror attacks on Chinese interests have also had a negative impact on economic cooperation. Pakistan’s financial woes have further decreased its capacity to fulfil its part of financial obligations in various projects.

China has also been accused of dubious practices in Pakistan, like signing fraudulent deals with most Independent Power Producers (IPP) and receiving tax exemptions. China has repeatedly refused to renegotiate the power purchase agreements worth USD 3 billion on the pretext that its commercial banks were not in a position to revise any of the clauses of the agreement reached earlier with the Pakistan government.

South Korea, Serbia reach tentative deal on bilateral investment treaty

South Korea and Serbia have reached a tentative deal to sign a bilateral investment treaty aimed at promoting mutual investments between the two countries, according to Seoul’s foreign ministry. The treaty is expected to provide a legal framework for the protection of South Korean investments in Serbia from non-commercial risks, and promote mutual investments and strengthen economic cooperation. The agreement is expected to go through formal signing. It is subject to approval by the legislatures of both countries for ratification. According to the ministry, bilateral trade between the two countries last year amounted to $410 million.

UAE strikes economic partnership agreement with Cambodia to enhance global ties

The UAE and Cambodia have finalized the terms for a Comprehensive Economic Partnership Agreement (CEPA) as the Gulf state seeks to enhance its global trade and commerce ties to fulfill its new foreign trade agenda. With the new framework in place, tariffs would be substantially eliminated, and non-tariff trade barriers would be reduced while promoting bilateral trade in goods, services, and investment. Cambodia’s major exports, including leather goods, apparel, footwear, meats, fruits, grains, and processed foods would take advantage of CEPA’s lower tariffs. UAE would be subsequently able to utilize new export opportunities for its manufacturing and industrial sectors along with investment opportunities for renewable energy, travel, and tourism projects, in addition to the logistics and infrastructure sector, WAM added.

Sri Lanka and Bangladesh to resume talks for bilateral trade deal this month

Sri Lanka and Bangladesh plan to hold an introductory meeting virtually on 29th of this month to commence negotiations for the proposed preferential trade agreement (PTA), which is expected to eventually lead to a free trade agreement (FTA). The two parties are expected to finalise dates and venue to hold negotiations on the proposed PTA during this virtual meeting. Weerasinghe shared that the two countries are planning to commence negotiations for the proposed PTA with plans to expand it to an FTA eventually.

Taiwan to suspend free trade agreement with El Salvador

The Republic of China (Taiwan) will suspend implementation of a free trade agreement (FTA) with El Salvador from May 15, following the former Central American diplomatic ally’s decision to repeal the deal. The suspension, proposed by the Ministry of Economic Affairs, the Ministry of Finance and the Ministry of Foreign Affairs, was passed at the Cabinet’s weekly meeting that day, and the decision will be sent to the Legislature for deliberation, according to government statement released that day. Despite the limited impact on Taiwan’s overall trade, Premier Chen Chien-jen (陳建仁) instructed relevant ministries to help Taiwanese businesses explore other markets for their products and procure goods from other countries with which Taiwan has an FTA, acting Cabinet spokesman Lo Ping-cheng (羅秉成) said at a press briefing on the weekly meeting.

Diplomatic ties between El Salvador and Taiwan ended on Aug. 21, 2018, and the foreign ministry of El Salvador announced its plan in December to terminate the trade agreement it signed as a trilateral FTA with Taiwan and Honduras in May 2007, the Bureau of Foreign Trade said in a statement dated April 6 this year.