International trade law is likely to continue on a rocky path over the coming year. Below, we set out some of the key Canadian trends in international trade for 2020.
The Canada Border Service Agency (CBSA) recently updated its trade verification priorities, which identify goods that will be subject to heightened compliance and enforcement scrutiny. This included certain furniture, footwear, specified plastics and chemical products (see client alert here). These products will be priorities for the CBSA throughout 2020.
Throughout 2020, the CBSA will continue its ongoing investigations into antidumping and countervailing duties, including for corrosion resistant steel and sucker rods. Additionally, the CBSA will actively monitor heavy plate steel and stainless steel wire, both of which are subject to safeguard duties (responsive to the US s. 232 steel and aluminum tariffs), and now require import permits for entry into Canada. Based on recent legislative amendments, we anticipate that again, in 2020, domestic steel producers may seek the imposition of safeguard duties on imported steel.
The CUSMA is set to be ratified by all treaty parties and enter into force in 2020. On December 10, 2019, the parties to the CUSMA agreed to amendments to the initially signed treaty through a Protocol of Amendment (Protocol). The Protocol includes improved state-to-state dispute settlement provisions, additional labour protections and a rapid response mechanism directed at Mexico with respect to freedom of association and collective bargaining, additional environmental protections, the removal of certain intellectual property protections, and a clarification on steel and rules of origin (requiring that all steel manufacturing processes occur in one of the CUSMA parties).
The CUSMA parties must ratify the agreement and Protocol through their respective domestic procedures for the CUSMA and Protocol to enter into force. In particular, the CUSMA will enter into force three months after all three parties have notified each other of the completion of the domestic ratification procedures.
Brexit appears poised to occur on January 31, 2020. Shortly after the December 12, 2019, UK election, the House of Commons passed the Withdrawal Agreement legislation, which is expected to pass through the UK legislative process before the January 31, 2020, deadline for leaving the EU.
The Withdrawal Agreement provides that after January 31, 2020, the UK and EU will enter into a transition period where they will negotiate a free trade agreement that will govern the trading relationship between the EU and UK. The transition period slated to begin on February 1, 2020, will last until December 31, 2020. During this period, the EU-UK relationship will remain the same as it was prior to Brexit.
Further, under the Withdrawal Agreement, the UK will continue to be bound with respect to third parties, such as Canada, by international agreements signed by the EU during the 2020 transition period. For example, in the context of the Comprehensive Economic and Trade Agreement (CETA), the UK will be required to continue providing CETA treatment for Canadians. Despite this, third countries are under no obligation to give preferential treatment to the UK after January 31, 2020, and in many cases, would need to pass or implement new laws or regulations to afford the UK such treatment.
Canada will continue to support the WTO against what many have viewed as attacks against the multilateral trading regime. On December 10, 2019, the terms of two Appellate Body members ended, leaving only one remaining Appellate Body member. The quorum for an Appellate Body panel is three members. New appointments to the Appellate Body have been continuously blocked by the United States with the result that the Appellate Body is no longer able to function. As a consequence, appeals from first instance dispute settlements cannot be heard by that body, the effect of which is to leave in legal limbo those first instance decisions.
In July 2019, Canada and the EU, and several other countries since that time, agreed to an ad hoc interim arbitration process under article 25 of the Dispute Settlement Understanding. Under this agreement, disputes between states that have agreed to such a process may be appealed to an ad hoc arbitration panel, which will decide the dispute in lieu of the Appellate Body. This solution will allow for finality of disputes between parties agreeing to an arbitration. However, it remains far from a satisfactory solution to the current impasse.
In brief, looking forward, we believe that 2020 will continue to present challenges to the international trading system that, until recently, has supported a vast expansion of global trade. At the same time, new opportunities will open as trade agreements come online or are negotiated.
To read the comprehensive Dentons’ pick of Canadian Regulatory Trends to Watch in 2020 report, click here.