Brazil Lowered Tariffs by 10% on 87% of Tariff Lines, One of Many Countries Liberalizing Trade
A global look at foreign trade agreements discussed how many major economies are moving toward more liberalization while the U.S. stands still on previously launched FTA negotiations. Baker McKenzie lawyers shared their insights on the opportunities and compliance concerns under FTAs in a webinar Jan. 25. Adriana Ibarra-Fernandez, a Mexico City, Mexico attorney, talked about Latin American FTAs, and noted that even though negotiations concluded after 20 years between Mercosur, which represents Brazil, Argentina, Paraguay and Uruguay, and the European Union, the trade deal has not been approved in the various capitals, three years after the negotiations ended.
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Getting that deal to go into force will be "quite a challenge" because of Argentina's stance, Ibarra Fernandez said. "Argentina has been showing a very strict position, it’s not open to liberalization. It has tensions with Brazil and Uruguay because Argentina does not want to reduce the common external tariff." She said the EU's concerns about Brazil's compliance with the Paris Climate Accord are also a hurdle.
She noted that in November, Brazil announced it would unilaterally drop duties by 10% on 87% of its tariff lines, and that reduction will continue through Dec. 31, 2022. She said it's the first time that Mercosur countries have diverged on tariffs.
Colombia is also reducing tariff rates, she said, and offering benefits to exporters through drawback and free zones, but at the same time, the country is increasing its antidumping and countervailing duty measures in textiles, steel and agricultural goods.
Mexico is still waiting for the legal review of its new trade deal with the European Union, she said. She noted that for countries that have FTAs with Mexico -- and there are many -- it is important to document how exports to Mexico qualify under the FTA's rules of origin. "Mexico is very, very active in verification of origin," she warned, and if a producer or issuer of the certificate of origin does not reply when Mexican authorities ask for proof, there will be an assessment of duties, adjusted for inflation, with added interest, and, she said, "very steep fines."
She added, "There's nothing free about free trade if you are not compliant."
Rules of origin are also a sticky wicket in the United Kingdom, said Alexandra Alberti, a lawyer in London. Because even though trade between the U.K. and the EU is supposed to be zero-tariff after Brexit, that's only if the British exporter demonstrates the goods meet the rules of origin. That's neither cheap nor simple to do, she said, calling it a significant compliance challenge.
Alberti said that the U.K. has a goal to have 80% of its trade covered by FTAs within three years of leaving the EU, and she expects its first from-scratch (as opposed to a roll-over of EU FTAs) deal to finish this year with Australia. The EU has trade agreements that cover 67 countries. She said that India has begun negotiations for an FTA with the U.K., whereas with the EU, India said it would start, but has not scheduled any rounds. Alberti said the U.K. is also seeking to improve roll-over agreements with other countries, such as Canada.