Who’s Who Legal brings together Ana Caetano of Veirano Advogados, Brazil, and Edwin Vermulst of VVGB Advocaten, Belgium, to discuss issues facing trade and customs lawyers and their clients in 2016.
Ana Caetano: Perhaps one of the most practical and impact-generating changes to Brazilian trade over the year has dealt with the advancement of trade facilitation. In March 2015, for example, Brazil and the US signed a memorandum of understanding on trade facilitation to stimulate the exchange of information between the countries and to develop partnerships aimed at identifying existing bottlenecks.
Regarding trade remedies, the last significant regulatory change took place in 2013 with the enactment of Decree no. 8,058/2013, which consolidated into one legislative framework precedent practices and different instruments related to the conduct, application, enforcement and effectiveness of anti-dumping (AD) proceedings and duties. Decree no. 8,058 provided for a more detailed and transparent regulation on changed circumstance reviews, sunset reviews, new shipper reviews and anti-circumvention (AC) reviews. The Decree also introduced new proceedings into the trade remedy legislation, such as reimbursement reviews, scope assessments and redetermination proceedings aimed at determining whether the effectiveness of a measure has been compromised (anti-absorption provisions). In 2015, the enactment of provisions relative to the electronic processing of administrative proceedings under Decree no. 8,058 was a significant change.
Countervailing duties (CVD) and safeguards rules, proceedings and measures remain to be updated and consolidated.
Other relevant changes occurred in 2015 and 2016 regarding public interest analysis and the procedures for the request for suspension or modification of AD and CVD measures. In 2012, by means of Resolution no. 13/2012, the Technical Group (GTIP) that evaluates public interest of applied trade remedy measures was created. In 2015, Resolution no. 27/2015 was enacted to regulate the public interest administrative proceedings to be examined by GTIP, providing more predictability and transparency to this process.
Further regulatory changes should take place resulting from trade agreements negotiated by Mercosul, which have either come into effect or were under negotiations in the past year:
Mercosul/SACU Preferential Trade Agreement: entered into force on 1 April 2016 by means of Decree no. 8,703/2016.
Mercosul/Egypt Free Trade Agreement: signed August 2010 and approved by Brazil only in 2015 by means of Legislative Decree no. 216/2015 (currently being incorporated into the legislative framework of the remaining Mercosul members).
Mercosul/Palestine Free Trade Agreement: signed December 2011 but was only sent to Congress for approval May 2016 (currently being incorporated into the legal framework of the remaining Mercosul members).
Brazil/Peru Economic and Trade Enlargement Agreement: regulates investments, services and government procurement to promote trade integration and the acceleration of economic and social development processes. This agreement is yet to be submitted to Congress for approval prior to entering into force.
Mercosul/EU Free Trade Agreement: under negotiation.
Enlargement of Mercosul/India Preferential Trade Agreement: under negotiation.
Expansion of the Brazil/Mexico Trade Agreement – ACE no. 53: under negotiation.
Edwin Vermulst: To the extent that lack of change represents change too, there have been two important failures to change EU trade remedies law.
First, the TDI modernisation exercise, launched by former EU Trade Commissioner Karel De Gucht in 2011, is still on hold as a result of the failure of the EU member states to reach agreement on key elements of the proposed reform.
Second, despite having known since 2001 that after 11 December 2016 it will no longer be authorised to apply its analogue country methodology to determine normal value in anti-dumping proceedings involving China, as a result of which the EU Basic Anti-Dumping Regulation will need to be changed, the EU Commission thus far has not launched its proposed amendment. As the complicated and time-consuming EU decision-making process will require agreement of both the European Parliament and the EU member states, which seems impossible by 11 December 2016, this means that on 12 December the EU will be in violation of its WTO obligations, opening the door for a Chinese challenge.
Ana Caetano: Brazil has not yet felt the impact and, hence, the nature of the trade work handled by Brazilian law firms has not changed. This is mainly due to the existing amount and relevance of trade between the two. In 2015, for example, imports into Brazil from the UK were ranked 14th in total value of imports into Brazil; exports to the UK ranked 13th among Brazil’s total export destinations. Although this may seem of some significance, in relative terms it is not. In 2015, imports from the UK represented 1.6 per cent of total value of imports into Brazil and exports to the UK represented just 1.5 per cent of the value of total Brazilian exports.
Naturally, the share in imports/exports between the two would be of a much greater significance if there were trade or economic cooperation agreements between them. Unfortunately, thus far, Brazil has entered into a very limited number of economic cooperation and/or trade agreements, none of which have had Britain or the EU as a partner. Under Mercosul, Brazil started negotiations in 1999 with the EU on a regional trade agreement that was interrupted in 2004 and relaunched in 2010. The agreement encompasses goods, services, investments and government procurement, and is supposed to cover approximately 90 per cent of the trade between Mercosul and the EU. With Britain’s exit from the EU, it is likely that negotiations will be interrupted and delayed once again.
Another question is the future of trade remedy cases in Brazil that involve EU imports. There are at least four AD duties currently in force on imports from the EU (E-SBR rubber, offset plates, phenol and powdered milk). Will these AD duties on these imports from the UK fall when Britain leaves the EU? The flipside, of course, is whether trade remedies applied by the EU on imports from Brazil would also remain in place with Britain’s exit from the EU.
It remains to be seen what will happen and how Brazil, and Mercosul, will be affected by Brexit.
Edwin Vermulst: Brexit, and in particular the numerous uncertainties surrounding it, have led to many queries from clients requesting advice on how this will affect the continued application of EU TDI measures, and the access to the EU market in the future whereas in the past such access was taken for granted. As long as there is no clarity on the exact goals and modalities of Brexit, we expect such questions and this area of advisory work to continue.
Ana Caetano: WTO data supports the idea of increasing global protectionism by the constant rise in the total number of trade remedy measures applied by members from 2011 to 2015, which went from 119 to 210 measures (76 per cent increase). However, when we look at the total number of trade remedy cases being initiated in the world, we see a somewhat different trend. From 2011 to 2013, the initiation of AD, CDV and Safeguard proceedings increased from 202 to 338 cases (67 per cent increase). But, from 2013 to 2015, the initiation of cases decreased from 338 to 277 (18 per cent fall), indicating a probable decline in the future application of measures.
Within this scenario, Brazil seems to follow the overall trend, with minor exceptions. From 2011 to 2014, Brazil went from applying 13 measures to 32 (146 per cent increase). It more than doubled the number of duties applied within a three-year period. A growth rate far superior to the global trend. From 2014 to 2015, a soft decline appears as the application of measures went from 32 to 31 (3 per cent fall). Regarding cases initiated, Brazil followed suit. From 2011 to 2013, there was a constant increase in the initiation of trade remedy cases, from 19 to 56 cases (195 per cent increase). This sharp increase, in such a short period, was probably a response to the surge in imports into Brazil that took place from 2009 until 2013, a result of the global financial crisis when certain countries searched for less affected consumer markets like Brazil. However, from 2013 to 2015, the number of initiated proceedings also fell drastically from 56 to 23 cases (59 per cent fall). The drop was clearly a result of the real’s devaluation and Brazil’s internal economic crisis. So, contrary to the trend established for prior years, in the past year the number of trade remedy proceedings initiated has drastically reduced and the number of measures applied is following a soft downward trend.
Edwin Vermulst: Protectionism has certainly increased in the EU, as witnessed by a sharp rise in the number of trade remedy cases, particularly in the steel sector. EU industries complaining about – notably Chinese – dumping and subsidisation, find a willing ear with EU and EU member states’ politicians looking for excuses to hide failed leadership and vision to deal with European over-regulation and labour market inflexibilities. Between January and August 2016, the EU initiated 11 new anti-dumping investigations and one anti-subsidy investigation and of these, 10 investigations concern steel (nine anti-dumping and one anti-subsidy investigation), it introduced surveillance of imports of iron and steel products and in an extraordinary move, for the first time imposed retroactive anti-dumping measures on imports in a steel case.
As a law firm which has for decades been advising Far Eastern governments, trade associations and exporters we are obviously deeply involved in these cases. Currently we are, for example, representing both the Government of China as well as several prominent producers in the solar panels/cells expiry review and the hot-rolled flat steel products subsidy cases launched by the EU.
Ana Caetano: The profile of trade cases brought by and against Brazil has changed over the years and, accordingly, so has the legal market. In early 2000 most trade remedy cases in Brazil dealt with imports from either the US and/or Europe, and Brazil was perceived as a “developing” country with very little trade interaction with partners other than the US, Europe and neighbouring countries. Trade cases were almost 100 per cent AD investigations and reviews.
In 2001, with China’s entry into the WTO, exports from that country began to take the world and trade geography changed. A shift in import origin began and cases in Brazil against China and other Asian countries started to increase. The same occurred with certain east European countries. Brazil began to have a pronounced role at the WTO as an active user of the dispute settlement body.
In subsequent years, a new category of countries with a high potential for investment and market growth came about: the emerging markets. As imports into Brazil from these countries started to increase so did cases against them. In addition, new trade defence instruments were developed and adopted by countries, including Brazil, outside the confines of the WTO (scope assessments, anti-circumvention, origin investigations, public interest proceedings, etc). This increased and diversified the type of trade instruments available.
In 2013, when the real appreciated against the dollar and the number of trade proceedings in Brazil reached its peak, we saw a movement in the legal market where smaller firms and boutiques began to offer trade services and compete with more traditional trade consultancies and law firms. These were either firms that did not have previous trade experience or professionals that left bigger firms to set up their own trade and customs boutique. At the same time, Brazil’s presence as a complainant at the WTO diminished.
From 2013 to 2016, the exchange rate changed and the real depreciated, which created a natural barrier to imports, and a more favourable scenario for exports. Consequently, the number of trade remedy proceedings in Brazil declined and cases in other jurisdictions against Brazilian exports increased. Full-service law firms with global contacts and structure were able to better capitalise on these changes. WTO litigation work also picked up, with Brazil being challenged by other members. Here, also, bigger firms were better positioned to take advantage of these opportunities.
Edwin Vermulst: Trade and customs in the EU is a niche market in which only a handful of boutique and large Anglo-Saxon law firms compete on a regular basis. Because of a steep learning curve and a limited pool of work, I do not expect this to change any time soon.