Session 5

The Global Trading System (B)

Trade Disputes and Their Settlement

COMM173
Introduction to International Business
MODULE 1 – GLOBAL ECONOMIC ENVIRONMENT
Prof. Nailin Bu
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UK – EU Trade Relation: Deals

The UK & EU engaged in a multi-year
negotiation to come to an agreement that
will smooth trade.
Rest of World
37% A deal was signed in the 11th hour
The EU
49% (December 24 2020): The UK-EU Trade
and Cooperation Agreement (TCA)

Countries with EU FTAs The UK held talks to roll over all the EU
14%
FTAs. The effort paid off in nearly all the
cases, including the agreements with:
 Canada
 Japan
 A uniform system of customs duties apply to 3

all imports from outside the EU and there are no

Customs Union customs duties at the borders between the EU
member countries.
The USMCA is NOT a Customs
The EU is a Customs Union Union

 Customs procedures for goods from Within USMCA, verification for

outside of the EU are completed and meeting the local content
duties are paid when they first enter the
requirement is necessary.
EU at any point of entry. After that, there
is nothing more to pay, no more checks
and all goods move freely within the EU
Customs Union.
Canada is free to negotiate FTAs
 Individual countries within a customs
with other countries
union do not have the freedom to
negotiate trade deals with other countries
outside of the EU. All trade deals must be
negotiated by the EU as a single entity.
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The UK-EU Trade and Cooperation Agreement (TCA)

The Rules of Origin Concerning Passenger
Cars
To qualify for duty-free status,

•Combustion engine cars need to be made with at least 55%

UK or EU content

•Currently, electric vehicles (including hybrids) need to

contain 40% UK or EU content. This percentage will rise to
55% in 2027.
Source:
Bunch, M. & Jones, S. 2021. Under a free trade agreement, preferential duty •EV Batteries and their parts for use in electric vehicles currently
rates or tariff-free trade depend on a good's national source. EY, February 26.
https://www.ey.com/en_uk/ey-brexit/what-rules-of-origin-requirements-mean-uk-
eu-trade
.
need to contain 30% UK or EU content, rising to 65% in
Thompson, C. 2021. Breakingviews - Brexit throws down electric gauntlet to UK 2027. 
cars. Reuters, January 4. https://
www.reuters.com/article/us-britain-brexit-autos-breakingviews/breakingviews-br
exit-throws-down-electric-gauntlet-to-uk-cars-idUKKBN2991N2
.

Work on Q1 & Q2
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Going Green
• Has committed to build US$1.4
billion Battery plant to supply
Nissan in UK
• Has committed to build US$2.4
billion battery plant for Renault in
France

The Straight Times. 2021. Nissan to

build $1.4 billion UK electric plant. July
2. https://youtu.be/TD-rsowvUgY.
[1.45m]
 The free movement of goods, capital, services, 6

and labour (the ‘four freedoms‘)

Single Market
The USMCA is NOT a Single
The EU is a Single Market Market
 the EU is committed to a common regulatory
There is no uniform rules and
framework. Countries must implement common
rules and to recognize each other’s standards. standards

 The Europe Court of Justice (ECJ) interpret EU

law and serve as arbiter of any dispute.
There is no supranational
authorities
 All member countries must contribute to the EU
budget.

Companies operating inside the EU sell their

products and services freely anywhere in the EU.
EU citizens can live and work anywhere in the EU. So, despite the FTA, trade in goods with
USMCA is NOT frictionless & trade in
services is not covered in the agreement. No
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Northern Ireland Protocol

The “Sausage War”
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Washing Machine Disputes: South Korea vs.
the US
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Viable Actions by Firms involved in Trade
Disputes
Q2B Q2C

Firms Facing Competition Firms Facing Punitive Tariffs

from Imports in Exporting Markets
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Trump Steel Tariff

In March 2018, Trump imposed tariffs on steel
and aluminum tariff from most countries,
including Canada, Mexico and EU, on the basis of
Section 232 of the Trade Expansion Act, which
relates to perceived effect of imports on U.S.
national security

Negative Consequences
Canada’s Participation in the WTO’s Trade Dispute Settlement
Process 11
Canada’s Participation in the WTO’s Trade Dispute Settlement
Process 12

https://www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm
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Canada’s Participation in the WTO’s Trade Dispute Settlement

Process
The WTO Appellate Body Crisis
• The Appellate Body (AB) hears appeals against the findings of the WTO panel.
• The AB ideally consists of seven members who serves 4-year terms.
• For each appeal, the AB needs to appoint 3 members to hear the case.
• Trump Administration’s ambassador to the WTO stated that the US does not approve
the appointment of new persons to the vacant AB seats.
• On December 10th 2019, AB went into crisis as 2 of its 3 remaining members’ terms
came to an end.

On April 19 2020:

Led by Canada, 19 WTO members (including Australia; Brazil; China; Chile; Colombia;
Costa Rica; the EU; Mexico; New Zealand) have agreed to put in place the Multi-party
Interim Arrangement [MPIA] for allowing appeals of panel reports in trade disputes.