Executive Summary

Global Trade Environment in 2020

The year of 2020 was marked by the onset of the COVID-19 pandemic. The pandemic left a profound impact on global economic activities and international trade, primarily through three channels: supply chain and trade flow disruptions, demand shifts, and government policy responses.

On December 31, 2019, China reported an outbreak of pneumonia cases to the World Health Organization (WHO). A novel coronavirus associated with these cases—severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2—was eventually identified. The infectious disease caused by this newly discovered coronavirus was named COVID-19. As the year unfolded, COVID-19 rapidly spread across the world. On March 11, 2020, the WHO declared it a pandemic. As the global health crisis evolved and progressed throughout the year, governments and businesses implemented various restrictive measures to help contain the spread of the virus, such as national lockdowns; closing or limiting occupancy of schools, offices, and factories; and international travel restrictions. These measures contributed to major disruptions to global supply chains and trade flows, leading to a shortage of goods, including components and parts, as well as the significant reduction of global air and sea shipments.

The COVID-19 pandemic also created demand shifts. With travel restrictions and social distancing in place, global demand for certain goods (e.g., petroleum products and transportation equipment) and services (e.g., transport and travel services) fell sharply, while global demand for other goods, including COVID-19 related medical goods (e.g., masks, surgical gowns), surged. To mitigate potential shortage of key supplies, many countries implemented temporary export restrictions and/or import liberalizations on personal protective equipment (PPE), food, and certain other products, which created further disruption in international trade.

Global Macroeconomic Trends

Global gross domestic product (GDP): In 2020, the global COVID-19 pandemic caused a worldwide economic recession. Global GDP contracted by an estimated 3.3 percent in 2020, compared to an expansion of 2.8 percent in 2019. The pandemic-induced economic decline was felt by most countries at all levels of economic development. Advanced economies contracted by an estimated 4.7 percent, while emerging market and developing economies contracted by an estimated 2.2 percent in 2020. The real GDP of the United States fell by 3.5 percent, less than the average of advanced economies. China was one of the few economies that expanded in 2020, growing by 2.3 percent, though still well below its 2019 growth rate of 5.8 percent.

Manufacturing output: In 2020, annual global manufacturing output declined by an estimated 4.1 percent. The biggest decline of manufacturing output occurred during the second quarter, followed by a strong recovery in the third and fourth quarters. Although global manufacturing output in the fourth quarter of 2020 was higher than the same quarter of 2019, output for the full year remained lower. In 2020, manufacturing output declined by about 8 percent in the North American region (including only the United States and Canada), the sharpest contraction across all regions.

Labor: According to the International Labour Organization (ILO), labor markets around the world were disrupted on a historically unprecedented scale in 2020. Global working hours are estimated to have fallen by 8.8 percent in 2020, driven by workers losing employment and a reduction in working hours for workers who remained employed. This decline in working hours is equivalent to losing approximately 255 million full-time jobs globally, four times greater than the decline that happened during the 2008–09 global financial crisis. Employment losses were higher for women than for men, and for younger workers than for older workers. Labor markets in accommodation and food services, other services, and transportation and storage services were hit the hardest.

Foreign direct investment (FDI): According to the United Nations Conference on Trade and Development (UNCTAD), global FDI inflows dropped by 34.7 percent from $1.5 trillion in 2019 to $999 billion in 2020. This is the lowest level since 2005 and nearly 20 percent below the nadir after the 2008–09 global financial crisis. The decline in global FDI inflows was significantly sharper than the falls in global GDP and trade, and was concentrated in developed countries. FDI inflow to the United States declined by 40.2 percent to $156 billion in 2020, though it remained the largest FDI recipient in the world. China and India are among the few economies that experienced an increase in FDI inflows in 2020.

Exchange rate: In 2020, the value of the U.S. dollar fluctuated considerably relative to a basket of other major global currencies. During the early months of the year, the dollar appreciated significantly vis-à-vis a broad index of global currencies, increasing by 6.6 percent between December 2019 and April 2020. In the remainder of 2020, the value of the U.S. dollar trended downward from its peak. By the end of 2020, the U.S. broad dollar index had decreased by 3.3 percent compared to its value at the end of 2019.

Global Trade Trends

Global merchandise trade: In 2020, global merchandise trade in value term dropped by 7.6 percent from the 2019 level, compared to a decline of 2.8 percent from 2018 to 2019. Based on the limited, preliminary merchandise trade statistics, global trade of most products experienced a decline from the 2019 level. Petroleum products and transportation equipment experienced the largest declines in both absolute dollar value and in percentage change. Nonmonetary gold ores, COVID-19 related medical goods (e.g., PPE), and computers were among the few product groups which experienced an increase in global trade.

Global services trade: Preliminary available data for 2020 indicate that global commercial services trade declined by 19.0 percent from the 2019 level. Travel services and transport services experienced the largest declines in global trade in 2020. Of these two categories, air passenger and freight transport services were the most adversely impacted by the COVID-19 pandemic. Business services, financial services, and telecommunications services were among the services sectors that fell less precipitously in 2020, likely due to the ability of providers to deliver these services through digital networks.

Key Developments in 2020

Administration of U.S. Trade Laws and Regulations

Safeguard investigations: During 2020, the United States had two global safeguard measures in effect under the Trade Act of 1974 (Trade Act), one on solar cells and modules and the other on large residential washers. The U.S. International Trade Commission (Commission, or USITC) conducted and completed two separate safeguard proceedings under section 204(a) of the Trade Act with respect to the measure on solar cells and modules, a mid-term monitoring proceeding and a proceeding to provide advice on possible modification of the measure. The Commission also conducted an investigation under section 204(c) of the Trade Act with respect to a possible extension of the safeguard measure on large residential washers. In September 2020, the Commission instituted a new global safeguard investigation under section 202(b) of the Trade Act with respect to imports of fresh, chilled, or frozen blueberries. In December 2020, at the request of the U.S. Trade Representative (Trade Representative), the Commission instituted two monitoring investigations under section 332(g) of the Tariff Act of 1930 with respect to imports of fresh or chilled strawberries, and imports of fresh or chilled bell peppers, in accordance with the perishable agricultural provision in section 202(d)(1) of the Trade Act.

Section 301 investigations: Active section 301 investigations in 2020 involved technology transfer, intellectual property, and innovation practices in China; taxes on digital services proposed or adopted by France and 10 other jurisdictions; large civil aircraft subsidies by the European Union (EU) and certain member states; and currency and timber-related activities in Vietnam.

Technology transfer, intellectual property, and innovation practices in China: In 2020, additional duties remained in force on products on Lists 1, 2, 3, and 4A. The Office of the U.S. Trade Representative (USTR) implemented a process by which U.S. importers could request the exclusion from additional duties of products covered under the lists. The first tranche of approved exclusions expired in December 2019 and the last in October 2020. The Trade Representative approved 549 requests for extensions of these exclusions. In December 2020, the Trade Representative determined to further extend product exclusions, or otherwise modify its determinations to remove section 301 duties on certain medical-care products to address the COVID-19 pandemic.

Digital services taxes (DSTs): In December 2019, the Trade Representative determined that the DST is actionable under the Trade Act. In July 2020, the Trade Representative determined that the appropriate action was the imposition of additional duties on certain French products but suspended the imposition for 180 days to allow for additional time to try to resolve the matter. Other trading partners also considered or adopted DSTs in 2020. On June 2, 2020, the Trade Representative initiated section 301 investigations of DSTs adopted or under consideration in 10 jurisdictions: Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom (UK). These investigations were ongoing at the end of 2020.

Large civil aircraft subsidies: : In 2020, USTR conducted reviews of the countermeasure actions implemented by the United States in 2019, modifying the list of products subject to duties and the amounts of the duties.

Vietnam currency and timber The Trade Representative initiated two new section 301 investigations involving Vietnam in 2020. The first involves Vietnam’s acts, policies, and practices related to the alleged undervaluation of its currency. The second involves acts, policies, and practices related to Vietnam’s import and use of illegally harvested or traded timber. Both investigations were ongoing in 2020.

Special 301 investigations: USTR conducts an annual review of the state of intellectual property (IP) rights enforcement and protection among U.S. trading partners pursuant to section 182 of the Trade Act (also known as “special 301”). To aid in the administration of the statute, USTR creates a priority watch list and watch list under the special 301 provisions to identify countries with particular IP-related problems. In its 2020 Special 301 Report, USTR placed 10 countries on its priority watch list: Algeria, Argentina, Chile, China, India, Indonesia, Russia, Saudi Arabia, Ukraine, and Venezuela.

Antidumping duty (AD) investigations: The Commission instituted 85 new antidumping investigations under title VII of the Tariff Act of 1930, and made 89 preliminary determinations and 29 final determinations in 2020. The U.S. Department of Commerce (USDOC) issued 21 antidumping duty orders on 10 products from 11 countries in 2020 as a result of the affirmative USDOC and Commission determinations.

Countervailing duty (CVD) investigations: The Commission instituted 26 new countervailing duty investigations under title VII of the Tariff Act of 1930, and made 30 preliminary determinations and 19 final determinations during 2020. The USDOC issued 13 countervailing duty orders on eight products from six countries in 2020 as a result of the affirmative USDOC and Commission determinations.

AD/CVD Reviews: The Commission instituted 64 reviews of existing AD/CVD orders or suspended investigations, as required by law, either five years after initial publication or five years after publication of a subsequent determination to continue them. The Commission completed 75 reviews, resulting in the continuation of 71 AD/CVD orders.

Section 129 determinations: Neither the USDOC nor the Commission made any determinations under section 129 of the Uruguay Round Agreements Act during 2020, nor were any proceedings in process.

Section 337 investigations: During 2020, there were 122 active investigations and ancillary proceedings under section 337 of the Tariff Act of 1930 alleging unfair import practices, such as patent infringement. Of the 57 new proceedings instituted in 2020, 48 were new section 337 investigations and 9 were new ancillary (secondary) proceedings relating to previously concluded investigations. The Commission completed a total of 68 section 337 investigations and ancillary proceedings in 2020. Of the 31 investigations in which the Commission rendered a final determination on the merits, the Commission found a violation of section 337 in 21 investigations and no violation in 10 investigations. The remaining 24 investigations were terminated based on settlement, consent order, complaint withdrawal, or other good cause. The Commission issued 9 general exclusion orders, 13 limited exclusion orders, and 63 cease and desist orders.

Section 337 proceedings active in 2020 involved a broad spectrum of products. Technology products remained the single largest category, with about 23 percent of the active proceedings involving computer and telecommunications equipment, and another 9 percent involving consumer electronics. Pharmaceuticals and medical devices were at issue in about 14 percent of the active proceedings, and automotive, manufacturing, and transportation products were also at issue in about 14 percent of the active proceedings. Small consumer products were at issue in about 7 percent of the proceedings and lighting products were also at issue in about 7 percent of the active proceedings.

National security investigations: During 2020, the USDOC instituted three new investigations under the national security provisions in section 232 of the Trade Expansion Act of 1962. The three new investigations assessed the national security implications of imports of grain-oriented electrical steel, mobile cranes, and vanadium. The investigations relating to grain-oriented electrical steel and mobile crane imports were concluded and terminated in 2020. The investigation into vanadium was pending at the end of 2020.

No new section 232 measures were imposed by the President during 2020. Tariff increases imposed in 2017 under section 232 on certain steel and aluminum imports remained in place throughout 2020, with an adjustment in January 2020 to include certain derivative goods.

American Manufacturing Competitiveness Act of 2016: On August 10, 2020, the Commission submitted its 2020 final report under the American Manufacturing Competitiveness Act of 2016 (AMCA) to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance. The Commission’s report provided recommendations on 3,442 petitions for duty suspensions or reductions. As of the end of 2020, no bill had been introduced. Duty suspensions and reductions enacted under the Miscellaneous Tariff Bill Act of 2018 following the Commission’s 2017 final report under the AMCA expired at the end of 2020.

Trade Adjustment Assistance (TAA): The U.S. Department of Labor (USDOL) administers the TAA for Workers Program, while the USDOC administers the TAA for Firms Program. In fiscal year (FY) 2020, the USDOL received 1,183 petitions, a decline from 1,346 petitions filed in FY 2019. The USDOL certified 770 petitions covering 96,111 workers as eligible to apply for benefits and services under the TAA for Worker Program, and denied 302 petitions covering 26,334 workers. In FY 2020, the USDOC certified 80 petitions as eligible for assistance under the TAA for Firms Program and approved 70 adjustment protocols.

Trade Preferences Programs

U.S. imports for consumption entered under trade preference programs have declined in recent years. Following a 17.5 percent decline in 2019, the value of U.S. imports entered under preference programs declined further by 27.9 percent to $21.7 billion in 2020. U.S. imports entered under the African Growth and Opportunity Act (AGOA) and the U.S. Generalized System of Preferences (GSP) had the largest decreases in value in 2020. However, the utilization rate of trade preference programs, measured by imports entered under specified tariff preference programs as a share of total imports under program-eligible HTS codes, increased from 47.5 percent in 2019 to 52.6 percent in 2020. The utilization rates of AGOA and the Caribbean Basin Economic Recovery Act (CBERA) declined, while the utilization rates of other programs improved in 2020.

Generalized System of Preferences (GSP): U.S. imports under GSP dropped by 20.1 percent to $16.8 billion in 2020. These imports accounted for 11.1 percent of total U.S. imports from all GSP beneficiary countries and nearly 1 percent of U.S. imports from all countries. Five beneficiary countries—Thailand, Indonesia, Brazil, Cambodia, and the Philippines—accounted for about 76 percent of GSP imports. In October 2020, based on Thailand’s failure to provide equitable and reasonable market access for U.S. pork products, USTR announced the suspension of trade preferential treatment on imports of certain GSP-eligible products from Thailand (about $817 million), effective December 30, 2020. In the same announcement, USTR closed eligibility reviews for Georgia, Uzbekistan, and Indonesia with no loss of GSP benefit, and USTR closed the GSP designation review for Laos with no eligibility granted. In addition, USTR initiated GSP eligibility reviews for Eritrea and Zimbabwe based on worker rights concerns; these reviews were ongoing at the end of 2020.

Nepal Trade Preferences Program (NTPP): U.S. imports under NTPP dropped by almost 22 percent to $2.4 million in 2020. These imports represented 2.8 percent of total U.S. imports from Nepal, a decline from 3.4 percent in 2019.

African Growth and Opportunity Act (AGOA): In 2020, 38 sub-Saharan African (SSA) countries were eligible for AGOA preferential benefits. Of these countries, 27 were eligible for AGOA textile and apparel benefits for all or part of 2020. As a result of the 2020 annual AGOA eligibility review, the Democratic Republic of Congo’s AGOA eligibility was reinstated, effective January 1, 2021. Therefore, 39 SSA countries are eligible for AGOA benefits in 2021.

In 2020, the value of U.S. imports that entered free of duty from beneficiary countries under AGOA (including imports under GSP) was $4.1 billion, a decline of 50.8 percent from 2019. These imports accounted for 22.4 percent of total imports from AGOA countries in 2020. The decline in U.S. imports under AGOA between 2019 and 2020 mainly reflected the lower value of imports of crude petroleum and macadamia nuts under the program.

Caribbean Basin Economic Recovery Act (CBERA): At yearend 2020, 17 countries and dependent territories were eligible for CBERA preferences, among which 8 were eligible for the Caribbean Basin Trade Partnership (CBTPA) preferences. CBTPA was extended for 10 years and is now set to expire in September 2030. In 2020, the value of U.S. imports entered under CBERA declined by 4.8 percent to $1.7 billion. Haiti was the leading supplier of U.S. imports under CBERA in 2020, followed by Trinidad and Tobago. Imports entered under CBERA accounted for 33.9 percent of all imports from CBERA beneficiary countries in 2020.

Haiti Initiatives: U.S. imports from Haiti under the umbrella of CBERA are brought in under CBTPA, the Haitian Hemispheric Opportunity through Partnership Encouragement Acts of 2006 and 2008 (HOPE Acts), and the Haiti Economic Lift Program of 2010 (HELP Act). The 2006, 2008, and 2010 amendments to CBERA expanded the duty-free benefits available only to Haiti. Nearly 98 percent of U.S. imports of textiles and apparel from Haiti entered under one of the CBERA-related programs. Of these, a growing portion of the duty-free trade relies on the more liberal HOPE/HELP preference rules. Imports under HOPE/HELP represented 74.9 percent of total U.S. textile and apparel imports from Haiti in 2020, up from 72.9 percent in 2019 and 69.5 percent in 2018.

The World Trade Organization (WTO)

WTO developments: Due to the COVID-19 pandemic, the Twelfth WTO Ministerial Conference was postponed from June 2020 to November 2021. During 2020, one priority of the General Council became the selection of a new WTO Director-General. Negotiations on selected plurilateral agreements, such as electronic commerce, fisheries subsidies, and services, continued. In addition, in October 2020, a group of developing countries, led by South Africa and India, called for a waiver for all WTO members of certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights in relation to the prevention, containment, and treatment of COVID-19.

WTO dispute settlement: During 2020, WTO members filed 5 new requests for dispute settlement consultations. This number was the lowest number for any year since the establishment of the WTO in 1995, and sharply lower than the 20 requests filed during 2019 and 38 filed during 2018. Only 5 countries filed requests, and no country filed more than one request. The requests were filed by Japan; Turkey; Peru; Hong Kong; and Australia. The named respondents were Republic of Korea (South Korea or Korea), the EU, Brazil, the United States, and China. The one dispute filed against the United States was by Hong Kong, which alleged that certain U.S. measures concerning the origin marking requirement applicable to goods produced in Hong Kong appear to be inconsistent with certain articles of the General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Rules of Origin, and the Technical Barriers to Trade (TBT) Agreement.

During 2020, the WTO Appellate Body issued one report in a dispute to which the United States was a party (DS505: United States—Countervailing Measures on Supercalendered Paper from Canada). The WTO Dispute Settlement Body (DSB) adopted the report on March 5, 2020.  The United States considered both the Appellate Body report and the DBS’s adoption of the report invalid. In the U.S. view, the Appellate Body report was invalid inter alia because two of the three presiding Appellate Body members’ terms had expired and therefore the report could only be adopted by positive consensus, which was lacking because the United States objected to the report’s adoption.

WTO dispute settlement panels issued reports in two disputes to which the United States was a party. (DS533: United States—Countervailing Measures on Softwood Lumber from Canada; and DS543: United States—Tariff Measures on Certain Goods from China). In both disputes, the United States notified the DSB of its decision to appeal certain issues of law covered in the panel report.

U.S. concerns about WTO dispute settlement: A report issued by USTR in February 2020, Report on the Appellate Body of the World Trade Organization, set out U.S. concerns about the operation of the WTO dispute settlement, particularly at the Appellate Body level. This February 2020 Report identified seven areas of concerns in which the Appellate Body has exceeded its authority, stating the Appellate Body has “taken away rights and imposed new obligations through erroneous interpretations of WTO agreements.” The United States continued to express such concerns at DSB meetings during 2020 about the Appellate Body’s disregard for the rules set by WTO members, adding to or diminishing rights or obligations under the WTO Agreement. The United States also expressed concern about appellate reports going far beyond the text of the WTO agreements setting out WTO rules in areas as varied as subsidies, antidumping and countervailing duties, standards under the TBT Agreement, and safeguards. The United States stated that, as a result, the United States was not prepared to agree to launch the process to fill vacancies on the Appellate Body without WTO members engaging with and addressing these critical issues.

Selected Regional and Bilateral Activities

Organisation for Economic Co-operation and Development (OECD): The OECD ministerial council meeting was held virtually October 28–29, 2020, covering a range of topics such as macroeconomic policies and recovery priorities from the pandemic, and employment and social protection. In 2020, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) continued working on building consensus on addressing digital taxation issues. Members agreed that the current proposal, known as the two-pillar approach, provides a foundation for a future agreement. They endorsed the Reports on the Blueprints of Pillar One and Pillar Two for public consultation, while acknowledging that different views on some political and technical issues remain and need to be bridged in the future multilateral process.

Asia-Pacific Economic Cooperation (APEC): In 2020, under Malaysia’s leadership, APEC member economies highlighted the theme of “Optimizing Human Potential towards a Resilient Future of Shared Prosperity: Pivot. Prioritise. Progress,” and focused on three priority areas: “Improve the Narrative of Trade and Investment; Inclusive Economic Participation through Digital Economy and Technology​; and Driving Innovative Sustainability.” Throughout 2020, APEC implemented initiatives to improve responses to the COVID-19 pandemic, support various ongoing negotiations under the WTO, and promote digital economy and e-commerce. In addition, APEC conducted the final review of APEC’s Progress towards the Bogor Goal, and identified a few areas for further improvement.

Trade and Investment Framework Agreements (TIFAs): At the end of 2020, the United States had entered 59 TIFAs, including the latest one with Fiji signed in October 2020. Several TIFA Council meetings and discussions took place in 2020, including those with Argentina, Bangladesh, Ecuador, Nepal, Pakistan, and Paraguay. On October 19, 2020, the United States and Brazil updated the U.S.-Brazil Agreement on Trade and Economic Cooperation with a new Protocol on Trade Rules and Transparency. On December 8, 2020, the United States and Ecuador updated the U.S.-Ecuador Trade and Investment Council Agreement by adding a Protocol on Trade Rules and Transparency.

U.S. Free Trade Agreements

As of December 31, 2020, the United States was party to 14 free trade agreements (FTAs) involving a total of 20 countries (table ES.1).

U.S. imports under FTAs: U.S. imports for consumption entered under FTA provisions decreased by over 14 percent to $351 billion in 2020. FTA imports accounted for almost 39 percent of total U.S. imports from FTA partners and 15 percent of U.S. imports from the world. FTA imports from all partners fell in 2020, except for Morocco and Singapore, which grew by 19.3 percent and 8.5 percent, respectively. FTA imports entered under NAFTA/USMCA fell by the largest amount (−$51.8 billion), followed by FTA imports entered under CAFTA-DR, which fell by over $2.4 billion. FTA imports from Bahrain suffered the largest percentage decrease, down by 42 percent.

Table ES.1 U.S. free trade agreements (FTAs) in force as of December 31, 2020

FTA = free trade agreement; TPA = trade promotion agreement.

Source: USTR, “ Free Trade Agreements ,” accessed April 14, 2021.

Note:

^a The U.S.-Jordan FTA was fully implemented on January 1, 2010.

^b CAFTA-DR is an FTA between the United States with six developing economies: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic. All parties signed CAFTA-DR on May 28, 2004, except the Dominican Republic, which signed in August 2004. CAFTA-DR entered into force between the United States and Costa Rica on January 1, 2009, between the United States and the Dominican Republic on March 1, 2007, between the United States and Guatemala on July 1, 2006, between the United States and Honduras and Nicaragua on April 1, 2006, and between the United States and El Salvador on March 1, 2006.

^c On July 1, 2020, the USMCA replaced the North America Free Trade Agreement (NAFTA) which entered into force on January 1, 1994.

U.S.-Mexico-Canada Trade Agreement (USMCA) Implementation: On January 29, 2020, the President signed the United States-Mexico-Canada Agreement Implementation Act (USMCA Implementation Act) into law. On July 1, 2020, the USMCA entered into force superseding the North American Free Trade Agreement (NAFTA).

Rules of origin: On June 3, 2020, in coordination with Mexico and Canada, the United States released the Uniform Regulations. The Uniform Regulations are comprised of two documents. The “Origin Procedures” document concerns “the interpretation, application, and administration of Chapter 5 (Origins Procedures), Chapter 6 (Textiles and Apparel Goods), and Chapter 7 (Customs Administration and Trade Facilitation).”  The “Rules of Origins (ROOs)” document concerns “the interpretation, application, and administration of Chapter 4 (Rules of Origin) and related provisions in Chapter 6 (Textiles and Apparel Goods).”  On July 2, 2020, the USMCA Free Trade Commission issued its first decision, agreed to, and signed by the three countries. The decision includes the adoption of the Uniform Regulations.

Automotive rules: The Interagency Committee on Trade in Automotive Goods was established on February 28, 2020, to prepare relevant information on the implementation, enforcement, and modification of the USMCA provisions that relate to automotive goods, including the automotive ROOs and the alternative staging regime. USTR announced that 13 companies whose requests for alternative staging have been approved.

Environment: The Interagency Environment Committee for Monitoring and Enforcement was established on February 29, 2020, to monitor and enforce the USMCA environment obligations. In parallel with the USMCA Environment Chapter, the Environment Cooperation Agreement (ECA) entered into force on July 1, 2020, which updates and supersedes the North American Agreement on Environmental Cooperation (NAAEC). The ECA retains and modernizes the Commission on Environment and Cooperation (CEC) established under the NAAEC.

Labor: The Interagency Labor Committee for Monitoring and Enforcement (ILC) was established on April 28, 2020, to coordinate the implementation and maintenance of the USMCA labor obligations, to monitor Mexico's labor reforms, and to enforce the USMCA labor provisions. The ILC established the Independent Mexico Labor Expert Board to monitor and evaluate the implementation and maintenance of Mexico’s labor reform, as well as its compliance with labor obligations. The Board delivered its first Interim Report on December 12, 2020. The report indicates that Mexico has made significant progress in implementing the labor reform bill which was signed into law on May 1, 2019. The report also acknowledges that many of the changes promised to improve the lives of workers—such as union democracy, freedom of association and collective bargaining—remain to be implemented.

Cross border long-haul trucking services: The USMCA Implementation Act requires that upon filing of a petition or request, the Commission undertakes an investigation and makes a determination as to whether “a grant of authority”—a registration granted by U.S. authorities to persons of Mexico to provide services in the United States—has caused material harm or threatens material harm to U.S. suppliers of cross-border long-haul trucking services, and if affirmative, to recommend a remedy to the President. On July 10, 2020, the Commission published a notice of interim rulemaking in the Federal Register to amend its rules of practice and procedure to implement the provisions of the USMCA Implementation Act regarding its investigations of cross-border long-haul trucking services.

USMCA dispute settlement: The main dispute settlement mechanisms of the USMCA are included in Chapter 10 (Trade Remedies), Chapter 14 (Investment), and Chapter 31 (Dispute Settlement). At the end of 2020, there were three active cases under review by binational panels established under Chapter 10. Two cases challenge the USDOC’s antidumping and countervailing duty orders on softwood lumber from Canada and one challenges the Canadian investigating authority’s final antidumping determination on gypsum, sheet, or panel originating in or exported from the United States.

In addition, there were two cases filed under the provisions of Chapter 31. The United States requested consultations with Canada on December 9, 2020 regarding Canada’s administration of its 14 tariff-rate quotas on dairy products, the first panel request ever filed under Chapter 31. The parties held consultations on December 21, 2020 but did not resolve the dispute. On December 22, 2020, Canada requested consultations with the United States under Chapter 31 regarding the imposition and ongoing application of U.S. safeguard tariffs on solar photovoltaic products, including from Canada. On December 30, 2020, Mexico requested to join the consultations as a third party.

NAFTA dispute settlement: The dispute settlement provisions of NAFTA—found in Chapter 11 (Investment), Chapter 19 (Review and Dispute Settlement in Antidumping/Countervailing Duty Matters), and Chapter 20 (State-to-State Dispute Settlement)—cover a variety of areas. As of December 31, 2020, there were 11 pending cases under Chapter 11. Pursuant to the USMCA Annex 14-C, which addresses the transition between NAFTA and the USMCA for investor-state disputes, these cases may proceed to their conclusion in accordance with Chapter 11 of NAFTA. There were 8 active binational panels under Chapter 19. Pursuant to the USMCA Chapter 34, which provides the transitional provisions from NAFTA, these panel reviews may proceed to their completion in accordance with Chapter 19 of NAFTA. There were no pending disputes under Chapter 20 in 2020.

Developments with other FTAs already in force: U.S. officials engaged with a number of partners representing member states of the 14 U.S. FTAs in force during 2020. Discussions with U.S. FTA partners covered a range of trade- and investment-related issues, in addition to the labor and environmental provisions included in most of these agreements. A new U.S.-Israel FTA Annex on certificates of origin entered into force in 2020, which allows streamlined Israeli customs declarations for U.S. goods entering under the FTA. In January 2020, the U.S.-Morocco FTA Agriculture Subcommittee and Sanitary and Phytosanitary (SPS) Subcommittee held meetings, in which representatives finalized export certificates for U.S. breeding and fattening cattle being shipped to Morocco and discussed the use of common names for meats and cheeses in Moroccan markets. During 2020, Parties to the U.S.-Colombia TPA and CAFTA-DR finalized modifications to product-specific rules of origin of the respective agreements, which took effect in February 2020 and November 2020.

FTA Negotiations: The United States and the UK held five rounds of FTA negotiations virtually from May to October 2020.  On February 6, 2020, President Donald Trump announced U.S. intent to initiate trade agreement negotiations with Kenya, which set in motion the negotiation process that included: The President’s notification to Congress of the intent to negotiate an FTA with Kenya; the USTR’s solicitation of public comment on the potential U.S.-Kenya trade agreement and publication of the negotiating objectives; and the launch of negotiations including two virtual rounds of negotiations as of November 2020.

U.S. Trade in 2020

U.S. Trade Overview

U.S. merchandise trade: U.S. two-way merchandise trade declined by 9.0 percent between 2019 and 2020. U.S. merchandise exports decreased by 12.9 percent to $1.4 trillion in 2020, while U.S. merchandise imports decreased by 6.4 percent to $2.3 trillion in 2020. As a result, the U.S. merchandise trade deficit increased by almost 6 percent to $905 billion in 2020 (figure ES.1). U.S. total trade of transportation equipment and energy-related products experienced the largest decreases. Ten of the 11 broad sectors that make up U.S. merchandise trade had a trade deficit. The three sectors with the largest trade deficits are miscellaneous manufactures, chemicals and related products, and electronic products. Energy-related products was the only sector with a trade surplus.

U.S. services trade: U.S. cross-border total services trade declined by 21.4 percent between 2019 and 2020. U.S. exports of services fell by 21.0 percent to $692 billion in 2020, while U.S. imports of services declined by 22.1 percent to $458 billion in 2020. As a result, the U.S. surplus in services decreased by 18.6 percent to $234 billion (figure ES.1). U.S. trade in each of the major services categories experienced decreases in 2020, except for insurance services.

In billions of dollars. Underlying data for this figure can be found in appendix table B.1.

Source: USITC DataWeb/Census, accessed April 14, 2021; USDOC, BEA, “International Transactions,” March 23, 2021, Table 1.2 “U.S. International Transactions, Expanded Detail.”

Developments with Selected Major Trading Partners

This report covers U.S. trade development in 2020 with its top five trading partners (the EU, [1] China, Mexico, Canada, and Japan), and two other major trading partners (the UK and India) based on their recent trade policy activities. Two-way merchandise trade and cross-border total services trade with each trading partner are presented in figures ES.2 and ES.3, respectively.

In billions of dollars. EU data do not include the UK; underlying data for this figure can be found in appendix table B.2.

Source: USITC DataWeb/Census, accessed April 14, 2021.

Figure ES.3 U.S. total services trade with selected major trading partners, 2020

In billions of dollars. EU data do not include the UK; underlying data for this figure can be found in appendix table B.3.

Source: USDOC, BEA, “ International Transactions ,” March 23, 2021, Table 3.1 “International Trade in Services.”

European Union (EU): The EU, viewed as a single market, was the United States’ largest merchandise trading partner in 2020. U.S. merchandise trade with the EU decreased by 10.0 percent to $648 billion in 2020, representing 17.2 percent of U.S. total merchandise trade with the world. The EU remained the top U.S. services trading partner in 2020. U.S. total services trade with the EU decreased by 18.6 percent to $282 billion in 2020, representing 24.5 percent of U.S. total services trade with the world. Among the major developments in the U.S.-EU trade relations in 2020 were the successful negotiation of an agreement on tariff reduction on EU lobster imports from the United States and U.S. imports of certain products from the EU, and the invalidation of the EU-U.S. Privacy Shield Framework by the Court of Justice of the European Union.

China: In 2020, China was the United States’ second-largest merchandise trading partner. U.S. merchandise trade with China grew by 0.3 percent to $560 billion in 2020, representing 14.9 percent of U.S. total merchandise trade with the world. In 2020, China was the United States’ sixth-largest services trading partner. U.S. total services trade with China decreased by 30.3 percent to $53 billion in 2020, representing 4.6 percent of U.S. total services trade with the world. In 2020, a major focus of U.S.-China trade relations was the signing of the “Phase One Agreement” on January 15, 2020. The Agreement requires structural reforms and other changes to China’s economic and trade regime in the areas of (1) intellectual property, (2) technology transfer, (3) agriculture, (4) financial services, and (5) currency and foreign exchange. It also includes commitments from China to import various U.S. goods and services in 2020 and 2021 in an amount that is at least $200 billion more than China’s annual level of imports for those goods and services in 2017. The Agreement concludes with a chapter introducing a dispute resolution system.

Mexico: Mexico was the United States’ third-largest merchandise trading partner in 2020. U.S. merchandise trade with Mexico decreased by 12.4 percent to $538 billion in 2020, representing 14.3 percent of U.S. total merchandise trade with the world. Mexico was the United States’ ninth-largest services trading partner in 2020. U.S. total services trade with Mexico decreased by 36.0 percent to $40 billion in 2020, representing 3.5 percent of U.S. total services trade. Among the major developments in the U.S.-Mexico trade relations in 2020 were the implementation of the USMCA, discussions regarding section 232 tariffs on electrical steel transshipped through Mexico from outside the North American region, and U.S. government efforts to enact seasonal produce protections.

Canada: Canada dropped in position to become the United States’ fourth-largest merchandise trading partner in 2020. U.S. merchandise trade with Canada decreased by 14.1 percent to $526 billion in 2020, representing 13.9 percent of U.S. total merchandise trade with the world. Canada was the United States’ third-largest services trading partner in 2020. U.S. total services trade with Canada decreased by 24.5 percent to $80 billion in 2020, representing 7.0 percent of U.S. total services trade with the world. Among the major developments in the U.S.-Canada trade relations in 2020 were the implementation of the USMCA, the filing of two disputes under Chapter 31 of the USMCA, and the reimposition of section 232 tariffs on imports of certain primary aluminum from Canada.

Japan: Japan continued to be the United States’ fifth-largest merchandise trading partner in 2020. U.S. merchandise trade with Japan decreased by 15.7 percent to $184 billion in 2020, representing 4.9 percent of U.S. total merchandise trade with the world. Japan dropped in position to become the United States’ fifth-largest services trading partner in 2020. U.S. total services trade with Japan decreased by 20.1 percent to $69 billion in 2020, representing 6.0 percent of U.S. total services trade with the world. Among the major developments in the U.S.-Japan trade relations in 2020 were the entry into force of the U.S.-Japan Trade Agreement and the U.S.-Japan Digital Trade Agreement on January 1, 2020, and the trilateral meeting in January 2020 between the United States, Japan, and the EU on industrial subsidies.

United Kingdom (UK): The UK was the United States’ seventh-largest merchandise trading partner in 2020. U.S. merchandise trade with the UK decreased 17.5 percent to $109 billion in 2020, representing 2.9 percent of U.S. total merchandise trade with the world. The UK remained the United States’ second-largest services trading partner in 2020. U.S. total services trade with the UK decreased by 22.4 percent to $109 billion in 2020, representing 9.5 percent of U.S. total services trade with the world. The UK officially exited the EU on January 31, 2020.  Among the major developments in the U.S.-UK trade relations in 2020 were several meetings regarding regulation and technology in cross-border financial services trade, the enactment of several agreements preserving the terms of existing U.S.-EU agreements in future trade between the United States and the UK, and the announcement of the UK’s post-Brexit position in existing U.S.-EU trade disputes on large civil aircraft and digital services taxes.

India: India became the United States’ 10th-largest merchandise trading partner in 2020. U.S. merchandise trade with India decreased by 14.6 percent to $79 billion in 2020, representing 2.1 percent of U.S. total merchandise trade with the world. India was the United States’ seventh-largest services trading partner in 2020, rising one place since 2019. U.S. total services trade with India decreased by 20.0 percent to $43 billion in 2020, representing 3.8 percent of U.S. total services trade with the world. Among the major developments in the U.S.-India trade relations in 2020 were talks on exploring a potential trade agreement, a dispute regarding India’s digital services tax, and U.S. concerns regarding India’s intellectual property protection.

Chapter 1
Global Trade Environment under the COVID-19 Pandemic

Introduction

Scope and Approach of the Report

This report provides information on the operation of the U.S. trade agreements program for calendar year 2020. Section 163(c) of the Trade Act of 1974 (19 U.S.C. 2213(c)) states that “the International Trade Commission shall submit to the Congress at least once a year, a factual report on the operation of the trade agreements program.” Section 1 of Executive Order 11846 defines the trade agreements program to include “all activities consisting of, or related to, the negotiation or administration of international agreements which primarily concern trade,” and section 163(a) of the Trade Act of 1974 sets out the types of information that the President is to include in his annual report to the Congress on the operation of the trade agreements program.

This report provides information on the activities defined in the Executive Order and, the elements set out in section 163(a), to the extent appropriate, where information is publicly available. This year marks the 72nd edition of the report prepared by the U.S. International Trade Commission.

Sources

This report is based on primary-source materials about U.S. trade programs and administrative actions pertaining to them. These materials chiefly reflect U.S. government reports, Federal Register notices, and news releases, including publications and news releases by the Commission and the Office of the U.S. Trade Representative (USTR). Other primary sources of information include publications of international institutions, such as the International Monetary Fund (IMF), World Bank, Organisation for Economic Co-operation and Development (OECD), World Trade Organization (WTO), Asia-Pacific Economic Cooperation (APEC), United Nations, and foreign governments. When primary-source information is unavailable, the report draws on professional journals, trade publications, and news reports for supplemental information.

Like past reports, The Year in Trade 2020: Operation of the Trade Agreements Program uses data from the U.S. Census Bureau (U.S. Census) of the U.S. Department of Commerce (USDOC) for U.S. merchandise trade statistics presented in chapters 2 through chapter 6. Most tables in the report present U.S. merchandise trade statistics using “total exports” and “general imports” [2] as measures, except for data on imports that have entered the United States with a claim of eligibility under trade preference programs and free trade agreements (FTAs), as in chapter 2 and chapter 5. Such data require an analysis of U.S. “imports for consumption”—the total of all goods that have been cleared by U.S. Customs and Border Protection (CBP) to enter the customs territory of the United States with required duties paid.

Chapters 6 also offers data on U.S. services trade. The information on U.S. cross-border total services trade is based on official statistics for 11 broad categories that are published by U.S. Bureau of Economic Analysis (BEA) under the USDOC. [3]

Also, much of the trade data used in the report, including U.S. merchandise and services trade data, are revised over time, so the trade statistics for earlier years in this report may not always match the data presented in previous reports.

Organization of the Report

This first chapter gives an overview of global trade environment under the COVID-19 pandemic. Chapter 2 covers the administration of U.S. trade laws and regulations in 2020, including tariff preference programs. Chapter 3 focuses on U.S. participation in the World Trade Organization (WTO), including developments in major WTO dispute settlement cases during 2020. Chapter 4 covers 2020 developments at the Organisation for Economic Co-operation and Development (OECD) and the Asian-Pacific Economic Cooperation (APEC), as well as developments involving trade and investment framework agreements (TIFAs). Chapter 5 describes U.S. negotiation of and participation in free trade agreements (FTAs) in 2020, and chapter 6 covers U.S. trade in 2020 and trade relations with selected major trading partners.

Global Trade Environment under the COVID-19 Pandemic in 2020

This section presents an overview of the unique global trade environment under the COVID-19 pandemic in 2020, highlighting global macroeconomic and trade trends, and the impact of the pandemic on key sectors.

The year of 2020 was marked by the onset of the COVID-19 pandemic. The pandemic left a profound impact on global economic activities, primarily through three channels: supply chain and trade flow disruptions, demand shifts, and government policy responses. As the pandemic evolved and progressed throughout the year (box 1.1), governments and businesses implemented various restrictive measures to help contain the spread of the virus, such as issuing national lockdowns; closing and limiting occupancy of schools, offices, and factories; and imposing travel restrictions. These measures contributed to major disruptions to global supply chains and trade flows, leading to a significant reduction of global air and sea shipments, as well as a shortage of goods, including components and parts. Figure 1.1 shows index values of the stringency of government response to the COVID-19 pandemic.

The COVID-19 pandemic also created demand shifts. With travel restrictions and social distancing in place, global demand for certain goods (e.g., petroleum products and transportation equipment) and services (e.g., transport and travel services) fell sharply, while global demand for other goods, including COVID-19 related medical goods (e.g., masks, surgical gowns, pharmaceutical products, hand sanitizer), surged. To mitigate potential shortage of key supplies, many countries imposed temporary export restrictions and/or import liberalizations on personal protective equipment (PPE), food, and certain other products, which created further disruption in international trade (figure 1.2 and 1.3). [4]

Chapter 2
Administration of U.S. Trade Laws and Regulations

This chapter surveys activities related to the administration of U.S. trade laws during 2020, covering import relief laws, laws against unfair trade practices, national security investigations, miscellaneous tariff bill reports under the American Manufacturing Competitiveness Act of 2016, trade adjustment assistance programs, and tariff preference programs. Tariff preference programs encompass the U.S. Generalized System of Preferences, the Nepal Trade Preferences Act, the African Growth and Opportunity Act, and the Caribbean Basin Economic Recovery Act, including the initiatives intended to aid Haiti.

Import Relief Laws

Safeguard Investigations

This section covers safeguard investigations conducted by the Commission during 2020, including under the global safeguard provisions in sections 201–204 of the Trade Act of 1974 (Trade Act), [89] and statutes implementing safeguard provisions in various bilateral free trade agreements involving the United States. [90]

Background

The safeguard provisions in sections 201–204 of the Trade Act set out a procedure under which the President may grant temporary relief to a domestic industry seriously injured by increased imports. The process begins at the Commission with the filing of a petition on behalf of a domestic industry, a request from the President or the U. S. Trade Representative, or a resolution from the House Committee on Ways and Means or the Senate Committee on Finance. Following receipt of a properly filed petition or a request or resolution, the Commission conducts an investigation to determine whether an article is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. If the Commission makes an affirmative determination, it recommends to the President the action that will address the serious injury or threat of serious injury, which may include a tariff or quota. The President makes the final decision on whether to take an action and, if so, the form and amount, subject to certain statutory limitations. The action may not exceed an initial period of four years and an overall period, with extensions, of eight years. [91]

The Commission must monitor industry developments during the period the action is in effect, and submit a report on its monitoring to the President and the Congress at the midpoint of the action if it exceeds three years. The Commission may also be required to conduct an investigation and make a determination in connection with any request for an extension of the action, and the President may request the Commission to provide advice regarding the effect on the industry of any reduction, modification, or termination of an action. After the action taken has terminated, the Commission must provide a report to the President and the Congress on the effectiveness of the action. [92] The statute also provides a procedure for provisional relief for perishable agricultural products pending completion of a Commission investigation and in the case of critical circumstances. [93]

Developments in 2020

During 2020, the United States had two global safeguard measures in effect, one on solar cells and modules, and one on large residential washers. [94] The President imposed both measures in February 2018 following receipt of affirmative serious injury determinations from the Commission. The measure on imports of solar cells and modules was imposed for four years, and the measure on imports of large residential washers was imposed for three years and one day. During 2020, the Commission conducted and completed two separate safeguard proceedings with respect to the measure on solar cells and modules, including (1) as required by section 204(a)(2) of the Trade Act, a midpoint monitoring review and report with respect to the progress and specific efforts of firms and workers in the domestic solar cells and modules industry to make a positive adjustment to import competition; [95] and (2) at the request of the President pursuant to section 204(a)(4) of the Trade Act, a proceeding to advise the President of its judgment as to the probable economic effect on the industry concerned of any reduction, modification, or termination of the safeguard measure on imports of solar cells and modules. [96]

The Commission also conducted an investigation under section 204(c) of the Trade Act with respect to a possible extension of the safeguard measure on large residential washers. Following receipt of a petition from Whirlpool Corporation on behalf of the domestic industry producing such washers, the Commission conducted an investigation to determine whether the safeguard action under section 203 of the Trade Act continues to be necessary to prevent or remedy serious injury and whether there is evidence that the industry is making a positive adjustment to import competition. The Commission made an affirmative determination. [97]

In September 2020, the Commission instituted a new global safeguard investigation under section 202(b) of the Trade Act with respect to imports of fresh, chilled, or frozen blueberries. The Commission instituted the investigation at the request of the U.S. Trade Representative. [98] The investigation was pending at the end of 2020, with the Commission required to make its determination and any recommendations, and to submit its report to the President by the end of March 2021. [99]

In December 2020, at the request of the U.S. Trade Representative, the Commission instituted two monitoring investigations under section 332(g) of the Tariff Act of 1930 with respect to imports of fresh or chilled strawberries, and imports of fresh or chilled bell peppers, in accordance with the perishable agricultural provision in section 202(d)(1) of the Trade Act. [100] Under that provision, and provided that the Commission has been monitoring imports of the product for at least 90 days, the domestic industry concerned can file a petition for import relief under section 202(b) of the Trade Act and in that petition seek provisional import relief pending completion of a full Commission investigation. In such a case, the Commission will have 21 days from receipt of a petition containing such a request to make a preliminary determination, and if affirmative, recommend a remedy to the President. The President has seven days from receipt of an affirmative Commission determination to proclaim any provisional relief. [101]

Laws against Unfair Trade Practices

Section 301 Investigations

Background

Section 301 of the Trade Act addresses unfair foreign practices affecting U.S. commerce. [102] Section 301 may be used to enforce U.S. rights under bilateral and multilateral trade agreements or respond to unjustifiable, unreasonable, or discriminatory foreign government practices that burden or restrict U.S. commerce. Interested persons may petition the U.S. Trade Representative (Trade Representative) to investigate foreign government policies or practices, or the Trade Representative may initiate an investigation.

In each investigation, the Trade Representative must seek consultations with the foreign government involved. If the matter is not resolved, section 304 of the Trade Act requires the Trade Representative to determine whether the practices in question fulfill any of three conditions: (1) they deny U.S. rights under a trade agreement; (2) they are unjustifiable, and burden or restrict U.S. commerce; or (3) they are unreasonable or discriminatory, and burden or restrict U.S. commerce. If the practices fulfill either of the first two conditions, the Trade Representative generally must take action. [103] If the practices are unreasonable or discriminatory and burden or restrict U.S. commerce, the Trade Representative determines whether action is appropriate and, if so, what action to take. [104] Section 301 authorizes a wide range of actions including the suspension of trade agreement concessions, the imposition of duties or other restrictions on the imports of goods or services, and entering into an agreement to eliminate the offending practice or provide the United States with compensatory benefits. Moreover, if a foreign country fails to comply with such an agreement, or to implement a WTO recommendation, the Trade Representative must determine what further action should be taken under section 301. [105]

Developments in 2020

Active section 301 investigations in 2020 involved technology transfer, intellectual property, and innovation practices in China; taxes on digital services proposed or adopted in France and 10 other jurisdictions; large civil aircraft subsidies by the EU and certain member states; and currency and timber-related activities in Vietnam. [106]

China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

On August 18, 2017, at the direction of the President, the Trade Representative initiated an investigation of China’s laws, policies, practices, or actions that might be unreasonable or discriminatory and harming U.S. intellectual property rights (IPRs), innovation, or technology development. [107] The Office of the U.S. Trade Representative (USTR) published the findings of its investigation in March 2018. [108] The Trade Representative then issued a notice finding the following four categories of acts, policies and practices of China to be unreasonable or discriminatory and to constitute a burden or restriction on U.S. commerce, and thus actionable under the Trade Act:

1. China’s use of foreign ownership restrictions and administrative processes to require or pressure technology transfer from U.S. companies.

2. China's regime of technology regulations that force U.S. companies seeking to license technologies to Chinese entities to do so on nonmarket-based terms.

3. China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to obtain cutting-edge technologies and generate technology transfer to Chinese companies.

4. China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies to access sensitive commercial information and trade secrets. [109]

In 2018, the Trade Representative initiated a WTO dispute to address the second category of actions. The Trade Representative requested a suspension of the WTO proceedings in June 2019, and the proceedings remain suspended. [110] To address the three other categories, and at the direction of the President, the Trade Representative imposed a series of additional duties on products of China. USTR also opened a process for stakeholders to request exclusions from the additional duties.

Following hearings and public comments, the Trade Representative imposed additional duties on products of China identified on a series of lists. In June 2018, the Trade Representative imposed an additional 25 percent duty on products on List 1; these products had an approximate annual trade value of $34 billion. In August 2018, the Trade Representative imposed an additional 25 percent duty on products included on List 2, which had an approximate annual trade value of $16 billion. In September 2018, the Trade Representative modified the prior action by imposing additional duties on List 3 products with an approximate annual trade value of $200 billion. The additional duty rate for List 3 initially was set at 10 percent and increased to 25 percent in May 2019. In August 2019, the Trade Representative imposed additional duties of 10 percent on products with annual trade valued at $300 billion. USTR divided the final list of products into two separate lists: List 4A, which would be subject to additional duties on September 1, 2019, and List 4B, subject to duties on December 15, 2019. Subsequently, at the direction of the President, the Trade Representative increased the rate of additional duties on both sets of List 4 products from 10 percent to 15 percent. [111]

On December 13, 2019, USTR announced a Phase One Agreement that requires China’s purchase of certain U.S. goods and services, as well as structural reforms and other changes to its economic and trade regime related to intellectual property, technology transfer, and other matters. [112] In light of the Phase One Agreement, and at the direction of the President, the Trade Representative suspended indefinitely the imposition of tariffs on products covered by List 4B and reduced the additional rate of duties on products covered by List 4A from 15 percent to 7.5 percent, effective February 14, 2020. [113]

USTR also implemented a process by which U.S. importers could request that products included on the various lists be excluded from additional duties. According to USTR, it approved about 34 percent of exclusion requests pertaining to List 1 (3,700 of 11,000 requests), and about 38 percent of the List 2 exclusion requests (1,100 of 2,900 requests). USTR reports that it approved about 5 percent of List 3 exclusion requests (1,500 of 30,300 requests), and about 7 percent of List 4A exclusion requests (575 of 8,800 requests). The first tranche of approved exclusions expired in December 2019 and the last expired in October 2020. USTR approved about 549 requests for extensions of these exclusions. In December 2020, the Trade Representative determined to further extend product exclusions, or otherwise modify its determinations to remove section 301 duties on certain medical-care products to address the COVID-19 pandemic. [114]

Digital Services Taxes

On July 24, 2019, the president of France signed into law a Digital Services Tax (DST) that would place a 3 percent levy on revenues that some companies generate from providing certain digital services to, or aimed at, persons in France. The DST applied retroactively beginning January 1, 2019 to companies that met certain global and French revenue thresholds for the covered services. On July 10, 2019, the Trade Representative initiated an investigation of the French DST under section 301 of the Trade Act. After holding a hearing and receiving written submissions as well as advice from the inter-agency Section 301 Committee, on December 2, 2019, USTR issued a report setting out its factual findings. [115]

On December 6, 2019, the Trade Representative determined under sections 301(b) and 304(a) of the Trade Act [116] that the French DST is unreasonable or discriminatory and burdens or restricts U.S. commerce and is thus actionable under the section 301 provisions of the Trade Act. USTR solicited public comments on a proposed trade action consisting of additional duties of up to 100 percent on certain French products. USTR further sought comment on the option of imposing fees or restrictions on French services. [117] The Section 301 Committee convened a public hearing in January 2020 and received written submissions. [118] On July 10, 2020, the Trade Representative determined that the appropriate action was the imposition of duties of 25 percent on certain French products. [119] To allow additional time for discussions that could lead to resolution of the matter, the Trade Representative suspended application of the additional duties for a period up to 180 days, or until January 6, 2021. [120]

Other trading partners also considered or adopted DSTs that reach the online activities of U.S. firms in 2020. For example, effective January 1, 2020, Austria implemented a 5 percent tax on online advertising revenue for companies with global annual revenues above a certain threshold. [121] Also effective January 1, 2020, Italy’s DST legislation imposed a three percent tax on revenues from targeted advertising and digital interface services, subject to annual thresholds. [122] In March 2020, India announced a two percent DST on foreign electronic commerce and digital service providers that does not apply to firms established in India. [123] Effective March 2020, Turkey’s DST imposed a 7.5 percent tax on revenues from digital advertising, digital content sales, and digital platform services. [124] Retroactive to April 2020, the UK adopted a DST that imposed a 2 percent tax on revenues of search engines, social media services, and online marketplaces and associated advertising, subject to certain thresholds. [125]

Based on these and other developments, on June 2, 2020, the Trade Representative initiated section 301 investigations of DSTs adopted or under consideration in 10 jurisdictions: Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey and the UK. [126] USTR continued with its investigations of DST legislation or proposals in these countries throughout the year. [127]

Large Civil Aircraft Subsidies by the EU and Certain Member States

On April 12, 2019, the Trade Representative initiated a section 301 investigation to enforce U.S. rights in a WTO dispute (DS316) initiated on October 6, 2004, when the United States requested consultations with the European Communities (now the EU), France, Germany, Spain, and the United Kingdom over certain subsidies granted the EU large civil aircraft industry. [128] For more information on this dispute and the subsequent WTO proceedings, see chapter 3 .

In preparation for a WTO arbitrator’s report on the appropriate level of countermeasures, USTR’s notice on April 12, 2019, requested comments on a list of products with an estimated trade value of $21 billion that were under consideration for additional duties of up to 100 percent. On July 5, 2019, USTR issued a notice requesting comments on a supplemental list of products valued at $4 billion for which additional duties of up to 100 percent also were being considered. USTR held public hearings and received written submissions based on these notices. [129] On October 2, 2019, the WTO Arbitrator issued a report concluding that the appropriate level of countermeasures was about $7.5 billion annually. [130] On October 9, 2019, the Trade Representative announced the determination to take action in the form of additional duties of 10 percent or 25 percent on products of certain member states with an annual trade value of about $7.5 billion, effective October 18, 2019. [131]

On December 12, 2019,  the Trade Representative announced a review of the action and, on February 14, 2020, modified the product list, and announced, at the direction of the President, the imposition of additional duty rates. [132] Tariffs on aircraft imports from France, Germany, Spain and the UK were increased from 10 to 15 percent, and the list of various agricultural, food, alcohol, machinery, equipment, textile, and apparel products from certain EU member states subject to 25 percent ad valorem tariffs [133] was modified, effective March 18, 2020. [134] On June 26, 2020, the Trade Representative announced another review of the action, including a proposal to impose additional duties of up to 100 percent on a new list of products with an approximate annual trade value of $3.1 billion. [135] The Trade Representative announced a revised action on August 12, 2020, including a determination that the action could be revised again upon any imposition of additional duties on U.S. products in connection with the dispute or with the EU's WTO challenge to the alleged subsidization of U.S. large civil aircraft. [136] The list of non-aircraft products subject to 25 percent tariffs was modified with changes effective September 1, 2020. [137] In late December 2020,  the Trade Representative announced further modifications to these tariffs which entered into effect on January 12, 2021. [138]

Vietnam Currency

On October 2, 2020, the Trade Representative initiated a section 301 investigation of whether Vietnam’s acts, policies, and practices related to currency valuation are unreasonable or discriminatory and burden or restrict U.S. commerce. According to USTR, the Government of Vietnam, through the State Bank of Vietnam, tightly manages the value of its currency and that, based on available analysis, the currency has been undervalued over the past 3 years. USTR further stated that the State Bank of Vietnam actively engaged in the exchange market in 2019, which contributed to the undervaluation. [139] USTR solicited written comments and convened a virtual public hearing on December 29, 2020. [140]

Vietnam Timber

On October 2, 2020, the Trade Representative initiated a section 301 investigation regarding whether acts, policies, and practices related to Vietnam’s import and use of illegally harvested or traded timber are unreasonable or discriminatory and burden or restrict U.S. commerce. According to USTR, available evidence suggests that a significant portion of Vietnam’s timber imports, upon which the country’s wood products manufacturing sector relies, was illegally harvested, or traded. USTR raised particular concerns about timber from Cambodia, as well as other countries. [141] USTR solicited written comments and convened a virtual public hearing on December 28, 2020. As of the end of 2020, the investigation was ongoing. [142]

Special 301 Investigations

USTR conducts an annual review of the state of intellectual property rights (IPR) enforcement and protection in U.S. trading partners pursuant to section 182 of the Trade Act, as amended, 19 U.S.C. § 2242 (known as “special 301”). Section 182(a) of the Trade Act requires the Trade Representative to identify “those foreign countries that deny adequate and effective protection of intellectual property rights, or deny fair and equitable market access to United States persons that rely on intellectual property protection.” [143] Under section 182(b), the Trade Representative only identifies as “priority foreign countries” those countries that have the most onerous or egregious acts, policies, or practices with the greatest actual or potential impact, and that are not entering into, or making significant progress in, good faith negotiations. Priority foreign countries are subject to an investigation under section 301 of the Trade Act. [144]

To aid in the administration of the statute, USTR created a priority watch list and watch list under the special 301 provisions. Placement of a trading partner on either list means that particular problems exist in that country with respect to IPR protection, enforcement, or market access for persons relying on IPRs. Countries placed on the priority watch list are the focus of increased bilateral attention during the year. [145] Section 182(g) of the Trade Act, as amended by the Trade Facilitation and Trade Enforcement Act of 2015, requires USTR to develop action plans for each country identified for placement on the priority watch list and that has remained on the list for at least one year. [146]

USTR solicited broad public participation in the 2020 special 301 review process including through a request for written submissions, a public hearing that included representatives of foreign governments, industry, and nongovernmental organizations, and a post-hearing comment period. [147] USTR and the interagency special 301 subcommittee of the Trade Policy Staff Committee assessed U.S. trading partners’ IPR protection and enforcement, as well as related market access issues. Based on this assessment, the subcommittee, through the Trade Policy Staff Committee, provided advice to USTR. [148]

USTR issued the 2020 Special 301 Report in April 2020. In the report, USTR placed 10 countries on the priority watch list: Algeria, Argentina, Chile, China, India, Indonesia, Russia, Saudi Arabia, Ukraine, and Venezuela. These countries were also listed in the 2019 Special 301 Report. USTR removed one country, Kuwait, from the list of priority watch countries based on improvements in its copyright law and regulations and in IPR enforcement. USTR stated that it would develop an action plan for each country that has been on the priority watch list for at least one year to encourage progress on high-priority IPR concerns. [149]

Antidumping and Countervailing Duty Investigations and Reviews

Antidumping Investigations

The U.S. antidumping law is found in Title VII of the Tariff Act of 1930, as amended. [150] This law offers relief to U.S. industries that are materially injured or threatened with material injury by imports that are dumped—that is, sold at “less than fair value” (LTFV). The U.S. government provides a remedy by imposing an additional duty on LTFV imports.

Antidumping duties are imposed when (1) the U.S. Department of Commerce (USDOC) has determined that imports are being, or are likely to be, sold at LTFV in the United States, and (2) the Commission has determined that a U.S. industry is materially injured or threatened with material injury, or that the establishment of an industry in the United States is materially retarded, by reason of such imports. Such a conclusion is called an “affirmative determination.” Investigations are generally initiated in response to a petition filed with the USDOC and the Commission by or on behalf of a U.S. industry, but can be self- initiated by the USDOC. The USDOC and the Commission each make preliminary determinations and, if the Commission’s preliminary determination is affirmative, then each agency will make final determinations during the investigation process. The USDOC will issue an antidumping duty order if both agencies make affirmative final determinations in their respective investigations.

In general, imports are considered to be sold at LTFV when a foreign firm sells merchandise in the U.S. market at a price that is lower than the “normal value” of the merchandise. [151] Generally, normal value is the price the foreign firm charges for a comparable product sold in its home market. [152] Under certain circumstances, the foreign firm’s U.S. sales price may also be compared with the price the foreign firm charges in other export markets or with the firm’s cost of producing the merchandise, taking into account the firm’s “selling, general, and administrative expenses” and its profit. Under the law, this latter basis for comparison is known as “constructed value.” [153] If the producer is located in a nonmarket economy, a comparison is made between average U.S. prices and a “surrogate” normal value (its factors of production, as valued by use of a “surrogate” country). [154] A nonmarket-economy country means any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that prices paid on sales of merchandise in such a country do not reflect the fair value of the merchandise. [155]

In all three instances, the amount by which the normal value exceeds the U.S. sales price is the “dumping margin.” The duty specified in an antidumping duty order reflects the weighted average dumping margins found by the USDOC, both for the specific exporters it examined and for all other exporters. [156] This rate of duty (in addition to any ordinary customs duty owed) will be applied to subsequent imports from the specified producers/exporters in the subject country, and may be adjusted if the USDOC receives a request for an annual review. [157]

The Commission instituted 85 new antidumping investigations, and made 89 preliminary determinations and 29 final determinations in 2020. [158] As a result of the affirmative USDOC and Commission determinations, the USDOC issued 21 antidumping duty orders on 10 products from 11 countries in 2020 (table 2.1). The status of all antidumping investigations active at the Commission during 2020—including, if applicable, the date of final action—is presented in the interactive dashboard of appendix A . A list of all antidumping duty orders and suspension agreements (agreements to suspend investigations) in effect as of the end of 2020 appears also in the interactive dashboard of appendix A. [159]

Table 2.1 Antidumping duty orders that became effective during 2020 (alphabetical by trade partner)

In percentages.

Source: Compiled by the USITC from Federal Register notices.

Note: Antidumping duty orders become effective following final affirmative determinations by USDOC and the Commission. The rates in the table apply in addition to any ordinary customs duty owed.

Countervailing Duty Investigations

The U.S. countervailing duty law is also set forth in Title VII of the Tariff Act of 1930, as amended. It provides for the imposition of additional duties to offset (“countervail”) foreign subsidies on products imported into the United States. [160] In general, procedures for such investigations are similar to those under the antidumping law. Petitions are filed with the USDOC (the administering authority) and with the Commission. Before a countervailing duty order can be issued, the USDOC must find that a countervailable subsidy exists. In addition, the Commission must make an affirmative determination that a U.S. industry is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, because of the subsidized imports.

The Commission instituted 26 new countervailing duty investigations and made 30 preliminary determinations and 19 final determinations during 2020. The USDOC issued 13 countervailing duty orders on 8 products from 6 countries in 2020 as a result of the affirmative USDOC and Commission determinations (table 2.2). The status of all countervailing duty investigations active at the Commission during 2020, and, if applicable, the date of final action, as well as a list of all countervailing duty orders and suspension agreements in effect at the end of 2020, are presented in the interactive dashboard of appendix A. [161]

Table 2.2 Countervailing duty orders that became effective during 2020 (alphabetical by trade partner)

In percentages.

Source: Compiled by the USITC from Federal Register notices.

Note: Countervailing duty orders become effective following final affirmative determinations by the USDOC and the Commission. The rates in the table apply in addition to any ordinary customs duty owed.

Reviews of Outstanding AD/CVD Orders and Suspension Agreements

Section 751(a) of the Tariff Act of 1930 requires the USDOC, if requested, to conduct annual reviews of outstanding AD/CVD orders to ascertain the amount of any net subsidy or dumping margin and to determine compliance with suspension agreements. Section 751(b) also authorizes the USDOC and the Commission, as appropriate, to review certain outstanding determinations and agreements after receiving information or a petition that shows changed circumstances. [162] Where a changed-circumstances review is directed to the Commission, the party that is asking to have an antidumping duty order or countervailing duty order revoked or a suspended investigation terminated has the burden of persuading the Commission that circumstances have changed enough to warrant revocation. On the basis of reviews from either the USDOC or the Commission, the USDOC may revoke an antidumping duty or countervailing duty order in whole or in part, or may either terminate or resume a suspended investigation.

The sunset process began in 1995. It is subject to section 751(c) of the Tariff Act of 1930, which requires both the USDOC and the Commission to conduct “sunset” reviews of existing antidumping duty and countervailing duty orders and suspension agreements five years after their initial publication and five years after publication of any subsequent determination to continue them. These reviews are intended to determine whether revoking an order or terminating a suspension agreement would be likely to lead to the continuation or recurrence of dumping or a countervailable subsidy and to material injury. If either the USDOC or the Commission reach negative determinations, the order will be revoked or the suspension agreement terminated. During 2020, the USDOC and the Commission instituted 64 sunset reviews of existing antidumping and countervailing duty orders or suspended investigations, and the Commission completed 75 reviews. As a result of affirmative determinations by the USDOC and the Commission, 71 antidumping duty and countervailing duty orders were continued. The AD/CVD tables in the interactive dashboard of appendix A lists, by date and action, the reviews of AD/CVD orders and suspended investigations completed in 2020.

Section 129 Determinations

Section 129 of the Uruguay Round Agreements Act sets out a procedure by which the Administration may respond to an adverse WTO panel or Appellate Body report concerning U.S. obligations under the WTO agreements on safeguards, antidumping, or subsidies and countervailing measures. Specifically, section 129 establishes a mechanism permitting USTR to request that the agencies concerned—the USDOC and the Commission—issue a consistency or compliance determination, where such action is appropriate, to respond to the recommendations in a WTO panel or Appellate Body report. [163] Neither the USDOC or the Commission made any determinations under section 129 during 2020, nor were any proceedings in process.

Section 337 Investigations

Background

Section 337 of the Tariff Act of 1930, as amended, [164] prohibits certain unfair practices in the import trade. In the context of patent infringement—the most commonly asserted unfair practice—section 337 prohibits the importation into the United States, the sale for importation, and the sale within the United States after importation of articles that infringe a valid and enforceable United States patent, provided that an industry in the United States, relating to articles protected by the patent concerned, exists or is in the process of being established. [165] Similar requirements govern investigations involving infringement of other federally registered intellectual property rights, including registered trademarks, registered copyrights, registered mask works, [166] and registered vessel hull designs. In addition, the Commission has authority to investigate other unfair methods of competition and unfair acts in the importation and sale of products in the United States (such as products manufactured abroad using stolen trade secrets), the threat or effect of which is to destroy or injure a U.S. industry, to prevent the establishment of a U.S. industry, or to restrain or monopolize trade and commerce in the United States. [167] The Commission may institute an investigation on the basis of a complaint or on its own initiative. [168]

If the Commission determines that a violation has occurred, it can issue an exclusion order directing U.S. Customs and Border Protection to block the imports in question from entry into the United States. The Commission can also issue cease and desist orders that direct the violating parties to stop engaging in the unlawful practices. The orders enter into force upon issuance, and become final within 60 days of issuance unless disapproved for policy reasons by USTR. [169]

Developments in 2020

During calendar year 2020, there were 122 active section 337 investigations and ancillary proceedings, [170] 57 of which were instituted that year. Of these 57 new proceedings, 48 were new section 337 investigations and 9 were new ancillary proceedings relating to previously concluded investigations. In 43 of the new section 337 investigations instituted in 2020, patent infringement was the only type of unfair act alleged. Of the remaining 5 investigations, 1 involved allegations of patent infringement and trademark infringement; 1 involved allegations of trademark infringement; 1 involved allegations of patent infringement and trade secret misappropriation; 1 involved allegations of copyright infringement; and 1 involved allegations of trademark infringement, false designation of source, and false advertising.

In 2020, the Commission completed a total of 68 section 337 investigations and ancillary proceedings. The ancillary proceedings included 6 rescission proceedings, 3 remand proceedings, 1 remand enforcement proceeding, 2 modification proceedings, and 1 declassification proceeding. [171] Of the 31 investigations in which the Commission rendered a final determination on the merits, the Commission found a violation of section 337 in 21 investigations and no violation in 10 investigations. The Commission terminated 24 investigations without determining whether there had been a violation; 12 of these were terminated on the basis of settlement agreements and/or consent orders, 11 were terminated based on withdrawal of the complaint, and 1 was terminated for other reasons. [172] The Commission issued 9 general exclusion orders, 13 limited exclusion orders, and 63 cease and desist orders during 2020. Commission activities involving section 337 proceedings in 2020 are presented in the interactive dashboard of appendix A.

As illustrated in figure 2.1 below, the section 337 investigations active in 2020 involved a broad spectrum of products. Technology products remained the largest single category, with about 23 percent of the active proceedings involving computer and telecommunications equipment, followed by about 9 percent involving consumer electronics. Pharmaceuticals and medical devices were at issue in about 14 percent of the active proceedings, and automotive, manufacturing, and transportation products were also at issue in about 14 percent of the active proceedings. Small consumer products were at issue in about 7 percent of the proceedings and lighting products were also at issue in about 7 percent of the active proceedings. The remaining about 26 percent of proceedings involved a wide variety of other types of articles, including synthetic roofing materials, drill bits, height-adjustable desks, plastic food trays, wrapping material for cotton bales, wind turbine generators, solar modules, furniture products, and chocolate milk powder.

At the close of 2020, 54 section 337 investigations and related proceedings were pending at the Commission. As of December 31, 2020, there were 132 exclusion orders based on violations of section 337 in effect. The table in the interactive dashboard of appendix A lists the investigations in which these exclusion orders were issued. Copies of the exclusion orders are available on the Commission’s website . For additional detailed information about 337 investigations instituted since October 1, 2008, see the Commission’s “337Info” database.

Underlying data for this figure can be found in appendix table B.18. Due to the rounding, the shares might not add to 100.

Source: USITC calculations.

National Security Investigations

Background

Section 232 of the Trade Expansion Act of 1962 provides for investigations by the Secretary of Commerce (Secretary) to determine effects on national security of imports of articles. Section 232(b) of the Act requires the Secretary, upon request of the head of any department or agency, upon application of an interested party, or upon the Secretary’s own motion, to initiate an appropriate investigation to determine the effects on the national security of imports of the article that is the subject of the request, application, or motion. The Secretary must submit a report to the President within 270 days of instituting an investigation. The report must include the Secretary’s findings “with respect to the effect of the importation of such article in such quantities or under such circumstances upon the national security” and his recommendations for action or inaction. The statute also provides that if the Secretary finds that the imported article “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security,” he must so advise the President in his report. [173]

Within 90 days of receiving such a report from the Secretary, the President must determine whether the President concurs with the finding of the Secretary, and if the President concurs, must determine the nature and duration of the action that must be taken to adjust imports of the article and its derivatives so that such imports will not threaten to impair the national security. [174]

During 2020, the USDOC instituted three new investigations under the national security provisions in section 232 of the Trade Expansion Act of 1962. [175] No new section 232 measures were imposed by the President during 2020.

Table 2.3 National security investigations during 2020 (chronological by date instituted)

Developments in 2020

Steel and Aluminum

On March 8, 2018, the President issued two proclamations, Proclamation 9705 [176] and Proclamation 9704, [177] imposing additional tariffs on certain steel and aluminum products, respectively. The President issued the proclamations following receipt of reports and findings from the Secretary of Commerce under section 232 of the Trade Expansion Act of 1962 following the initiation of investigations on April 19, 2017. [178] The additional tariffs—25 percent ad valorem on certain steel products and 10 percent ad valorem on certain aluminum products—remained in effect through the end of 2020. [179] The President modified the proclamations several times during 2018 to exempt certain countries and products, and modified the proclamations again in 2019 as explained in greater detail in the 2019 report. [180] In January of 2020, the President further modified the steel and aluminum tariffs to also apply to certain derivative steel and aluminum articles. [181]

Uranium

On April 14, 2019, the Secretary of Commerce transmitted his report to the President on his investigation into the effect of imports of uranium (uranium ore, uranium concentrate, uranium hexafluoride, enriched uranium, and enriched uranium in fuel assemblies) on the national security. The Secretary had initiated this investigation on uranium on July 18, 2018. [182] The Secretary reported that uranium is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security. He reported that the United States currently imports about 93 percent of its commercial uranium, compared to 85.8 percent in 2009, and attributed the increase to elevated production by foreign state-owned enterprises, which he said have distorted global prices and made it more difficult for domestic mines to compete. [183]

The President did not concur with the Secretary’s finding. Although stating that the Secretary’s findings raise significant concerns, the President concluded “that a fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain is necessary at this time.” He stated that domestic mining, milling, and conversion of uranium, while significant, “are only part of the nuclear supply chain necessary for national security.” To address the concerns identified by the Secretary, the President directed that the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy establish a United States Nuclear Fuel Working Group (Working Group) to develop recommendations for reviving and expanding domestic nuclear fuel production. [184] The Working Group released its policy recommendations in April 2020. The recommendations called for the U.S. government to bolster the uranium mining industry, end reliance on foreign uranium enrichment, and remove strategic vulnerabilities across the nuclear fuel cycle, among others. [185]

Titanium Sponge

On March 4, 2019, in response to a petition, the Secretary of Commerce initiated an investigation to determine the effects on the national security of imports of titanium sponge. [186] Titanium sponge is used in a broad range of national defense-related applications including helicopter blades, tank armor, and fighter jet airframes and engines. [187] On February 27, 2020, the President issued a memo stating that the Secretary of Commerce had transmitted his report on November 29, 2019, in which the Secretary advised the President of his finding that titanium sponge is being imported into the United States in such quantities and under such conditions as to threaten to impair the national security. [188] The Secretary stated that imports account for 68 percent of U.S. consumption of titanium sponge and that 94.4 percent of titanium sponge imports in 2018 were from Japan. [189]

In the February 2020 memo, the President concurred with the Secretary’s finding and agreed with the Secretary’s recommendation that actions to adjust imports under section 232 should not be taken at this time, because measures other than the adjustment of imports are more likely to be effective to address the threatened impairment of the national security. Based on that recommendation, the President directed officials to negotiate with Japan to ensure access to titanium sponge in the United States for use for national defense and critical industries in an emergency. The President also directed the Secretary of Defense to take all appropriate action to increase access to titanium sponge for national defense and critical industries. [190]

Grain-Oriented Electrical Steel

On May 11, 2020, based on inquiries and requests from interested parties in the United States, the Secretary of Commerce initiated an investigation to determine the effects on the national security of imports of grain-oriented electrical steel (laminations for stacked cores for incorporation into transformers, stacked cores for incorporation into transformers, wound cores for incorporation into transformers, electrical transformers, and transformer regulators. Hereafter, GOES). [191]

The United States and Mexico issued a joint statement on May 17, 2020, committing to, among other things, address the transshipment of steel and aluminum products, including GOES, from outside the North American region into the United States. [192] On June 12, 2020, the USDOC extended the public comment period until July 3, 2020, from the initial deadline of June 9, 2020. [193]

On November 5, 2020, USTR announced that the United States and Mexico had successfully concluded the consultations regarding the transshipment of GOES from outside the North American region into the United States through GOES-containing downstream products. As a result of the consultations, Mexico agreed to establish a strict monitoring regime for exports of electrical transformer laminations and cores made of non-North American GOES. Mexico also agreed to closely monitor shipments of these products to the United States from the fourth quarter onward. In response to the steps taken by Mexico, the United States agreed to not implement any 232 action to adjust imports from Mexico of electrical transformers and related parts. The United States and Mexico also agreed to consult at regular intervals on the implementation of these agreed measures and on the state of bilateral trade and market conditions relating to these products. [194]

Mobile Cranes

On May 19, 2020, in response to a petition, the Secretary of Commerce initiated an investigation to determine the effects on the national security from imports of mobile cranes. [195] The petitioner submitted a formal request on September 8, 2020, requesting the withdrawal of its application and the termination of the investigation. Citing the COVID-19 pandemic, the petitioner stated that the economic environment shifted substantially from the time the petition was initially submitted. Subsequently, the Secretary of Commerce terminated the investigation on November 23, 2020. [196]

Vanadium

On May 28, 2020, in response to a petition, the Secretary of Commerce initiated an investigation to determine the effects on the national security from imports of vanadium. [197] Vanadium is a metal used in the production of metal alloys that are integrated into a range of national defense-related projects; the Department of the Interior has designated it as a critical mineral. [198] The period for public comment, which initially closed on July 20, 2020, was reopened and extended to October 9, 2020, by the Secretary of Commerce on September 25, 2020. [199] The investigation into vanadium was pending at the end of 2020.

American Manufacturing Competitiveness Act of 2016

The American Manufacturing Competitiveness Act of 2016 (AMCA) sets out a procedure under which members of the public may submit petitions for temporary duty suspensions or reductions with the U.S. International Trade Commission. [200] Submitters must be able to demonstrate that they are likely beneficiaries of the requested duty suspension or reduction. Following receipt of petitions, the Commission must evaluate the petitions in accordance with certain statutory criteria, seek public comment, and then file preliminary and final reports with the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance (Committees). [201] The AMCA requires the Commission in its reports to categorize petitions as either (a) petitions that meet the requirements of the Act with or without modification (Category I, II, III, or IV petitions), (b) petitions that do not contain the information required by the Act or for which the Commission determined that the petitioner was not a likely beneficiary (Category V petitions), or (c) petitions that the Commission does not recommend for inclusion in a miscellaneous tariff bill (Category VI petitions). [202] The AMCA includes a “Sense of Congress” statement that Congress should consider a miscellaneous tariff bill not later 90 days after receiving the Commission’s final report. [203]

The Miscellaneous Tariff Bill Act of 2018, Pub. L. No. 115-239, 132 Stat. 2451 (amending the Harmonized Tariff Schedule and 19 U.S.C. § 58c), suspended or reduced duties on 1,660 products, effective October 13, 2018, and through December 31, 2020. The MTB Act of 2018 suspended or reduced only most-favored-nation rates of duty, and it did not suspend or reduce duties applied under other statutory authorities, such as the trade remedy laws, unfair trade practice statutes, or national security provisions.

In 2020, the Commission completed its second and final cycle of petition analysis under the AMCA. On August 10, 2020, the Commission submitted its final report to the Committees, which provided recommendations on 3,442 petitions for duty suspensions or reductions. [204] The largest product categories reflected in the 2020 report were chemicals, accounting for 1,839 petitions; machinery and equipment, accounting for 715 petitions; and textiles, apparel and footwear, accounting for 581 petitions. Of the 3,442 petitions, the Commission assigned 2,695 to Categories I through IV, 42 to Category V, and 705 to Category VI. [205]

As of the end of 2020, no MTB bill had been introduced. Duty suspensions and reductions enacted under the Miscellaneous Tariff Bill Act of 2018 following the Commission’s 2017 final report under the AMCA expired at the end of 2020.

Trade Adjustment Assistance

For several decades, the United States has provided trade adjustment assistance (TAA) to aid U.S. workers and firms adversely affected by import competition. Title IV of the Trade Preferences Extension Act (TPEA)—the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA 2015)—amended and reauthorized TAA for six years, until June 30, 2021. [206] The main TAA programs in effect in fiscal year (FY) 2020 were TAA for Workers, administered by the U.S. Department of Labor (USDOL), and TAA for Firms, administered by the USDOC. A third program, TAA for Farmers, administered by the U.S. Department of Agriculture (USDA), was reauthorized by Congress under the TPEA of 2015. [207] However, the U.S. Congress did not appropriate funding for new participants in this program for FY 2020. As a result, the USDA did not accept any new petitions or applications for benefits in FY 2020. [208] Table 2.4 provides information on the amount of funding allocated to the TAA programs in recent years. Selected developments in the TAA programs for workers and firms during FY 2020 are summarized below. [209]

Table 2.4 Funding by the Trade Adjustment Assistance (TAA) Program, annual, FY 2016–20

In millions of dollars.

Source: USITC, Year in Trade 2016, July 2017, 67–71; USITC, Year in Trade 2017, August 2018, 69–73; USITC, Year in Trade 2018, October 2019, 79–82; USITC, Year in Trade 2019, August 2020, 87–91; USTR, 2021 Trade Policy Agenda and 2020 Annual Report, March 2021, 141–42.

Assistance for Workers

The provisions relating to the TAA for Workers Program are set out in chapter 2 of title II of the Trade Act. [210] The program provides federal assistance to eligible workers who have been adversely affected by import competition. A variety of TAA benefits and services are available to eligible workers, including training, help with healthcare premium costs, trade readjustment allowances, reemployment assistance, and employment and case management services. [211] Current information on provisions of the TAA for Workers Program, as well as detailed information on program eligibility requirements, benefits, and available services, is available at the USDOL’s Employment and Training Administration (ETA) website for TAA.

For petitioning workers to be eligible to apply for TAA benefits, the Secretary of Labor must determine that they meet certain criteria relating to the reasons they were separated from their firm, including declining sales or production at their firm and increased imports of like or directly competitive articles. Workers at firms that are or were suppliers to or downstream users of the output of TAA-certified firms may also be eligible for TAA benefits. [212]

In 2020, $553 million was allocated to state governments to fund different aspects of the TAA for Workers Program. Funding of $410 million was allocated for Training and Other Activities, which included funds for training, job search allowances, relocation allowances, employment and case management services, and related state administration. Of the remaining funding, $128 million was allocated for Trade Readjustment Allowance benefits, and $15 million for Alternative Trade Adjustment Assistance/ Reemployment Trade Adjustment Assistance benefits. [213]

Groups of workers [214] submitted 1,183 petitions for TAA in FY 2020, a decline from the 1,346 petitions filed in FY 2019. The USDOL certified 770 petitions covering 96,111 workers as eligible to apply for benefits and services under TAA, [215] and denied 302 petitions covering 26,334 workers. [216] The largest number of petitions certified in FY 2020 was in the Midwest region, followed by the South, West, and Northeast (table 2.5). [217] By state, Washington had the most workers certified (10,795 workers), followed by Kansas (9,242), Utah (6,573), and California (6,158). [218]

Table 2.5 Trade Adjustment Assistance (TAA) certifications, by region, FY 2020

“Other” includes all industry sectors where less than 10 petitions were certified in FY 2020. Underlying data for this figure can be found in appendix table B.19 .

Source: USDOL, ETA, email message to USITC staff, March 10, 2021.

On November 7, 2019, the USDOL posted a Notice of Proposed Rulemaking to the Federal Register that reportedly would both expand worker access to support opportunities, such as apprenticeships, and make it easier for states to administer the TAA program. [219] The TAA Final Rule was published in the Federal Register on August 21, 2020, and became effective on September 21, 2020. This Final Rule is considered the first substantial regulatory update to the TAA program in more than two decades. [220]

Assistance for Firms

The TAA for Firms Program provides technical assistance to help U.S. firms experiencing a decline in sales and employment to become more competitive in the global marketplace. [221] The program provides cost-sharing technical assistance to help eligible businesses create and implement targeted business recovery plans. The program pays up to 75 percent of the costs of developing the recovery plans, with firms also contributing a share of the cost of creating and implementing their recovery plans. [222] Current information on provisions of the TAA for Firms Program, as well as detailed information on program eligibility requirements, benefits, and available services, is available at the USDOC’s Economic Development Administration (EDA) website for TAA.

To be eligible for the program, a firm must show that an increase in imports of like or directly competitive articles “contributed importantly” to the decline in sales or production and to the separation or threat of separation of a significant portion of the firm’s workers. [223] The program supports a nationwide network of 11 nonprofit or university-affiliated Trade Adjustment Assistance Centers to help firms to apply for a certification of eligibility and to implement a business recovery plan or adjustment proposal. Historically, most firms that apply for Trade Adjustment Assistance for Firms certification are in the manufacturing sector. [224]

In FY 2020, the EDA awarded a total of $13 million in the TAA for Firms Program funds to its national network of 11 Trade Adjustment Assistance Centers. During FY 2020, the EDA certified 80 petitions for eligibility and approved 70 adjustment protocols. [225]

Tariff Preference Programs

Tariff preference programs provide duty-free treatment or reduced duty treatment to U.S. imports of eligible articles from beneficiary developing countries. [226] Following a 17.5 percent decline in 2019, the value of total U.S. imports entered under all preference programs declined further by 27.9 percent in 2020 (table 2.6). U.S. imports entered under the African Growth and Opportunity Act (AGOA) and the U.S. Generalized System of Preferences (GSP) had the largest decreases in value in 2020. [227]

However, the utilization rate of preference programs, measured by imports entered under specified tariff preference programs as a share of total imports under program-eligible HTS codes, increased from 47.5 percent in 2019 to 52.6 percent in 2020. The utilization rates of AGOA and the Caribbean Basin Economic Recovery Act (CBERA) declined, while the utilization rates of other preference programs improved during this period (table 2.7). [228]

Table 2.6 Imports for consumption under specified tariff preference programs, annual, 2018–20

In millions of dollars and percentages. AGOA = the African Growth and Opportunity Act; CBERA = the Caribbean Basin Economic Recovery Act; CBTPA = the Caribbean Basin Trade Partnership; HOPE = the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 and of 2008; GSP = the U.S. Generalized System of Preferences; GSP-LDBC = the U.S. Generalized System of Preferences for least-developed beneficiary developing countries; NTPP = the Nepal Trade Preference Program.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note:

^a CBERA data in 2019 incorporate USITC estimates to account for the misclassification of certain imports of methanol as not having received duty preferences under CBERA when in fact they did. These data will be subject to a forthcoming revision from the U.S. Census Bureau. Data available through USITC’s DataWeb or the Census Bureau’s USA Trade Online will not incorporate these revisions, until the Census Bureau’s release of annual revisions in June 2022. U.S. government representative email message to USITC staff, July 20, 2021.

^b Total tariff preference programs = AGOA (excluding GSP) + CBERA/CBTPA/Haiti HOPE + GSP (including GSP-LDBC) + NTPP. Because of rounding, figures may not add to totals shown.

Table 2.7 The utilization rate of specific tariff preference programs, annual, 2018–20

In percentages. AGOA = the African Growth and Opportunity Act; CBERA = the Caribbean Basin Economic Recovery Act; CBTPA = the Caribbean Basin Trade Partnership; HOPE = the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006; GSP = the U.S. Generalized System of Preferences; GSP-LDBC = U.S. Generalized System of Preferences for least-developed beneficiary developing countries; NTPP = the Nepal Trade Preference Program.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: The utilization rate is measured by imports under specified tariff preference programs as a share of total program-eligible country imports. Percentages reflect the total imports for consumption under the specified program as a share of imports for consumption of products classified under eligible Harmonized Tariff Schedule of the United States (HTS) 8-digit subheadings from program-eligible countries.

Generalized System of Preferences

Background

The U.S. Generalized System of Preferences (GSP) program authorizes the President to grant duty-free access to the U.S. market for about 3,500 products that are imported from designated beneficiary developing countries (BDCs) and territories. [229] About 1,500 additional products are allowed duty-free treatment only when imported from countries designated as least-developed beneficiary developing countries (LDBDCs). [230] The most recent reauthorization, in March 2018, authorized the program through December 31, 2020. [231] Authorization lapsed on January 1, 2021.

The GSP program aims to accelerate economic growth by offering eligible exports from BDCs to enter the United States duty free. [232] An underlying principle of the program is that the creation of trade opportunities for developing countries encourages broader-based economic development and sustains momentum for economic reform and liberalization. [233] As of December 31, 2020, there were 119 designated GSP BDCs and territories. Forty-four countries and territories are designated LDBDCs.

The President designates countries as BDCs under the GSP program, though countries can lose the designation and GSP eligibility based on findings of country practices that violate the provisions of the GSP statute, including inadequate protection of intellectual property rights or of internationally recognized worker rights. [234] Complaints about such violations (country practice allegations) are usually brought to the attention of the interagency GSP subcommittee by a petition process.

The President also designates the articles that are eligible for duty-free treatment, but he cannot designate any articles that are “import sensitive” in the context of GSP. The statute designates certain goods (e.g., most footwear, textiles, and apparel) as “import sensitive” and thus not eligible for duty-free treatment under the GSP program. [235] The statute further provides that countries “graduate” when they become “high income,” as defined by the World Bank’s per capita income tables. [236] In addition, the statute allows for ending the eligibility of certain imports, or imports from specific countries, under certain conditions.

Competitive need limitations (CNLs)—quantitative ceilings on GSP benefits for each product and BDC—are another important part of the GSP program. [237] There are two different measures for CNLs: during any calendar year, imports of a particular product from a specific BDC (1) account for 50 percent or more of the value of total U.S. imports of that product; or (2) exceed a certain dollar value ($195 million in 2020).  If either is met, the product from this specific BDC is considered “sufficiently competitive,” and GSP eligibility for this product from this specific BDC terminates on November 1 of the next calendar year, unless a wavier is granted. [238] CNLs can be waived under special conditions. [239] A CNL waiver in effect on a product for five or more years should be revoked if total U.S. imports from a beneficiary developing country exceed “super-competitive” value thresholds—that is, 75 percent of all U.S imports or 150 percent of the current year’s CNL dollar limit. [240]

Developments in 2020

U.S. Imports under GSP

U.S. imports under GSP dropped by over 20 percent in 2019–20 (table 2.8). GSP accounted for about 11 percent of imports from all GSP-eligible countries, up from 8.9 percent in 2019 (table 2.9). Thailand was the leading source of imports entered under the GSP program in 2020, followed by Indonesia and Brazil ( interactive dashboard of appendix A). These three countries together accounted for about 55 percent of U.S. imports under GSP in 2020, while the top five countries (including Cambodia and the Philippines) accounted for about 76 percent of GSP imports. [241]

Table 2.8 U.S. imports for consumption from GSP beneficiaries, annual, 2018–20

In millions of dollars and percentages. GSP = the U.S. Generalized System of Preferences; LDBC = least-developed beneficiary developing countries.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: Eligible products from LDBDCs are those for which the rate of duty of “free” appears in the special rate column of the HTS, followed by the symbol “A+” in parentheses. The symbol “A+” indicates that all LDBDCs (and only LDBDCs) are eligible for duty-free treatment with respect to all articles listed in the designated provisions. Non-LDBDC-eligible products are those for which a rate of duty of “free” appears in the special rate column of the HTS, followed by the symbols “A” or “A*” in parentheses. The symbol “A” indicates that all beneficiary countries are eligible for duty-free treatment with respect to all articles listed in the designated provisions. The symbol “A*” indicates that certain beneficiary countries (specified in general note 4(d) of the HTS) are not eligible for duty-free treatment with respect to any article listed in the designated provision. Not all products are eligible for GSP. Because of rounding, figures may not add to totals shown.

Table 2.9 Share of U.S. imports for consumption from GSP beneficiaries, annual, 2018–20

In percentages. GSP = the U.S. Generalized System of Preferences; LDBDC = least-developed beneficiary developing countries; — (em dash) = not applicable.

Source: USITC DataWeb/Census, accessed February 25, 2021. See footnote to previous table.

In 2020, imports under GSP decreased in most leading sectors. The agricultural products sector remained the top sector for imports claiming eligibility under GSP, but agricultural imports under GSP dropped 7.4 percent from 2019 (the interactive dashboard of appendix A). Similarly, chemicals and energy-related products, which ranked second and ninth, dropped by 32.1 percent and 99.7 percent, respectively, from 2019. Forest products as well as textiles and apparel were two sectors experiencing an increase in imports, by 25.5 percent and 13.6 percent, respectively. [242]

Among the top 15 GSP imports by HTS subheading (the interactive dashboard of appendix A), “jewelry and parts” was the largest by value, and increased by about 31 percent from 2019. It was followed by “container bags and boxes” (increased by 2.3 percent), “gloves” (increased by about 36 percent), and “handbags” (decreased by 10 percent). [243]

GSP Developments in 2020

On January 30 and 31, 2020, the GSP Subcommittee held GSP country practice reviews of Azerbaijan, Ecuador, Georgia, Indonesia, Kazakhstan, Thailand, South Africa, and Uzbekistan, and reviewed the country eligibility of Laos. [244] In October 2020, the U.S. Trade Representative announced the closure of the reviews with no loss of eligibility for Georgia, Uzbekistan, and Indonesia. The results for the first two, Georgia and Uzbekistan, were based on improvements in the protection of worker rights in those countries. The result for the third, Indonesia, was based on improvements in providing the United States with equitable and reasonable market access. In the same month, the USTR also announced the closure of the GSP designation review of Laos without granting GSP eligibility. [245] Country practice review was ongoing for Azerbaijan, Ecuador, Kazakhstan, and South Africa as of the yearend of 2020. [246]

On October 30, 2020, the President issued Proclamation 10107, implementing decisions regarding the 2020 Annual GSP Review. Based on Thailand’s failure to provide equitable and reasonable market access for U.S. pork products, the President suspended trade preferential treatment for $817 million GSP-eligible imports from Thailand (about one-sixth of Thailand’s GSP benefits). The partial suspension of trade preferences for Thailand became effective December 30, 2020. [247] Thailand accounted for the largest share of U.S. imports entered under the GSP in 2020. [248]

In the Proclamation No. 10107, the President also granted the petitions to add fresh cut roses, thereby allowing fresh cut roses to enter into the United States duty free under GSP, and partially granted the petition to remove rice products by removing parboiled rice from the list of goods eligible for GSP duty-free benefits. The President also granted one-year de minimis CNL waivers for 24 eligible products. [249] Finally, the President removed GSP eligibility for six products from Argentina, Brazil, Ecuador, and Indonesia that exceeded the $190 million CNL threshold for imports of those products from a single country, above which the GSP statute requires removal of the product from eligibility. [250] These modifications to the program became effective on November 1, 2020. [251]

On October 30, 2020, the USTR self-initiated GSP eligibility reviews for Eritrea and Zimbabwe, based on questions about compliance with the GSP worker rights criterion. The concerns in Eritrea relate to forced labor associated with Eritrea’s national service requirement, as well as freedom of association. Concerns in Zimbabwe relate to a lack of freedom of association, including the rights of independent trade unions to organize and bargain collectively, and government crackdowns on labor activists. [252]

Nepal Trade Preference Program

The Nepal Trade Preferences Act (NTPA) authorizes the President to provide preferential treatment to articles imported directly from Nepal into the United States if the President determines that Nepal meets certain requirements set forth in NTPA, in the African Growth and Opportunity Act (AGOA), and in GSP statutes. [253] NTPA originally gave Nepal duty-free access to the U.S. market for goods classified under 66 HTS 8-digit tariff lines, including certain luggage and flat goods in HTS chapter 42, certain carpets and floor coverings in chapter 57, some apparel in chapters 61 and 62, two non-apparel made-up textile articles in chapter 63, and various headwear items in chapter 65. [254] Nepal, has gained 11 tariff lines, and is now eligible for duty-free treatment on 77 tariff lines, 31 of which are also duty free under GSP. [255]

In 2020, total U.S. imports from Nepal were about $86 million; imports from Nepal under GSP were about $10 million; and imports under the Nepal Trade Preference Program (NTPP) were $2.4 million (table 2.10). Imports under NTPP and GSP represented 14.5 percent of total imports from Nepal, a decline from 17.2 percent in 2019 (table 2.11).

Table 2.10 U.S. imports for consumption from Nepal, annual, 2018–20

In thousands of dollars and percentages. NTPP = Nepal Trade Preference Program; GSP = the U.S. Generalized System of Preferences.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: Nepal Preference Program (NPP)-eligible products are those for which a rate of duty of “free” appears in the special rate column of the HTS followed by the symbol “NP” in parentheses. The symbol “NP” indicates that Nepal is eligible for duty-free treatment with respect to all articles listed in the designated provisions. Includes imports for which preferential tariff treatment was claimed for NTPOP-eligible goods by U.S. importers under GSP, for HTS rate liens with special duty symbols “A,” “A*,” or “A+.”

Table 2.11 Share of U.S. imports for consumption from Nepal, annual, 2018–20

In percentages. NTPP = Nepal Trade Preference Program; GSP = the U.S. Generalized System of Preferences; — (em dash) = not applicable.

Source: USITC DataWeb/Census, accessed February 25, 2021.

African Growth and Opportunity Act

Enacted in 2000, the African Growth and Opportunity Act (AGOA) gives tariff preferences to eligible sub-Saharan African (SSA) countries pursuing political and economic reform. [256] In particular, AGOA provides duty-free access to the U.S. market for all GSP-eligible products, and for more than 1,800 additional qualifying HTS 8-digit tariff-line items that are eligible under AGOA only. While AGOA’s eligibility criteria and rules of origin are similar to those of the GSP program, AGOA beneficiary countries are exempt from the GSP competitive need limitations (CNLs). [257] AGOA also provides duty-free treatment for certain apparel articles cut and sewn in designated beneficiary countries on the condition that additional eligibility criteria are satisfied. [258] The current AGOA expiration date is September 30, 2025. [259]

Each year, the President must consider whether individual SSA countries are, or remain, eligible for AGOA benefits based on the eligibility criteria. USTR initiates this annual eligibility review with the publication of a notice in the Federal Register requesting comments and announcing a public hearing. In 2020, 38 SSA countries were eligible for AGOA benefits. [260] Of these countries, 27 were eligible for AGOA textile and apparel benefits for all or part of 2020. [261] Of the countries in the latter group, all but one (South Africa) were also eligible for additional textile and apparel benefits intended for least-developed beneficiary countries (LDBCs) for all or part of 2020. [262] Notable among these extra benefits is the third-country fabric provision for LDBCs. This provision provides duty-free treatment for certain apparel articles cut and sewn in designated beneficiary countries from non-U.S., non-AGOA fabrics as long as additional eligibility criteria are satisfied. [263] Meanwhile, as a result of the 2020 annual AGOA eligibility review, Democratic Republic of Congo’s AGOA eligibility was reinstated, effective January 1, 2021. Therefore, 39 SSA countries are eligible for AGOA benefits in 2021. [264]

In 2020, the value of U.S. imports that entered free of duty from beneficiary countries under AGOA (including imports under GSP) was $4.1 billion, a 50.8 percent decline from 2019. These imports accounted for about 22 percent of total imports from AGOA countries in 2020. In 2020, imports entering the United States exclusively under AGOA (excluding those entered under GSP) were valued at $3.2 billion, accounting for about 18 percent of U.S. imports from AGOA countries (table 2.12 and 2.13).

Table 2.12 U.S. imports for consumption from AGOA beneficiaries, annual, 2018–20

In millions of dollars and percentages. AGOA = African Growth and Opportunity Act; GSP = the U.S. Generalized System of Preferences.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: Eligible products under AGOA are those for which a rate of duty of “free” appears in the special

rate column of the HTS, followed by the symbol “D” in parentheses. The symbol “D” indicates that all AGOA beneficiaries are eligible for duty-free treatment with respect to all articles listed in the designated provisions. In addition, provisions of subchapters II and XIX of chapter 98 of the HTS set forth specific categories of AGOA-eligible products, under the terms of separate country designations enumerated in subchapter notes. Includes imports for which preferential tariff treatment was claimed for AGOA-eligible goods by U.S. importers under GSP, for HTS rate lines with special duty symbols “A,” “A*” (unless the AGOA beneficiary country is excluded), or “A+.”

Table 2.13 Share of U.S. imports for consumption from AGOA beneficiaries, annual, 2018–20

In percentages. AGOA = African Growth and Opportunity Act; GSP = the U.S. Generalized System of Preferences; — (em dash) = not applicable.

Source: USITC DataWeb/Census, accessed February 25, 2021. See footnote to previous table.

The decline in U.S. imports under AGOA (excluding GSP) in 2020 compared to 2019 mainly reflected a decline in the value of imports of crude petroleum, as well as a decline in imports of macadamia nuts under the program. [265] The value of U.S. crude petroleum imports under AGOA dropped 85.2 percent ($3.7 billion) from 2019 to 2020, while the value of U.S. imports of macadamia nuts under AGOA dropped by 44.1 percent ($76.2 million) from 2019 to 2020. Nigeria and Angola, two of the top petroleum-producing countries in SSA, both experienced declines in the value of their exports of crude petroleum to the United States under AGOA (the interactive dashboard of appendix A), mostly due to the decline in global crude oil prices.

The major suppliers of duty-free U.S. imports under AGOA (excluding GSP) in 2020 were South Africa (36.5 percent of total AGOA imports), Nigeria (14.4 percent), Kenya (13.3 percent), Lesotho (7.8 percent), Ethiopia (7.3 percent), and Madagascar (6.0 percent). These six countries accounted for 85.4 percent of total imports by value under AGOA in 2020 ( interactive dashboard of appendix A).

Section 105 of AGOA required the President to establish the U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum (also known as the AGOA Forum) to discuss trade, investment, and development at an annual ministerial-level meeting with AGOA-eligible countries. [266] USTR planned to host the 2020 AGOA Forum in Washington, DC, on June 24–25, 2020. However, due to the COVID-19 pandemic, and in consultation with the SSA country governments, the event was postponed to a later date. [267]

Caribbean Basin Economic Recovery Act

The Caribbean Basin Economic Recovery Act (CBERA) was enacted in 1983 as part of the United States’ Caribbean Basin Initiative. Its goal is to encourage economic growth and development in the Caribbean Basin by using duty preferences to promote increased production and exports of nontraditional products. [268]

The Caribbean Basin Trade Partnership Act (CBTPA) amended CBERA in 2000 and expanded the list of qualified articles to include certain apparel. The CBTPA also extended preferential treatment to several other products previously excluded from CBERA. These products include certain tuna; crude petroleum and petroleum products; certain footwear; watches and watch parts assembled from parts originating in countries not eligible for normal trade relations (NTR) rates of duty; and certain handbags, luggage, flat goods, work gloves, and leather wearing apparel. [269] Products that are still excluded from CBERA preferential treatment include textile and apparel products not otherwise eligible for preferential treatment under CBTPA (mostly textile products) and above-quota imports of certain agricultural products subject to tariff-rate quotas (primarily sugar, beef, and dairy products).

While the original CBERA has no expiration date, CBTPA preferential treatment provisions expired on September 30, 2020. However, CBTPA was extended on October 10, 2020, for 10 years. [270] In the section that follows, the term CBERA refers to CBERA as amended by the CBTPA.

At the end of 2020, 17 countries and dependent territories were designated eligible for CBERA preference, and 8 of those countries were designated eligible for CBTPA preferences. [271] Several countries have asked to be designated as eligible for benefits under CBERA, CBTPA, or both, including Turks and Caicos Islands (which requested eligibility under CBERA); Aruba, The Bahamas, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, and Saint Vincent and the Grenadines (under CBTPA); and Sint Maarten and Suriname (under both CBERA and CBTPA). [272]

In 2020, the total value of U.S. imports from CBERA beneficiaries decreased by 10.7 percent to $5.0 billion, while the value of all U.S. imports entered under CBERA decreased by 4.8 percent to $1.7 billion in 2020 (table 2.14). [273] The top five imports under CBERA in 2020—crude petroleum oils (HTS 2709.00), methanol (HTS 2905.11), cotton T-shirts (HTS 6109.10), sweaters, pullovers, and sweatshirts of manmade fibers (HTS 6110.30), and T-shirts (HTS 6109.90)—comprised 65 percent of imports under the program. U.S. imports crude petroleum oils under CBERA rose by 130 percent from $191 million in 2019 to $441 million in 2020, while U.S. import of methanol under CBERA decreased by 30 percent from $355 million in 2019 to $248 million in 2020 (the interactive dashboard of appendix A).

Table 2.14 U.S. imports for consumption from CBERA/CBTPA beneficiaries, annual, 2018-20

In millions of dollar and percentages. CBERA = the Caribbean Basin Economic Recovery Act; CBTPA = the Caribbean Basin Trade Partnership; HOPE = the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 and of 2008.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: The data for U.S. imports under CBERA include U.S. imports under CBERA as amended by both CBTPA and HOPE and Haiti Economic Lift Program (HELP) Acts. For the Haiti HOPE methodology, refer to appendix C. CBTPA-eligible products are those for which a special duty rate appears in the special rate column of the HTS, followed by the symbol “R” in parentheses. The symbol “R” indicates that all CBTPA beneficiary countries are eligible for special duty-rate treatment with respect to all articles listed in the designated provisions. In addition, subchapters II and XX of chapter 98 set forth provisions covering specific products eligible for duty-free entry, under separate country designations enumerated in those subchapters (and including former CBTPA beneficiaries El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, Costa Rica, and Panama). CBERA (excluding CBTPA)-eligible products are those for which a special duty rate appears in the special rate column of the HTS, followed by the symbols “E” or “E*” in parentheses. The symbol “E” indicates that all beneficiary countries are eligible for special duty rate treatment with respect to all articles listed in the designated provisions. The symbol “E*” indicates that certain articles, under general note 7(d) of the HTS, are not eligible for special duty treatment with respect to any article listed in the designated provision. CBERA data in 2019 incorporate USITC estimates to account for the misclassification of certain imports of methanol as not having received duty preferences under CBERA when in fact they did.  These data will be subject to a forthcoming revision from the U.S. Census Bureau. Data available through USITC’s Dataweb or the Census Bureau’s USA Trade Online will not incorporate these revisions, until the Census Bureau’s release of annual revisions in June of 2022. U.S. government representative email message to USITC staff, July 20, 2021.

U.S. imports entered under CBERA accounted for 34 percent of all U.S. imports from CBERA countries in 2020 (table 2.15). Haiti was the leading supplier of U.S. imports under the program in 2020, accounting for 45 percent of the total value. Haiti is the only supplier of apparel under CBERA. Trinidad and Tobago was the second leading supplier of U.S. imports under CBERA in 2020, accounting for 28 percent of the total value. The country was the sole supplier of several top U.S. imports under CBERA, including petroleum products and melamine. Haiti and Trinidad and Tobago together supplied about 73 percent of U.S. imports under CBERA preferences. Guyana, Jamaica, and The Bahamas were the third-, fourth-, and fifth-leading suppliers, accounting for 16, 6, and 3 percent of the total, respectively (the interactive dashboard of appendix A).

Table 2.15 Share of U.S. imports for consumption from CBERA/CBTPA beneficiaries, annual, 2018–20

In percentages. CBERA = the Caribbean Basin Economic Recovery Act; CBTPA = the Caribbean Basin Trade Partnership; HOPE = the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 and of 2008; — (em dash) = not applicable.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Note: the same as table 2.14.

Haiti Initiative

In 2006, 2008, and 2010, amendments to CBERA expanded the duty-free benefits available to Haiti only. For apparel, these benefits give Haitian producers more flexibility in sourcing yarns and fabrics beyond the preferences available under the Caribbean Basin Trade Partnership Act (CBTPA), where apparel must be made exclusively from U.S. yarns, or fabrics of U.S. yarns. The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE Act) and of 2008 (HOPE II Act) (collectively referred to as the HOPE Acts) expand the rules of origin for apparel by permitting the limited use of materials of any origin, and added new benefits for ignition wiring sets for vehicles, aircraft, or ships assembled in Haiti. [274] The Haitian Economic Lift Program of 2010 (HELP Act) further modified existing U.S. trade preferences for Haiti (for certain apparel) established under the CBTPA and HOPE Acts, and extended benefits through September 30, 2020. [275] The Trade Preferences Extension Act of 2015 extended the HOPE/HELP Acts preferences through September 30, 2025. [276] To date, there have been no other changes to the HOPE/HELP Acts.

As in recent years, nearly all (98 percent) of U.S. imports of textiles and apparel from Haiti entered duty-free under trade preference programs in 2020 (table 2.17). Of the duty-free U.S. imports of apparel from Haiti, a smaller percentage relied on the preference rules of the CBTPA program in 2020 (23 percent) than in 2019 (25 percent). Although slight, the drop in CBTPA’s share of the preference trade reflects a continued shift in utilization away from CBTPA to the more liberal HOPE/HELP preference rules of origin. Although the value of U.S. imports of textile and apparel entering under the HOPE/HELP Acts declined by 21 percent (table 2.16), [277] the imports under HOPE/HELP represented 75 percent of total U.S. textile and apparel imports from Haiti, up from 73 percent in 2019, and 70 percent in 2018 (table 2.17).

Table 2.16 U.S. imports of textiles and apparel from Haiti, annual, 2018–20

In millions of dollars and percentages. CBERA= the Caribbean Basin Economic Recovery Act; CBTPA= the Caribbean Basin Trade Partnership; HOPE= The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 and of 2008; HELP=The Haiti Economic Lift Program of 2010.

Source: Compiled from official statistics of USDOC, ITA, Office of Textiles and Apparel, accessed March 2, 2021 and April 5, 2021.

Note: These data reflect detailed U.S. general import data under trade preference programs sorted by category and published by the Office of Textiles and Apparel at the U.S. Department of Commerce.

Table 2.17 Share of U.S. imports of textiles and apparel from Haiti, annual, 2018–20

In percentages. CBERA= the Caribbean Basin Economic Recovery Act; CBTPA= the Caribbean Basin Trade Partnership; HOPE= The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 and of 2008; HELP=The Haiti Economic Lift Program of 2010.

Source: Compiled from official statistics of USDOC, ITA, Office of Textiles and Apparel, accessed March 2, 2021 and April 5, 2021.

Note: These data reflect detailed U.S. general import data under trade preference programs sorted by category and published by the Office of Textiles and Apparel at the U.S. Department of Commerce.

Table 2.18 below shows the usage of each type of preference rule under CBTPA and Haiti HOPE/HELP. Apparel production in Haiti remains concentrated in high-volume, basic commodity garments such as knit T-shirts, pullovers, and undergarments, that have relatively predictable consumer demand and require few styling changes. [278] There was a notable increase in the usage of the HOPE/HELP preference rule for headwear in 2020 ($9.0 million) as compared to 2019 ($4.9 million). [279]

In terms of non-apparel textile imports from Haiti, of special note are the imports under the HOPE/HELP home goods provision. Imports under this preference rule first appeared in 2017 ($2.7 million), increased rapidly in 2018 ($10.2 million) and 2019 ($15.2 million), and grew slightly in 2020 ($16.1 million) despite challenging market conditions where imports of other products declined. [280]

Table 2.18 U.S. general imports of textiles and apparels from Haiti, by duty treatment, annual, 2018–20

In millions of dollars and percentages. — (em dash) = not applicable.

Source: Compiled from official statistics of USDOC, ITA, Office of Textiles and Apparel, accessed March 2, 2021 and April 5, 2021.

Note: Because of rounding, figures may not add to totals shown.

Chapter 3
The World Trade Organization

This chapter provides an overview of major developments at the World Trade Organization (WTO) during 2020, particularly as they affect the United States. The overview includes developments at ministerial and General Council meetings, selected WTO plurilateral agreements under discussion, and developments under the WTO Dispute Settlement Mechanism.

Background

The WTO was established by 124 governments through the Marrakesh Agreement in April 1994, which replaced an earlier world trade framework under the General Agreement on Tariffs and Trade (GATT) established in October 1947. The main functions of the WTO include: (1) facilitating the implementation, administration and operations of the Marrakesh Agreement, the Multilateral Trade Agreements, and the plurilateral agreements; (2) providing a forum for negotiations among its members concerning their multilateral trade relations; and (3) administering the Understanding on Rules and Procedures Governing the Settlement of Disputes. [281] Currently, the WTO oversees 16 different multilateral agreements (to which all WTO members are parties) and two plurilateral agreements (to which only some WTO members are parties). [282] As of March 29, 2021, the WTO had 164 member and 25 observer countries. [283] Turkmenistan was the latest country to receive observer status on July 22, 2020. [284]

Under the Marrakesh Agreement, the Ministerial Conference is the WTO’s highest decision-making body. It is composed of representatives of all the members and carries out the functions of the WTO. Usually convening once every two years, the Ministerial Conference has the authority to take decisions on all matters under any of the multilateral trade agreements. [285] Day-to-day work in between the ministerial conferences is handled by three bodies: the General Council (GC), the Dispute Settlement Body, and the Trade Policy Review Body. [286] The GC is also composed of representatives of all the members and it meets as appropriate. In the intervals between the Ministerial Conference meetings, it conducts the functions of the Ministerial Conference. [287] The WTO Secretariat, led by the WTO Director-General, provides support to its members and the WTO work. [288]

WTO Developments in 2020

Ministerial Conference

The Twelfth WTO Ministerial Conference was originally scheduled to take place during June 8–11, 2020, in Kazakhstan's capital, Nur-Sultan. Due to the COVID-19 pandemic, it was postponed to the week of November 29, 2021, in Geneva, Switzerland. [289]

General Council

During 2020, one priority of the GC became the selection of a new WTO Director-General. On May 14, 2020, WTO Director-General Roberto Azevêdo informed members that he intended to step down on August 31, 2020, a year before his term was to expire. Under the process set out by GC Chair Ambassador David Walker, eight nominations for the post were submitted during June 8–July 8, 2020. On July 31, 2020, the GC agreed on the guidelines for the Director-General selection process. The consultations with WTO members commenced on September 7, 2020, to assess their preferences and to determine which candidate was best placed to attract consensus support. During these confidential consultations, the field of candidates was narrowed from eight to five and then two. On October 28, 2020, the GC Chair informed members that the consultations indicated a strong preference among members for Ngozi Okonjo-Iweala, nominated by Nigeria. [290] However, the WTO reported that the United States continued to support another candidate, Minister Yoo Myung-hee, nominated by South Korea. [291] Unable to reach a final agreement, the GC meeting to select the Director-General, originally scheduled for November 9, 2020, was postponed. [292]

In other business, on December 10, 2019, members of the GC agreed to extend two existing moratoriums related to customs duties. One was on electronic transmissions and the other was on initiation of “non-violation” complaints under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Both were scheduled for decision during the Twelfth Ministerial Conference in June 2020. [293] However, due to the pandemic, the conference was postponed to November 2021, suggesting a decision on these moratoriums will be taken then.

Selected Plurilateral Agreements under Discussion

Negotiations on Electronic Commerce

Members launched negotiations on trade-related aspects of electronic commerce (e-commerce) in Davos, Switzerland, in January 2019. By the end of 2020, 86 members participated in the e-commerce negotiations. [294] Throughout 2020, participating members continued to engage in negotiations of rules on e-commerce. According to the WTO, despite the challenges presented by the pandemic, the negotiations advanced, leading to progress in small groups on specific issues. [295] At a plenary meeting in October 2020, participants re-engaged on topics that had been slated for the postponed negotiating rounds in March, April, and May of 2020. Topics included protection of personal information and data; spam; source code; open government data; trade facilitation in goods; services market access; electronic signatures and authentication; and online consumer protection. [296] Co-conveners (Australia, Japan, and Singapore) encouraged members to negotiate informally—bilaterally and in small groups—in order to reach consensus by November 16, 2020, the deadline for submissions of new proposals. [297] In December 2020, co-conveners released a public statement and provided an update on e-commerce negotiation. According to the statement, a consolidated text was developed and circulated among participants on December 7, 2020. [298] The text was based on members’ proposals, which cover the following themes: enabling electronic commerce; openness and e-commerce; trust and e-commerce; crosscutting issues; telecommunications; market access; and scope and general provisions. Co-conveners stated that the text would form the basis of the next stage of negotiation. [299]

Negotiations on Fisheries Subsidies

WTO members launched negotiations on fisheries subsidies in 2001 at the Doha Ministerial Conference. At the 11th Ministerial Conference (MC11) in Buenos Aires, 2017, ministers committed to negotiations with an aim to adopt an agreement before the next Ministerial Conference. [300] Based on the mandate fixed under the Ministerial Decision from MC11, negotiators were expected to secure an agreement on the elimination of subsidies for illegal, unreported, and unregulated (IUU) fishing. [301] The agreement would also cover the prohibition of certain forms of fisheries subsidies that contribute to overcapacity and overfishing. In addition, the agreement would allow developing and least-developed countries to receive special and differential treatment. [302]

According to the WTO, since 2017, the Rules Negotiating Group has held regular meetings in various configurations to advance the negotiations on fisheries subsidies. Following the resumption of WTO activities in Geneva in early summer 2020, negotiations proceeded under a rigorous schedule. Negotiating rounds took place every few weeks along with extensive intersessional work to revise a slim “draft consolidated text” prepared by the Chair in June 2020. [303]

In spite of the difficulties caused by COVID-19 pandemic-related disruptions to the 2020 meeting schedules, the Rules Negotiating Group members expressed the hope that progress made in 2020 would facilitate an agreement early in 2021. [304] Pending issues as of November 2020 include: the duration of a subsidy prohibition when a vessel or operator is found to have engaged in IUU fishing; unassessed stocks; dispute settlement and remedies; and special and differential treatment for developing and least-developed country members. [305]

Negotiations on Services

The Special Session of the Council for Trade in Services was formed in 2000, in accordance with the Uruguay Round mandate of the General Agreement on Trade in Services (GATS), to undertake new multi-sectoral services negotiations. The four major areas of service negotiations are: market access; domestic regulation; GATS rules (emergency safeguard measures, government procurement and subsidies); and implementation of special treatment of least-developed countries under GATS. [306] The Special Session of the Council for Trade in Services held informal meetings in October and December 2020. The focus of the meetings was market access for environmental services, agricultural-related services, logistics, and financial services. [307] The discussion of market access issues relating to logistics and financial services stemmed from two new communications submitted by members underscoring the importance of these sectors to world trade and economic growth. [308]

The Chair of the negotiations on services domestic regulation circulated a negotiating text in December 2020 that reflected the progress made in 2020 on domestic regulation disciplines. The disciplines under discussion are related to licensing and qualification requirements for service providers as well as the procedures and technical standards for supplying services. They are intended to facilitate trade in services, and to increase transparency and predictability. At a meeting on December 10, 2020, participants agreed to clarify that the disciplines build upon GATS and do not diminish any obligations contained in the Agreement. According to the WTO, 63 developed and developing countries participated in the negotiations on services domestic regulation. [309]

Waiver Proposal for Certain TRIPS Provisions

On October 2, 2020, South Africa and India submitted a proposal calling for a waiver for all WTO members of certain provisions of the TRIPS Agreement in relation to the “prevention, containment or treatment” of COVID-19. [310] According to the proponents, the objective of the waiver request is to avoid barriers to the timely access to affordable medical products including vaccines and medicines or to scaling-up of research, development, manufacture, and supply of essential medical products. The waiver would cover obligations in four sections of the TRIPS Agreement—Section 1 on copyright and related rights, Section 4 on industrial designs, Section 5 on patents, and Section 7 on the protection of undisclosed information. Under the proposal, the waiver would last for a specific number of years, to be determined by the General Council. It would remain in place until vaccination is available globally, and the majority of the world's population has developed immunity to COVID-19. WTO members would review the waiver annually until termination. [311]

The proposal was subsequentially co-sponsored by the delegations of Kenya, Eswatini, Pakistan, Mozambique, and Bolivia. [312] Discussions on the waiver proposal were held at the TRIPS Council meetings on October 15–16, November 20, and December 3 and 10, 2020. [313] Some WTO members at the time expressed opposition to the waiver, citing the existing flexibilities in the TRIPS Agreement which allows for compulsory licensing in health emergencies such as the pandemic. [314]

Dispute Settlement Body

This section provides an overview of the WTO dispute settlement process, as well as information about proceedings during calendar year 2020, particularly those in which the United States was a complaining or responding party. More specifically, it provides: (1) a tally of new requests for consultations filed by WTO members during calendar year 2020 under the WTO Dispute Settlement Understanding; (2) a table that lists the new dispute settlement panels established during calendar year 2020 in which the United States was either the complaining party or the named respondent; and (3) short summaries of the procedural and substantive issues in disputes involving the United States in 2020, as well as summaries of panel and Appellate Body reports issued during 2020 in disputes that involved the United States. This section also describes the impact that both the COVID-19 pandemic and the impasse on appointing new Appellate Body members had on panel and Appellate Body activity during 2020.

This section’s summaries of issues and of findings and recommendations in panel and Appellate Body reports are based entirely on information in publicly available documents. Sources include summaries published online by the WTO, summaries included in 2021 Trade Policy Agenda and 2020 Annual Report released by the Office of the U.S. Trade Representative (USTR), and summaries included in USTR press releases. The summaries in this report should not be regarded as comprehensive or as reflecting a U.S. government or Commission interpretation of the issues raised or addressed in the disputes or in panel or Appellate Body reports. A table showing procedural developments during 2020 in disputes in which the United States was the complainant or respondent appears in the interactive dashboard of appendix A .

This section focuses on developments during 2020, including panel and Appellate Body reports issued during 2020 and adopted by the Dispute Settlement Body (DSB). With minor exceptions, panel and Appellate Body reports and DSB actions after the close of 2020 will be summarized in the next edition of Commission’s report covering 2021. A number of disputes filed before 2020 remained inactive throughout 2020, either at the consultation stage or with a panel established but not composed. With minor exceptions, this report will not address those disputes.

Finally, this section focuses largely on developments through the panel and Appellate Body stage and includes only limited discussion of matters that arose after the DSB adopted panel or Appellate Body reports in the original dispute. As indicated in the flowchart in figure 3.1, dispute settlement often continues beyond the adoption of the panel or Appellate Body report, particularly when the defending party is the “losing” party. Issues may arise about the reasonableness of the time sought by the losing party to implement findings and recommendations, the adequacy of actions taken by that party to comply with the findings and recommendations, and possible compensation and retaliation. Matters may be referred to the original panel or to a new panel for further findings and recommendations on compliance and other matters, and when appropriate, the parties may seek the help of an arbitrator to resolve matters.

The table in the interactive dashboard of appendix A sets out the timeline for procedural actions in specific active WTO dispute settlement cases, including procedural actions at the implementation, compliance, and compensation/retaliation stages. A number of disputes were still active at the compliance stage or were before an arbitrator during 2020.

Source: WTO, “ Flow Chart of the Dispute Settlement Process ,” accessed March 29, 2021.

Dispute Activities During 2020

During 2020, the COVID-19 pandemic slowed the filing of new disputes and delayed the progress of ongoing disputes before established and composed panels. [315] The pandemic impacted the ability to hold face-to-face proceedings and required parties to disputes to agree to flexible arrangements in order to proceed. [316] Similarly, the impasse over appointment of new members to the Appellate Body prevented it from addressing new appeals. The combination of these two situations likely slowed the pursuit of disputes even at the panel stage.

During 2020, WTO members filed five new requests for dispute settlement consultations. This number was the lowest number for any year since the establishment of the WTO in 1995, and sharply lower than the 20 requests filed during 2019 and 38 filed during 2018. [317] Only five countries filed requests, and no country filed more than one request. The requests were filed by Japan, Turkey, Peru, Hong Kong, and Australia, respectively. No country was the named respondent in more than one request. The named respondents were South Korea, the European Union, Brazil, the United States, and China. [318]

New Dispute Filed in Which the United States Was the Named Respondent

DS597: United States — Origin Marking Requirement

The single new dispute filed in 2020 involving the United States, “DS597: United States—Origin Marking Requirement,” was filed by Hong Kong. On October 30, 2020, Hong Kong requested consultations with the United States regarding certain measures concerning the origin marking requirement applicable to goods produced in Hong Kong. Hong Kong claimed that the U.S. measures appear to be inconsistent with: Articles I:1, IX:1, and X:3(a) of the GATT 1994 Agreement; Articles 2(c), 2(d) and 2(e) of the Agreement on Rules of Origin; and Article 2.1 of the Technical Barriers to Trade (TBT) Agreement.

In its request for establishment of a panel, Hong Kong noted that the U.S. Customs and Border Protection (CBP) had published a notice on August 11, 2020, stating that, after September 25, 2020, goods produced in Hong Kong must be marked to indicate that their origin is "China" for the purposes of the origin marking requirement set forth in Section 304 of the Tariff Act of 1930, 19 U.S.C. 1304. Hong Kong noted that CBP in a subsequent notice extended the date for compliance with this requirement to November 10, 2020. [319]

On November 9, 2020, the United States requested the Chair of the DSB to circulate to members a communication where it indicated that the United States was willing to enter into consultations with Hong Kong without prejudice to the U.S. view that the measures imposed by the United States concern issues of national security not susceptible to review or capable of resolution by WTO dispute settlement.

On November 13, 2020, the Russian Federation requested to join the consultations. On November 19, 2020, the United States requested the Chair of the DSB to circulate to members a communication where it rejected the Russian Federation's request to join the consultations. The United States and Hong Kong held consultations on November 24, 2020. The consultations failed to resolve the dispute and Hong Kong requested establishment of a panel on January 14, 2021. [320]

No New Panels Were Established in 2020 that Involve the United States

No new dispute settlement panels were established during 2020 in which the United States was the named complaining party or responding party. This compares with six dispute settlement panels that were established during 2019 in which the United States was a named party—three in which the United States was the complaining party, and three in which the United States was the responding party. In 2018, 23 panels were established: The United States was the complaining party in 8 of the disputes, and the responding party in 15 disputes. [321]

Panel and Appellate Body Reports Issued and/or Adopted during 2020 That Involve the United States

During 2020, the WTO Appellate Body issued one report in a dispute to which the United States was a party, and WTO dispute settlement panels issued reports in two disputes to which the United States was a party. The United States was the named respondent in all three of the disputes (table 3.1). With the exception of the overview below of developments at the compliance level in two U.S. and EU disputes on large civil aircraft, this section covers only panel and Appellate Body reports relating to the original disputes and does not include subsequent reports, such as those of a compliance panel or an arbitrator. Many of the compliance reports are noted in the interactive dashboard of appendix A , which contains a procedural summary of most of the dispute settlement cases that are still active in some respect.

Table 3.1 WTO dispute settlement panel and Appellate Body (AB) reports circulated and/or adopted in 2020 in which the United States was a party

Source: WTO, “ Chronological List of Disputes Cases ,” accessed March 29, 2021.

Developments at the Compliance Level in Two U.S. and EU Disputes on Large Civil Aircraft

One dispute active at the compliance level in 2020, “DS316: European Communities and Certain Member States—Measures Affecting Trade in Large Civil Aircraft,” had been filed by the United States in 2004. It alleged that subsidies provided to Airbus by the EU as well as Germany, France, Spain, and the UK violated various provisions of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and Article XVI:1 of the GATT 1994. [322]

On October 2, 2019, after 15 years of litigation and multiple panel and Appellate Body reports in the United States’ favor, the arbitrator addressing the level of countermeasures sought by the United States issued its decision. The decision states that the level of countermeasures commensurate with the degree and nature of the adverse effects determined to exist are up to $7.5 billion annually. [323] It was by far the largest award in WTO history—nearly twice the largest previous award. The Arbitrator calculated this amount based on WTO findings that EU launch aid for Airbus had been causing significant loss of sales of Boeing large civil aircraft, as well as impeding exports of Boeing large aircraft to the EU, Australia, China, South Korea, Singapore, and United Arab Emirates markets. Under WTO rules, the Arbitrator’s decision is final and not subject to appeal. [324] On April 12, 2019, USTR initiated a section 301 investigation to enforce U.S. rights in this WTO dispute. For more information on U.S. implementation of countermeasures and other development, see section 301 investigations in chapter 2 of this report.

In further developments in 2020, the EU, in a communication dated August 21, 2020, informed the DSB that it had amended the French A350XWB MSF and the Spanish A350XWB MSF loan agreements. The EU noted that the amendment aligns the terms of these financial instruments with a market benchmark prevailing at the time of the original measure, with the prospective effect from the date of the amendment. The EU claimed that these measures achieve full compliance with the findings of a report issued on December 2, 2019 by a second compliance panel. [325] In addition, the EU noted that it had adopted these measures in spite of having appealed the findings of the compliance panel report and disagreeing with some of the findings of the Arbitrator’s decision of October 2, 2019. [326]

A second dispute that was active at the compliance level during 2020 also involved large civil aircraft. That dispute was initially filed in 2004 by the EU and concerned U.S. subsidies allegedly provided to Boeing. Following an appeal of a 2017 compliance panel report, the Appellate Body issued a report on March 28, 2019, rejecting arguments made by the EU that U.S. federal and state programs gave more than $10 billion in subsidies to Boeing large civil aircraft. The report affirmed a 2017 compliance panel report that had rejected EU arguments that 29 U.S. state and federal programs conferred $10.4 billion in subsidies to Boeing over six years. It found only one program, a Washington State tax measure worth an average annual value of about $100 million from 2013 to 2015, to be WTO-inconsistent. [327] On June 5, 2019, at the request of the EU, the arbitration regarding the level of countermeasures was resumed. [328]

On October 13, 2020, the arbitrator issued its decision with respect to the adverse effects caused by the Washington State tax rate reduction during the historical 2012 reference period. The arbitrator determined the level of countermeasures commensurate with the degree and nature of the adverse effects determined to exist is about $3.99 billion annually. On October 26, 2020, the WTO granted the EU authorization to take countermeasures consistent with the arbitrator’s decision. In the U.S. view, the EU had no legal basis to maintain countermeasures on U.S. goods because the Washington State tax rate reduction was repealed effective April 1, 2020. [329] On November 7, 2020, the EU imposed duties of 15 percent on imports of certain aircraft and 25 percent on imports of certain machinery, vehicles, and parts, food and alcohol products, luggage, and other products from the United States, effective November 10, 2020. [330] These duties totaled about $4 billion annually. [331]

Reports in Which the United States Was the Complainant

There were no reports where the United States was the Complainant.

Reports in Which the United States Was the Respondent

DS505: United States — Countervailing Measures on Supercalendered Paper from Canada

On March 30, 2016, Canada requested consultations with the United States to consider claims related to U.S. countervailing duties on supercalendered paper from Canada (Investigation C-122-854). Consultations between the United States and Canada took place in Washington, DC on May 4, 2016. On June 9, 2016, Canada requested the establishment of a panel challenging certain actions of the U.S. Department of Commerce (USDOC) with respect to the countervailing duty investigation and final determination, the countervailing duty order, and an expedited review of that order. The WTO established a panel on July 21, 2016, and the Director-General composed the panel on August 31, 2016. [332]

The panel report was circulated on July 5, 2018. The panel found the USDOC acted inconsistently with certain articles of the SCM Agreement [333] and Article VI:3 of the GATT 1994. [334] The USDOC terminated the countervailing duties on July 5, 2018. [335] On August 27, 2018, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. [336] A hearing was held in Geneva on November 4 and November 5, 2019, and a report in appeal issued by the Appellate Body was circulated on February 6, 2020. [337] This appellate document contains a majority view upholding the findings of the panel report and also a separate opinion that calls into question the reasoning and interpretative analysis of the appellate majority concerning “ongoing conduct.” [338]

At its meetings held on February 28 and March 5, 2020, the DSB considered this appellate document and the panel report. [339] The United States noted in its DSB statement that it had serious procedural and substantive concerns, and it objected to the adoption of the appellate document as an Appellate Body Report. The United States explained that the document cannot be an Appellate Body report because the Chinese national who served on the appeal was not a valid member of the Appellate Body given that the individual is affiliated with the Government of China, in breach of Article 17.3 of the WTO Dispute Settlement Understanding (DSU). The concern related to the individual’s service was further compounded because the appeal directly implicated the interests of the Government of China. The United States also reiterated its concerns of ex-Appellate Body members’ continuation of service without authorization by the DSB, and the failure to adhere to the deadline in Article 17.5 of the DSU. Accordingly, the United States did not join in a consensus to adopt the document and report that were before the DSB. The United States explained that because there was no valid Appellate Body Report in this dispute, the document and report could only be adopted by positive consensus. It further explained that because there was no consensus on adoption, the DSB did not validly adopt any document and report in this dispute, and therefore there was no valid recommendation of the DSB with which to bring a measure into conformity with a covered agreement. [340]

On June 18, 2020, Canada requested authorization to suspend concessions and other obligations pursuant to Article 22.2 of the DSU. On June 26, 2020, the United States objected to Canada’s request, referring the matter to arbitration pursuant to Article 22.6 of the DSU. On August 6, 2020, the WTO notified the parties that the arbitration would be carried out by the panelists who served during the panel proceeding. The arbitration proceedings were ongoing as of the end of 2020. [341]

DS533: United States — Countervailing Measures on Softwood Lumber from Canada

On November 28, 2017, the United States received from Canada a request for consultations pertaining to the final determination issued by the USDOC following a countervailing duty investigation regarding softwood lumber from Canada. Canada claimed that the USDOC determination is inconsistent with U.S. commitments and obligations under Articles 1.1(a), 1.1(b), 2.1(a), 2.1(b), 10, 11.2, 11.3, 14(d), 19.1, 19.3, 19.4, 21.1, 21.2, 32.1, and 32.5 of the SCM Agreement; and Article VI:3 of the GATT 1994. Specifically, Canada challenged the USDOC’s determinations regarding benchmarks for stumpage, log export permitting processes, and non-stumpage programs. The United States and Canada held consultations on January 17, 2018. At Canada’s request, the WTO established a panel on April 9, 2018, and the Director-General composed the panel on July 6, 2018. [342]

The panel circulated its report on August 24, 2020. The panel found that the USDOC’s determinations regarding benchmarks for stumpage, log export permitting processes, and non-stumpage programs were inconsistent with certain articles of the SCM Agreement. [343] USTR responded that the panel applied the WTO Appellate Body’s flawed test for using out-of-country benchmarks in its analysis of benchmarks from within Canada that the USDOC used to measure the benefit of subsidies. In addition, USTR noted that the panel applied a heightened level of scrutiny to its review of the USDOC’s determination, in essence putting itself in the place of the investigating authority, contrary to the terms of the SCM Agreement. On September 28, 2020, the United States notified the DSB of its decision to appeal certain issues of law covered in the panel report. [344]

DS543: United States — Tariff Measures on Certain Goods from China

On April 4, 2018, China requested consultations with the United States concerning certain tariff measures on Chinese goods that the United States proposed to implement under sections 301–310 of the Trade Act of 1974. [345] China alleged that the tariff measures were inconsistent with U.S. commitments and obligations under the Articles I:1, II:1(a), and II:1(b) of the GATT 1994 and Article 23 of the DSU. On July 6, July 16, and September 18, China requested additional consultations regarding tariff measures imposed under section 301 that supplemented its original consultations request of April 4, 2018. The United States and China held consultations in Geneva on August 28 and October 22, 2018. On December 6, 2018, China requested the establishment of a panel, which was established on January 28, 2019. The Panel was composed on June 3, 2019. Following the resignation of a panelist on September 25, 2019, the Director-General appointed a new panelist on October 17, 2019. The panel circulated its report on September 15, 2020. The panel concluded that the tariff measures at issue are inconsistent with Article I:1 of the GATT 1994 (most-favored-nation treatment, or MFN), because they fail to provide treatment for Chinese products that is no less favorable than that granted to like products originating from other WTO members, and with Articles II:1(a) and (b) of the GATT 1994, because the additional duties are in excess of the bound rates found in the U.S. Schedule of Concessions. On October 27, 2020, the United States notified the DSB of its decision to appeal certain issues of law covered in the panel report. [346]

U.S. Concerns about WTO Dispute Settlement

In February 2020, USTR issued a detailed report, Report on the Appellate Body of the World Trade Organization (the February 2020 Report), setting out U.S. concerns about the operation of the WTO dispute settlement, particularly at the Appellate Body level. The February 2020 Report identified seven areas of concerns in which the Appellate Body has exceeded its authority: (1) “Contrary to the principle of prompt settlement of disputes, the Appellate Body has consistently breached the mandatory deadline for the completion of appeals.” (2) “Contrary to WTO rules, the Appellate Body has unilaterally declared that it has the authority to allow individuals formerly serving on the Appellate Body, whose terms have expired, to continue to participate in and decide appeals.” (3) “The Appellate Body has exceeded its limited authority to review legal issues by reviewing panel findings of fact, including factual findings relating to the meaning of WTO Members’ domestic law.” (4) “The Appellate Body has overstepped its role under the Dispute Settlement Understanding by rendering advisory opinions on issues not necessary to assist the Dispute Settlement Body in resolving a dispute.” (5) “The Appellate Body wrongly claims that its reports are entitled to be treated as binding precedent and must be followed by panels, absent cogent reasons.” (6) “The Appellate Body has asserted that it may ignore the text of the Dispute Settlement Understanding explicitly mandating it recommend a WTO Member to bring a WTO-inconsistent measure into compliance with WTO rules.” And (7) “The Appellate Body has overstepped its authority and opined on matters within the authority of other WTO bodies, including the Ministerial Conference, the General Council, and the Dispute Settlement Body.” [347] The February 2020 Report stated that “the Appellate Body’s persistent overreaching has taken away rights and imposed new obligations through erroneous interpretations of WTO agreements,” [348] and supported this with examples to illustrate how the Appellate Body’s erroneous findings have harmed WTO Members, and in particular have prejudiced the ability of market economy countries to take measures to address economic distortions caused by non-market economies. [349]

In its 2020 Annual Report, issued in March 2021, USTR recapped efforts made to raise those concerns at DSB meetings during 2020, particularly regarding the Appellate Body’s disregard for the rules set by WTO members, adding to or diminishing rights or obligations under the WTO Agreement. The 2020 Annual Report stated that many WTO members share the same concerns: (1) on the mandatory 90-day deadline for appeals, (2) review of panel fact finding, (3) issuing of advisory opinions on issues not necessary to resolve a dispute, (4) the treatment of Appellate Body reports as precedent, or (5) persons continuing to serve on appeals after their term has ended. The 2020 Annual Report said that the United States has also explained that when the Appellate Body abused the authority that it had been given within the dispute settlement system, it undermined the legitimacy of the system and damaged the interests of all WTO members who cared about having the agreements respected as they had been negotiated and agreed. The 2020 Annual Report indicated that for many years, the United States and other WTO members have raised repeated concerns about appellate reports going far beyond the text setting out WTO rules in areas as varied as subsidies, antidumping and countervailing duties, standards under the TBT Agreement, and safeguards. The report stated that such overreach restricts the ability of the United States to regulate in the public interest or protect U.S. workers and businesses against unfair trading practices. The USTR report stated that, as a result, the United States was not prepared to agree to launch the process to fill vacancies on the WTO Appellate Body without WTO members engaging with and addressing these critical issues. [350]

Chapter 4
Selected Regional and Bilateral Activities

This chapter summarizes trade-related activities during 2020 in two major multilateral organizations–the Organisation for Economic Co-operation and Development and the Asia-Pacific Economic Cooperation forum. It also covers the activities conducted under U.S. trade and investment framework.

Organisation for Economic Co-operation and Development

Background

Established in 1961, the Organisation for Economic Co-operation and Development (OECD) is an international intergovernmental organization that “works to build better policies for better lives.” [351] It serves as a policy forum as well as a knowledge hub, producing data and analyses, enabling member countries to share experience and best practices, and providing advice on public policy and international standard-setting. Collaborating closely with the G7 and the G20, the OECD focuses on finding multilateral solutions to a range of global economic, social, and environmental challenges. [352]

The OECD’s membership has expanded in recent years. At the end of 2020, it included 37 middle- and high-income countries, with Colombia being the latest member to join in April 2020. [353] On May 15, 2020, Costa Rica became an OECD accession candidate, and its membership will take effect once it meets the accession requirements. The OECD also works closely with the so-called “OECD key partners,” including Brazil, China, India, Indonesia, and South Africa. Although they are not OECD members, the OECD key partners participate in policy discussions in the OECD bodies, take part in the regular OECD surveys, and are included in the OECD statistical databases. [354]

The OECD organizational structure consists of the OECD Council, Committees, and the Secretariate. The OECD Council is the overarching decision-making body. It convenes the annual Ministerial Council Meeting to set priorities, discuss the global economic and trade environment, and agree upon issues such as the OECD budget or the accession process. Led by the OECD Secretariat, through various bodies such as committees, expert groups, and working groups, the OECD carries out key areas of work, such as agriculture and climate, development, energy, green investment and finance, as well as international negotiation. [355] The OECD trade bodies include the Trade Committee and its subsidiary bodies.

OECD Developments in 2020

Ministerial Council Meeting

The annual OECD Ministerial Council Meeting took place virtually on October 28–29, 2020. The theme of the 2020 OECD Ministerial Council Meeting was “The Path to Recovery: Strong, Resilient, Green and Inclusive,” focusing on measures to strengthen international cooperation and promote an inclusive, sustainable global recovery from the COVID-19 pandemic. At the meeting, Ministers discussed “macroeconomic policies and recovery priorities, employment and social protection, trade and investment, global value chain resilience, and the actions needed for an inclusive and sustainable recovery.” [356] In the 2020 Ministerial Council Statement , Ministers proposed (1) harnessing the acceleration of the digital transition induced by the pandemic and its transformative potentials, (2) promoting a job-rich recovery through education and active labor market policies, and (3) incorporating the advancement of sustainable, resource-efficient, carbon-neutral economies in the recovery plan, among other topics. [357]

Digital Taxation Negotiations

Throughout 2020, the OECD continued to work on the issues surrounding taxation of the digital economy under the Base Erosion and Profit Shifting (BEPS) Project and the OECD/G20 Inclusive Framework on BEPS (the OECD/G20 Inclusive Framework).

The term of BEPS refers to tax planning strategies used by multinational enterprises that use gaps and mismatches in tax rules to avoid paying tax, such as artificially shifting profits from countries where their activities are located to jurisdictions with low or zero tax rates. The OECD estimates that the BEPS practice costs countries $100–$240 billion dollars in lost tax revenue every year. [358] The OECD launched the BEPS Project in partnership with the G20 in 2013 to tackle tax avoidance, while improving the coherence of international tax rules and ensuring a more transparent tax environment. [359] Under the OECD/G20 BEPS project, 15 action items were developed, with action 1 focusing on tax challenges arising from digitalization. [360] The OECD/G20 Inclusive Framework was established in 2016 to review and monitor the implementation of the OECD/G20 BEPS Project. As of February 2021, the OECD/G20 Inclusive Framework had 139 countries and jurisdictions as members, including the United States. [361]

Given the difficulty of drawing borders around the digitalized economy and other potential theoretical and administrative challenges to taxing digital activities (for more information on digital taxation challenges, see box 4.1 ), since 2019, the OECD/G20 Inclusive Framework has been working on developing a multilateral, consensus-based solution with a two-part, or so-called “two-pillar” approach. [362] Pillar One focuses on the profit allocation rules across multiple jurisdictions. Pillar Two, also referred to as the global anti-base erosion or “GloBE” proposal, focuses on the remaining BEPS issues, seeking to develop rules to ensure a minimum level of taxation for both traditional and digital companies. [363] Members’ various proposals were grouped under these two pillars. [364]

At the 8th Session on January 29–30, 2020, the OECD reported that the members of the OECD/G20 Inclusive Framework endorsed the outline of the “Unified Approach” as the basis for negotiations of the Pillar One solution. Developed by the OECD Secretariat, the OECD states that the Unified Approach identifies commonalities among different proposals and thus brings together competing proposals. The OECD further states that this Approach is designed to incorporate new business models enabled by digitization, expand the taxing rights of market jurisdictions, and enhance dispute prevention and resolution procedures. [365]

At the OECD/G20 Inclusive Framework meeting on October 8–9, 2020, the OECD noted that members agreed that the two-pillar approach provides a foundation for a future agreement, and endorsed the release of the Reports on the Blueprints of Pillar One and Pillar Two for public consultation. [366] According to the OECD statement, these outlines reflect convergent views on several key policy features, principles, and parameters under these two pillars. [367] However, the OECD said that discussions would continue, and that different views on certain issues would need to be bridged in the future multilateral process. [368]

At the G20 Finance Ministers and Central Bank Governors Meeting in October 2020, leaders urged the OECD/G20 Inclusive Framework to address the remaining issues and reach a global and consensus-based solution by mid-2021. [369]

Asia-Pacific Economic Cooperation

Background

The Asia-Pacific Economic Cooperation (APEC) is a regional economic and trade forum established in 1989 and composed of 21 member economies. [370] The primary goal of APEC is to “support sustainable economic growth and prosperity in the Asia-Pacific region.” Through initiatives, APEC champions free and open trade and investment, promotes and accelerates regional economic integration, encourages economic and technical cooperation, enhances human security, and facilitates a favorable and sustainable business environment. [371]

APEC is an international intergovernmental group committed to reducing barriers to trade and investment without requiring its members to enter into legally binding obligations. APEC achieves its goals by promoting dialogue and arriving at decisions on a voluntary, consensus basis. [372]

APEC has a two-level operational structure. At the policy level, APEC economic leaders and ministers and the APEC Business Advisory Council meet annually to provide policy direction and set the vision for overarching goals and initiatives. At the working level, four core committees, including the Committee on Trade and Investment and its subsidiary bodies, implement initiatives and carry out activities. [373] The APEC Secretariat operates as the core support mechanism for the APEC process. It administers the budget and performs a central project management role, overseeing more than 250 APEC-funded projects. [374]

Every year, one of the 21 APEC member economies hosts APEC meetings and serves as the APEC chair. In 2020, Malaysia was the APEC chair. [375]

APEC Developments in 2020

2020 APEC Themes and Priorities

Under Malaysia’s leadership in 2020, APEC adopted the theme “Optimizing Human Potential towards a Resilient Future of Shared Prosperity: Pivot. Prioritise. Progress,” and focused on three priority areas: “Improve the Narrative of Trade and Investment; Inclusive Economic Participation through Digital Economy and Technology​; and Driving Innovative Sustainability.” [376]

Response to the COVID-19 Pandemic

On May 5, 2020, the APEC Ministers Responsible for Trade issued a statement regarding the response to the COVID-19 pandemic in the APEC region. The Ministers Responsible for Trade urged APEC economies to identify and resolve any unnecessary barriers to trade, facilitate the flow of essential goods and services to fight the pandemic, and minimize disruptions to the global supply chains. The Committee on Trade and Investment held a virtual meeting on June 23, 2020, to discuss the implementation of the statement by the Ministers Responsible for Trade. As a result, several initiatives and projects were undertaken in 2020, including initiatives concerning the movement of essential goods and people across borders, a proposal regarding notifying the WTO of COVID-19 related emergency measures, several self-funded projects concerning the stabilization and resilience of supply chains, and a project seeking to share best practices on utilizing digital technologies to facilitate trade during the pandemic and beyond. In addition, on September 17, 2020, the Committee on Trade and Investment and the OECD jointly organized a webinar, Impacts of COVID-19 on International Trade and Investment: Insights and Policy Responses for APEC . [377]

Support for the Multilateral Trading System

Throughout 2020, APEC continued to support the multilateral trading system and contribute to various ongoing negotiations under the WTO. [378] Some areas of focus were the WTO negotiations on e-commerce and fishery subsidies; the implementation of the WTO Trade Facilitation Agreement, Technical Barriers to Trade Agreement, and Information Technology Agreement; and the implementation of the 2015 WTO Ministerial decision on agricultural export subsidies. [379] The United States undertook three capacity-building and technical assistance projects to support APEC economies’ implementation of the WTO Trade Facilitation Agreement, including Article 1 (publication and availability of information), Article 3 (advance ruling), and Article 8 (border agency cooperation). [380]

Progress toward the Bogor Goal

With an intention to complete the Bogor Goal of creating a free and open trade and investment area in the Asia-Pacific by 2020, [381] APEC Policy Support Unit conducted the final review of APEC’s Progress toward the Bogor Goal and presented the findings in its November 2020 report. The review concluded that progress has been made in many areas since the inception of the Bogor Goal in 1994. In particular, it noted that tariff rates have been significantly reduced across the APEC region, and that trade facilitation efforts have led to simplified procedures, improved logistics services, and reduced trade costs in the APEC region. However, the review identified several areas for further improvement, such as uneven sectoral tariff liberalization; a high number of nontariff measures; restrictions on cross-border data transfer, storage, and processing; and a slowdown in improvement of investment conditions in primary sectors and some services sectors. [382]

According to the report, although the pandemic initially led to an increase in temporary export restrictions, many of them had been suspended or terminated as of late 2020. Meanwhile, several APEC economies implemented a temporary reduction or suspension of import tariffs and other measures to facilitate trade, especially concerning imports of COVID-19 related medical equipment and supplies, medicines, and personal protective equipment. [383]

In 2020, the Group on Services implemented the “final push” on services to address the unfinished business of the Bogor Goals, including work plans in five priority areas: domestic services regulation, development of the APEC index, mutual recognition of qualifications and licensing, environmental services, and manufacturing-related services. [384]

Internet, Digital Economy, and E-Commerce

Internet, digital economy, and e-commerce continued to be an important area of work at APEC in 2020. [385] On September 8–10, 2020, Australia organized the Digital Symposium Series, discussing current development and opportunities in digital trade including emerging technologies, digital privacy, and digital trade standards. On October 13–14, 2020, the United States held the APEC Digital Trade Policy Dialogue Webinar, discussing policies and regulatory frameworks that facilitate digital trade, commercial development, and the adoption of emerging technologies, particularly in the COVID-19 environment. [386] In addition, the APEC Digital Economy Steering Group produced two reports: one in March 2020, providing information on policies, initiatives and best practices to develop digital economy and promote participation by small and medium-sized enterprises; and the other in June 2020, discussing consumer protection in digital trade. [387]

On March 9, 2020, the Philippines became the ninth APEC economy to join the APEC Cross-Border Privacy Rules System, following the United States, Mexico, Canada, Japan, South Korea, Singapore, Chinese Taipei (Taiwan), [388] and Australia. The system is a government-backed data privacy certification that companies can join to demonstrate compliance with internationally recognized data privacy protections. [389]

Trade and Investment Framework Agreements

Trade and Investment Framework Agreements (TIFAs) provide a strategic framework and principles for dialogue on trade and investment issues between the United States and its trading partners. TIFAs and related council meetings serve as a setting for the United States and other parties to discuss diverse issues of mutual interest (e.g., market access, labor, environment, and intellectual property rights), with the objective of strengthening trade and investment ties. At the end of 2020, the United States had entered into 59 TIFAs, whether specifically called a TIFA or by a similar name including Agreement on Trade and Economic Cooperation (ATEC), Trade and Investment Council Agreement (TIC), Trade and Investment Cooperation Forum (TICF), Trade and Investment Cooperation Agreement (TICA), and Trade and Investment Cooperation Forum Agreement (TICFA). All are considered TIFAs by the USTR. [390]

On October 15, 2020, the United States signed a TIFA with Fiji. This is the first TIFA that the United States signed with a small developing island state in the Pacific. [391] On October 19, 2020, the United States and Brazil signed a new Protocol on Trade Rules and Transparency, updating the U.S.-Brazil ATEC concluded in 2011 with three new annexes: (1) Trade Facilitation and Customs Administration, (2) Good Regulatory Practices, and (3) Anti-Corruption. [392] On December 8, 2020, the United States and Ecuador updated their TIC Agreement by signing a new Protocol on Trade Rules and Transparency.  The Protocol of Trade Rules and Transparency is composed of four annexes that are added on to the TIC: (1) Customs Administration and Trade Facilitation, (2) Good Regulatory Practices, (3) Anticorruption, and (4) Small and Medium-Sized Enterprises. [393] For more information on the 2020 developments under other TIFAs, see table 4.1 below.

Table 4.1 U.S. trade and investment framework agreements (TIFAs) developments in 2020

ATEC = Agreement on Trade and Economic Cooperation; TIC = Trade and Investment Council; TICF = Trade and Investment Cooperation Forum; TICA = Trade and Investment Cooperation Agreement; and TICFA = Trade and Investment Cooperation Forum Agreement.

Sources: USTR, “ Trade and Investment Framework Agreements ,” accessed March 23, 2021; USTR, “ USTR Statement on 5th U.S.—Bangladesh Trade and Investment Cooperation Forum Agreement Council Meeting ,” March 5, 2020; USTR, 2021 Trade Policy Agenda and 2020 Annual Report , March 2021; USTR, “ Joint Statement of the United States-Ecuador Trade and Investment Council ,” November 19, 2020; USTR, “ United States and Ecuador Update TICA with New Protocol on Trade Rules and Transparency ,” December 8, 2020; USTR, “ Joint Statement on the 5th U.S.-Nepal Trade and Investment Framework Agreement Council Meeting ,” December 16, 2020; UNCTAD, “ UNCTAD Investment Policy Hub ,” accessed March 25, 2021;  USTR, “ United States and Brazil Update Agreement on Trade ,” October 19, 2020.

Chapter 5

U.S. Free Trade Agreements

This chapter summarizes developments related to U.S. free trade agreements (FTAs) [394] during 2020. It describes trends in U.S. merchandise imports entered under FTAs, summarizes major activities involving U.S. FTAs in force during 2020, and highlights the status of U.S. FTA negotiations during the year. To date, the United States has implemented 14 FTAs with a total of 20 countries (table 5.1). [395]

Table 5.1 U.S. free trade agreements (FTAs) in force as of December 31, 2020

FTA = free trade agreement; TPA = trade promotion agreement; Korea refers to the Republic of Korea, or South Korea.

Source: USTR, “ Free Trade Agreements ,” accessed April 14, 2021.

Note:

^a The U.S.-Jordan FTA was fully implemented on January 1, 2010.

^b CAFTA-DR is an FTA between the United States with six small developing economies: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic. All parties signed CAFTA-DR on May 28, 2004, except the Dominican Republic, which signed in August 2004. CAFTA-DR entered into force between the United States and Costa Rica on January 1, 2009, between the United States and the Dominican Republic on March 1, 2007, between the United States and Guatemala on July 1, 2006, between the United States and Honduras and Nicaragua on April 1, 2006, and between the United States and El Salvador on March 1, 2006.

^c On July 1, 2020, the USMCA replaced the North America Free Trade Agreement (NAFTA) which entered into force on January 1, 1994.

U.S. Imports Entered under FTAs in 2020

The value of U.S. merchandise imports entered under FTAs (hereafter FTA imports) [396] decreased by over 14 percent in 2020 (table 5.2). During this period, U.S. imports entered under NAFTA/USMCA decreased by nearly 16 percent, while U.S. imports entered under non-NAFTA/USMCA FTAs decreased by nearly 7 percent. U.S. FTA imports from Mexico and Canada incurred the largest decreases in absolute dollar value; meanwhile, U.S. FTA imports from Bahrain, Jordan, Oman, and Colombia had the largest decreases in percentage changes. Morocco and Singapore were the only two FTA partners from which the United States increased FTA imports in 2020 (table 5.2). [397]

Table 5.2 U.S. imports entered under FTA provisions, by FTA partner, annual, 2018–20

In millions of dollars and percentages. NAFTA = North America Free Trade Agreement; USMCA = United States-Mexico-Canada Agreement; CAFTA-DR = Dominican Republic-Central America-United States Free Trade Agreement. The table first shows U.S. imports for consumption from Canada and Mexico under NAFTA and the USMCA; then from U.S. partners under 13 other FTAs; then imports for consumption under non-FTAs; and finally, total U.S. imports for consumption.

Source: USITC DataWeb/Census, accessed February 25, 2021.

In 2020, FTA imports accounted for almost 39 percent of U.S. merchandise imports from FTA partners and 15 percent of U.S. merchandise imports from the world. [398] FTA imports made up more than 50 percent of total imports for 7 of 15 FTA partners, including Jordan, Oman, Peru, Bahrain, Mexico, Chile, and CAFTA-DR countries, indicating the importance of FTAs for these partners. [399] Although the shares of FTA imports in total imports from most FTA partners declined in 2020, Morocco was a notable exception with an increase of 12.5 percentage points (Table 5.3). Among the top U.S. FTA imports from Morocco in 2020 were road wheels and parts for motor vehicles, sardines, and mandarins. [400] While sardines and mandarins have been top FTA imports from Morocco for years, the United States only recently (in 2019) began importing road wheels, which have contributed to the rising FTA imports from Morocco.

Table 5.3 Share of U.S. imports entered under FTA provisions, by FTA partner, annual, 2018–20

In percentages. NAFTA = North America Free Trade Agreement; USMCA = United States-Mexico-Canada Agreement; CAFTA-DR = Dominican Republic-Central America-United States Free Trade Agreement. The table first shows share of U.S. imports for consumption from Canada and Mexico entered under NAFTA and the USMCA; then from other U.S. partners entered under 13 other FTAs; and finally share of U.S. imports for consumption entered under all FTAs.

Source: USITC DataWeb/Census, Imports for consumption, accessed February 25, 2021.

Developments in U.S. FTAs Already in Force During 2020

During 2020, the United States had 14 free trade agreements in force, including the USMCA, which replaced NAFTA on July 1, 2020. While these agreements vary in coverage, they address, along with their supplemental agreements, many issues beyond trade, including labor, environment, intellectual property, anti-corruption, digital trade, regulatory practices, and small and medium enterprises. [401] Highlights of development in 2020 related to these FTA provisions as well as other issues are discussed below.

The United States-Mexico-Canada Agreement

On January 29, 2020, the President signed the United States-Mexico-Canada Agreement Implementation Act (USMCA Implementation Act) [402] into law. Through the USMCA Implementation Act, Congress approved the United States-Mexico-Canada Agreement (USMCA) and enacted legislation that implements its provisions. The USMCA entered into force on July 1, 2020. This section describes actions taken in 2020 to implement provisions such as automotive rules, environment and labor monitoring and enforcement, cross-border long-haul trucking services, and dispute settlement.

Background

The USMCA Implementation Act and its companion bill were passed in the U.S. House of Representative and U.S. Senate, and signed by the President on January 29, 2020. NAFTA remained in effect until the USMCA entered into force on July 1, 2020 (table 5.4). [403]

Table 5.4 Major USMCA developments, 2018–21

Source: USTR, 2018 Trade Policy Agenda and 2017 Annual Report , March 2018; USTR, “ Trilateral Statement on the Conclusion of the Fifth Round of NAFTA Negotiations ,” November 21, 2017; Government of Mexico, Embajada de México en Estados Unidos (Embassy of Mexico in the United States), “ Continúan Los Trabajos de Renegociación del TLCAN en Washington, D.C. (Work Continues on NAFTA Renegotiations in Washington, DC) ,” August 3, 2018; USTR, “ Joint Statement from United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland ,” September 30, 2018; USTR, 2019 Trade Policy Agenda and 2018 Annual Report , March 2019; USTR, 2021 Trade Policy Agenda and 2020 Annual Report , March 2021; CRS, USMCA: Amendment and Key Changes , January 30, 2020; Government of Canada, “ Statement by the Deputy Prime Minister on Canada’s Ratification of the New NAFTA ,” April 3, 2020; USTR, “ Ambassador Lighthizer Celebrates USMCA’s Entry Into Force ,” July 1, 2020.

Developments in the Implementation of the USMCA

Rules of Origin

On June 3, 2020, in coordination with Mexico and Canada, the United States released the Uniform Regulations. The Uniform Regulations are comprised of two documents. The “Origin Procedures” document is relatively short and concerns “the interpretation, application, and administration of Chapter 5 (Origins Procedures), Chapter 6 (Textiles and Apparel Goods), and Chapter 7 (Customs Administration and Trade Facilitation).” [404] The “Rules of Origin (ROOs)” document is more extensive and concerns “the interpretation, application, and administration of Chapter 4 (Rules of Origin) and related provisions in Chapter 6 (Textiles and Apparel Goods).” [405] On July 2, 2020, the USMCA Free Trade Commission issued its first decision, agreed to and signed by the three countries. The decision includes the adoption of the Uniform Regulations. [406]

The Uniform Regulations provide information on how USMCA’s rules of origin should be interpreted, applied, and administrated, especially as relevant to the automotive as well as textiles and apparel goods industries. They cover several key USMCA obligations, including the automotive rules of origins, the textile and apparel rules of origin, the labor value content rules, and the steel and aluminum purchasing requirements. The Uniform Regulations also cover procedural and implementation elements related to ROOs. [407]

On April 20, 2020, the U.S. Customs and Border Protection (CBP) published the interim USMCA implementing instructions, which was subsequently updated on June 16, 2020 to reflect the published Uniform Regulations. [408]

Automotive Rules

The USMCA’s new ROOs for motor vehicles raise the regional value content requirements to 75 percent for automobiles to receive preferential tariff treatment (compared to 62.5 percent under the NAFTA). The USMCA also requires that at least 70 percent of a producer’s steel and aluminum purchases originate in North America. In addition, a new rule for labor value content requires that a certain percentage of qualifying vehicles be produced by employees earning an average of $16 per hour. [409] However, the USMCA allows vehicle producers to request an alternative staging regime for these requirements, which would permit them up to five years from entry into force of the agreement but no later than January 1, 2025, to meet these regional value and labor value content requirements. [410]

As required by the USMCA Implementation Act, the President established an Interagency Committee on Trade in Automotive Goods (Interagency Autos Committee) on February 28, 2020. [411] The Interagency Autos Committee has held regular meetings to prepare relevant information for the implementation of the USMCA’s automotive rules of origin, including information for the alternative staging regime, the U.S. Customs and Border Protection (CBP) guidance, and the Uniform Regulations. [412]

The Uniform Regulations, published on June 3, 2020, and signed by the three countries, include provisions covering the ROOs for automotive goods. The Uniform Regulations are intended to assist North American automotive producers, exporters, and importers by ensuring all USMCA countries share the same interpretation, application, and administration of the automotive rules contained in the USMCA. [413] However, this did not resolve all disagreements, such as one outstanding issue concerning the applicability of an alternative calculation of origination for so-called “supercore” parts, which may affect vehicle manufacturers’ plans. [414]

The alternative staging regime allows vehicle producers up to five years to phase in the regional value content requirement. On April 21, 2020, the USTR, in consultation with the Interagency Autos Committee, published a notice in the Federal Register providing procedures and guidance for North American producers of vehicles intending to submit petitions for alternative staging. [415] According to USTR, 13 companies that requested alternative staging were approved. [416]

Environment [417]

The USMCA Implementation Act allocates over $400 million in new resources to support cooperation and enhanced monitoring and enforcement of USMCA environment provisions, including resources to support the construction of wastewater facilities along the U.S.-Mexico border and cooperation to combat illegal, unreported, and unregulated (IUU) fishing. [418] USTR was allocated $60 million over four years to strengthen monitoring and enforcement of the USMCA environmental obligations. [419] These resources were used to establish the Interagency Environment Committee [420] to monitor and enforce the USMCA environment obligations and three new environment attaché positions in the U.S. Embassy in Mexico City, Mexico. The attaché positions’ objectives are to communicate directly with the Mexican government, industry, and civil society to assist with monitoring and enforcement of environment obligations under the USMCA. [421] In addition, USTR selected a Senior U.S. Trade Representative to Mexico, a new position intended to support the coordination of the USMCA labor and environmental issues in Mexico, as well as other USMCA implementation matters. [422]

In parallel with the USMCA Environment Chapter, the United States, Mexico, and Canada entered into the Environment Cooperation Agreement (ECA), which took effect and superseded the North American Agreement on Environmental Cooperation on July 1, 2020, the same day as the USMCA. The ECA retains and modernizes the Commission on Environment and Cooperation (CEC). [423] One of the ECA objectives is to support the implementation of the USMCA Environment Chapter commitments. The ECA also facilitates cooperation among the three countries in the areas of pollution reduction, strengthening environmental governance, biological diversity conservation, and sustainably managing natural resources. [424]

The CEC Council met virtually in British Columbia on June 26, 2020. [425] At this 27 th session of the CEC Council and Meeting of the Joint Public Advisory Committee, the CEC announced the renewal and expansion of the trilateral commitment to environmental cooperation through the cooperative framework of the ECA. The CEC also announced the adoption of a comprehensive 2021–2025 CEC Strategic Plan, which establishes the CEC strategic priorities in six pillar areas for the upcoming five years. These six pillar areas are clean air, water, and land; prevention and reduction of pollution in the marine environment; circular economy and sustainable materials management; shared ecosystems and species; resilient economies and communities; and, effective enforcement of environmental laws. [426] CEC noted that the Strategic Plan 2021–2025 marks a renewed commitment by Canada, Mexico and the United States to work together on pressing regional and global issues related to trade and the environment within the framework of the USMCA and the ECA. [427]

Labor

The Labor Chapter of the USMCA requires the Parties to adopt and maintain in law and practice labor rights as recognized by the International Labour Organization (ILO)’s Declaration on Fundamental Principles and Rights at Work, to effectively enforce their labor laws, and not to waive or derogate from their labor laws. It includes new provisions requiring Parties to take measures to prohibit the importation of goods produced by forced labor and to address violence against workers exercising their labor rights. The USMCA labor provisions are fully enforceable under the USMCA’s dispute settlement mechanism. The USMCA also includes a Rapid Response Mechanism in the Dispute Settlement Chapter to address protection of association and collective bargaining rights at the facility level. The new mechanism provides for the suspension of the USMCA tariff benefits or the imposition of other penalties, such as blocking imports from businesses that are repeat offenders, in cases of non-compliance with key labor obligations. [428]

As per the USMCA Implementation Act, the President established the Interagency Labor Committee (ILC) on April 28, 2020. [429] The Committee met in 2020 on several occasions to review labor rights issues in Mexico and prepare reports to the U.S. Congress. [430] The USMCA Implementation Act allocates $30 million over four years for the USTR to support the monitoring of compliance with labor obligations, including through the ILC. With these resources, the USTR hired three new employees in the USTR’s Office of Labor Affairs and designated three attorneys to cover the USMCA labor issues in the Office of the General Counsel. [431] In addition, USTR selected a Senior U.S. Trade Representative in December 2020 to Mexico to support the coordination of the USMCA labor and environmental issues in Mexico, as well as other USMCA implementation matters. [432]

To monitor and evaluate the implementation and maintenance of Mexico’s labor reform, as well as compliance with its labor obligations, the USMCA Implementation Act, through the ILC, established the Independent Mexico Labor Expert Board (the Board). [433] The Board delivered its first interim report to the ILC and the U.S. Congress on December 12, 2020. The Interim report indicated that “Mexico has made significant progress in the implementation of the May 1, 2019 labor law reform, especially taking into account the impact of the Covid-19 pandemic….. At the same time, it must be acknowledged that many of the changes promised to improve the lives of workers, in terms of union democracy, freedom of association and collective bargaining, remain to be implemented.” [434] However, the Board did not make a determination on whether Mexico was in compliance with its labor obligations under the USMCA, [435] noting that Mexico’s new labor institutions began operating less than a month from the date of the delivery of the Interim Report. [436]

Finally, Annex 31-A to the USMCA’s Dispute Settlement Chapter established a Rapid Response Labor Mechanism, which allows the United States to take expedited enforcement action against individual facilities in Mexico that deny workers the right of free association and collective bargaining under Mexico’s laws necessary to fulfill the obligations under the USMCA labor provisions. It also requires the establishment and maintenance of three lists of Rapid Response Labor Panelists who can serve as Labor Panelists for the Mechanism. [437] On July 1, 2020, the United States named six U.S.-national labor panelists, and in consultation with Mexico, had agreed on six non-U.S. national panelists. [438]

Cross Border Long-haul Trucking Services

Section 322 of the USMCA Implementation Act [439] requires the U.S. International Trade Commission (the Commission) to undertake an investigation, upon filing of a petition or request, and to make a determination as to whether “a grant of authority”—registration granted to persons of Mexico—has caused material harm or threatens material harm to U.S. suppliers of cross border long-haul trucking services, and if affirmative, to recommend a remedy to the President. Section 324(a) requires the President, within 30 days of receiving an affirmative determination from the Commission and subject to the exceptions in section 324(b), to issue an order to the Secretary of Transportation specifying the relief to be provided. The nature of the relief the President is authorized to provide is described in section 324(c). [440] On July 10, 2020, the Commission published a notice of interim rulemaking in the Federal Register to implement the provisions of the USMCA Implementation Act regarding its investigations of cross-border long-haul trucking services. [441]

USMCA Dispute Settlement

The main dispute settlement mechanisms of the USMCA are included in Chapter 10 (Trade Remedies), Chapter 14 (Investment), and Chapter 31 (Dispute Settlement). [442] Article 10.12 establishes a mechanism to provide an alternative to judicial review by domestic courts of final determinations in antidumping and countervailing duty cases with review by independent binational panels established under the agreement. Chapter 14 includes procedures for resolving disputes between a party and an investor of another party. Annex 14-C addresses the transition from NAFTA to the USMCA regarding “Legacy Investment Claims and Pending Claims.” Two annexes (Annexes 14-D and 14-E) apply only between Mexico and the United States regarding investment disputes. Finally, Chapter 31 governs government-to-government disputes concerning interpretations of, and obligations under, the Agreement. As noted previously, an annex to that chapter, Annex 31-A, established a Rapid Response Labor Mechanism, which allows the United States to take expedited enforcement action against individual facilities in Mexico that that deny workers the right of free association and collective bargaining under Mexico’s laws necessary to fulfill the obligations under the USMCA labor provisions. [443]

At the end of 2020, there were three active cases under review by binational panels established under Chapter 10. Two challenge the U.S. Department of Commerce’s (USDOC) antidumping and countervailing duty orders on softwood lumber from Canada, and one challenges the Canadian investigating authority’s final antidumping determination on gypsum board, sheet, or panel originating in or exported from the United States. The USMCA active review panels under Article 10.12 are shown in table 5.5.

Table 5.5 USMCA Article 10.12, active panels reviews through 2020

AD = antidumping duty; CVD = countervailing duty; AR = administrative review.

Source: USMCA Secretariat, “ Active Chapter 10 Article 10.12 panel reviews through 2020 ,” March 3, 2020.

In addition, the United States requested consultations with Canada on December 9, 2020 regarding Canada’s administration of its 14 tariff-rate quotas on dairy products. [444] The parties held consultations on December 21, 2020 but did not resolve the dispute. [445] Canada requested consultations with the United States under Chapter 31 on December 22, 2020 regarding the imposition and ongoing application of U.S. safeguard tariffs on solar photovoltaic products, including from Canada. [446] On December 30, 2020, Mexico requested to join the consultations as a third party. [447]

The North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico was superseded on July 1, 2020, when the USMCA entered into force. The following section provides an update on NAFTA developments during 2020.

NAFTA Dispute Settlement

The dispute settlement provisions of NAFTA—found in NAFTA’s Chapter 11 (Investment), Chapter 19 (Review and Dispute Settlement in Antidumping/Countervailing Duty Matters), and Chapter 20 (State-to-State Dispute Settlement)—cover a variety of areas. [448] As of June 30, 2020, pending cases filed under Chapter 11 include five cases against Canada by U.S. investors; [449] four cases filed against Mexico, three filed by U.S. investors and one by Canadian investors; [450] and two cases filed against the United States, one filed by Canadian and Mexican investors, and one filed by Canadian enterprises. [451] Pursuant to the USMCA Annex 14-C, which addresses the transition between NAFTA and the USMCA for investor-state disputes, these cases may proceed to their conclusion in accordance with Chapter 11 of NAFTA. [452] There were no pending disputes under Chapter 20 in 2020.

Regarding binational panels continuing under NAFTA Chapter 19, as of June 30, 2020, there were eight remaining active binational panels (table 5.6). Two concern the USITC’s determinations in fabricated structural steel, and one concerns the USDOC’s determination in its related investigation on goods from Mexico. Other active Chapter 19 cases include challenges to both the USDOC antidumping and countervailing duty orders on softwood lumber from Canada; a challenge to the USDOC antidumping duty administrative reviews in large residential washers from Mexico and light-walled rectangular pipe from Mexico; and a challenge to the Mexican investigating authority’s final antidumping determination on ammonium sulphate from the United States. Pursuant to the USMCA Chapter 34, which provides the transitional provisions from NAFTA, these panel reviews may proceed to their completion in accordance with Chapter 19 of NAFTA. [453]

During 2020, the Secretariate received five requests for binational panel review under Chapter 19: three regarding the matter of fabricated structural steel from Mexico, and two regarding the matter of fabricated structural steel from Canada. One panel review was “suspended/stayed,” and two panel reviews were completed during 2020. [454] On April 10, 2020, the Secretariate issued a notice of the completion of the panel review in the matter of certain fabricated structural steel from Mexico (USA-MEX- 2020-1904-03). According to the notice, the dispute was terminated, effective April 2, 2020, because Mexico withdraw its request for panel review on March 31, 2020, and no complaints were filed by the deadline of April 1, 2020. [455] On May 22, 2020, the panel completed the review in the matter of softwood lumber from Canada (USA-CDA-2018-1904-03), upholding the Commission’s affirmative remand determination from December 2017 that imports of softwood lumber from Canada materially injured American producers and workers. [456] The Secretariat subsequently issued a notice that the panel review was completed on July 9, 2020. [457]

Table 5.6 Active NFTA Chapter 19 binational panels reviews during 2020 and their status as of June 30, 2020

AD = antidumping; IN = injury; CVD = countervailing; AR = administrative review; IN = injury determination; USDOC = U.S. Department of Commerce; ITA = International Trade Administration; USITC = U.S. International Trade Commission.

Source: USMCA Secretariat, “ Publications ,” NAFTA-Chapter 19-Article 1904, accessed August 14, 2021.

Note:

¹ On March 30, 2021, the Secretariate issued a notice that this panel review was terminated. 86 FR 16587 (March 30, 2021).

Other U.S. FTAs in Force

In 2020, the COVID-19 pandemic limited the ability of FTA partners to meet with U.S. counterparts in person. However, U.S. officials continued to engage with FTA partners for discussions on several matters, including labor and environmental issues, enhancing trade and investment, and dispute settlement. Highlights of these activities are summarized below.

The U.S.-Israel FTA

The U.S.-Israel Joint Committee, established to oversee the implementation of the FTA, met in December 2020. Representatives discussed (1) progress made in removing trade barriers related to standards and customs, (2) the potentials for further engagement in the areas of services, investment, and digital trade, and (3) their ongoing commitment to the negotiation of a permanent United States-Israel Agreement on Trade in Agricultural Products (ATAP). [458] In addition, a new FTA annex on certificates of origin entered into force in 2020, which allows Israeli customs authorities to accept streamlined declarations. [459]

The U.S.-Jordan FTA

In response to requests brought before the U.S.-Jordan Joint Committee in 2019, Jordan issued regulations in 2020 aimed at reducing import barriers. These regulations allow for the importation of products that contain genetically engineered ingredients and establish a 5 percent threshold for labeling purposes. [460] Jordan also abolished the requirements for legalization of commercial invoices, certificates of origin, and other customs documentation. [461]

In accordance with commitments made under the Implementation Plan Related to Working and Living Conditions of Workers in Jordan [462] and the U.S. Department of Labor (USDOL)-funded International Labour Organization (ILO) Better Work program, Jordan continued to improve inspections of garment factory dormitories through additional technical support in 2020. Jordan made garment sector audits public and worked with the ILO to increase the understanding of internationally recognized standards within the Jordanian Ministry of Labor. [463]

The U.S.-Chile FTA

Although the U.S.-Chile Joint Committee did not meet in 2020, representatives of both countries continued to engage on issues related to intellectual property rights through the year, including those associated with Chapter 17 (Intellectual Property Rights) of the U.S.-Chile FTA. [464] In addition, both countries continued a dialogue under the auspices of the FTA labor cooperation mechanism, focused on sharing information and best practices through technical exchanges. Discussion topics in 2020 concerned the implementation of the FTA labor chapters, pathways for promoting women in the workplace, and potential labor policy responses to the COVID-19 pandemic. [465]

The U.S.-Singapore FTA

Although the U.S.-Singapore Joint Committee did not meet in 2020, USTR noted that representatives of both countries continued to strengthen their trade and broader bilateral relationship. [466]

The U.S.-Australia FTA

In April 2020, officials from USTR, the U.S. Department of Agriculture (USDA), and the Australian government discussed the topics of U.S. market access for pork, turkey, beef, and horticulture products, under the auspices of the U.S.-Australia FTA Sanitary and Phytosanitary Committee. [467]

The U.S.-Morocco FTA

In January 2020, the U.S.-Morocco FTA Agriculture Subcommittee and Sanitary and Phytosanitary (SPS) Subcommittee held meetings, in which representatives finalized export certificates for U.S. breeding and fattening cattle being shipped to Morocco and discussed the use of common names for meats and cheeses in Moroccan markets. They also reviewed the FTA’s tariff-rate quotas affecting access to Moroccan markets for U.S. wheat and meat products. [468]

Throughout 2020, U.S. trade and labor officials continued to monitor the implementation of a new domestic worker law, and engage with Moroccan labor stakeholders on existing labor priorities as well as the impacts of the pandemic on workplaces. [469]

The U.S.-Bahrain FTA

Although the U.S.-Bahrain Joint Committee did not meet in 2020, Bahrain continued to implement commitments established by the 2018 U.S.-Bahrain Memorandum of Understanding on Trade in Food and Agriculture Products. [470]

The Dominican Republic-Central America FTA (CAFTA-DR)

Throughout 2020, various U.S. government agencies continued to engage in labor-related capacity building projects with CAFTA-DR countries:

• The USDOL continued to fund labor-related technical assistance projects focused on enforcing Costa Rican labor laws on agricultural worker health and safety, supporting vulnerable and marginalized youth via job training programs, and enacting legislation to align the legal worker age requirements with such programs. [471]

• In November 2020, the USDOL’s Bureau of Labor Statistics and the Ministry of Labor of El Salvador held a technical exchange under the Labor Cooperative Dialogue, centered around labor market intelligence, enforcement of labor laws, and further compliance with labor commitments under CAFTA-DR. [472]

• Throughout 2020, the USDOL sponsored various technical assistance projects under the CAFTA-DR labor Cooperation and Capacity building Mechanism, including activities supporting freedom of association and labor relations under the U.S. Agency for International Development’s (USAID) Global Labor Program, and a U.S. Department of State (USDOS)-sponsored program combatting labor violence in Guatemala and Honduras. [473]

• The U.S. government conducted a mission to Honduras to assess the progress made on the Labor Rights Monitoring and Action Plan (MAP). The two governments also agreed to extend the MAP for 9 months following the end of Honduras’ COVID-19 state of emergency, to ensure that certain requirements are achieved. [474] The USDOL continued to fund supplementary programs aimed at helping Honduras achieve its MAP commitments, including programs to reduce child labor, improve labor rights, and expand a new electronic case management system for labor inspections. [475]

• The USDOC established the Central America Customs, Border Management, and Supply Chain Trade Facilitation Program to assist the governments of El Salvador, Guatemala, and Honduras in implementing reforms to customs clearance procedures. [476]

• El Salvador, Guatemala, and Honduras improved regulatory transparency and tariff rate quota administration, which increased market access for various U.S. exports, such as dairy products and table eggs. [477]

• The United States and Costa Rica finalized a bilateral agreement allowing for the recognition of the U.S. Department of Transportation’s “Blue Ribbon” program as satisfying Costa Rican tire regulations. [478]

• The USAID and the USDA jointly organized workshops on the functioning of the U.S. regulatory system, internal standards, and WTO obligations for CAFTA-DR Parties. [479]

In 2020, environmental protection developments included:

• Trade and environment officials from CAFTA-DR countries met virtually four times to further the monitoring and implementation of CAFTA-DR Environment Chapter. [480] Furthermore, the U.S. government implemented trade-related environmental cooperation programs to assist in the implementation of the FTA Environment Chapter in the areas of enforcement, combatting illegal trade of wild flora and fauna, air quality, and waste management.

• The Secretariat for Environmental Matters received and reviewed one new submission from the public alleging that a CAFTA-DR country failed to enforce its environmental laws and virtually conducted workshops to promote the use of the Secretariat submission mechanism. [481]

Other activities include:

• The Commercial Law Development Program, sponsored by the USTR and the USDOC, held multiple workshops focused on textile and apparel industry competitiveness in global supply chains, utilization of CAFTA-DR preferences, and U.S. supply chains. [482]

• During 2020, CAFTA-DR Parties announced notifications of modification to product-specific rules of origin. The U.S. modifications became effective as of November 1, 2020. [483]

• CAFTA-DR countries satisfied Article 3.18 of the FTA in 2020, by exchanging trade data reports under the associated Agricultural Review Commission. [484]

The U.S.-Oman FTA

Although the U.S.-Oman Joint Committee did not meet in 2020, USTR and the USDOL continued to monitor labor rights in Oman pursuant to labor provisions of the FTA. As a part of the effort to improve labor rights, in 2020, the government of Oman implemented its first unemployment insurance scheme for Omani workers. [485]

The U.S.-Peru TPA (PTPA)

Throughout 2020, several activities took place under the U.S.-Peru Trade Promotion Agreement (PTPA). In January 2020, Peru issued a final ruling in a self-initiated countervailing duty investigation into imports of U.S. corn, which determined that duty imposition was not justified. [486] In September 2020, the U.S.-Peru Committee on Sanitary and Phytosanitary Matters met to discuss topics including the Peruvian moratorium on agricultural biotechnology. [487] In October 2020, the United States continued to block timber imports from Peruvian exporter Inversiones La Oroza SRL (Oroza) for an additional three years or until the compliance is demonstrated, due to illegally harvested timber found in its supply chain. [488] Throughout 2020, the USDOL funded four technical assistance projects aimed at improving Peru’s enforcement of labor laws and compliance with the PTPA Labor Chapter. In addition, the United States and Peru began the process to select and designate a new Executive Director of the U.S.-Peru Secretariat for Submissions on Environmental Enforcement Matters in April 2020 and completed the hiring process in October of 2020. [489]

U.S.-Korea FTA (KORUS) [490]

The U.S.-Korea Joint Committee met in April 2020 to discuss work in progress. [491] Of the 21 committees and working groups established under the KORUS, six held meetings throughout 2020. At these meetings, representatives discussed issues including cross-border data transfers by financial service providers, innovation valuation and pharmaceutical pricing and reimbursement policies, automotive regulations, regulations related to fair market access for online content, cloud computing services procurement, barriers to U.S. meat and poultry exports, various regulatory processes related to genetically engineered products, and Korean positive list system for pesticides and TRQs on agricultural goods. [492]

Following engagement between the United States and Korean governments aimed at increasing the fairness of competition hearings, the Korean Fair Trade Commission adopted administrative rules in December 2020, allowing for the review of documents classified as business confidential information by a respondents’ outside counsel. [493] In addition, during 2020, USTR led U.S. government engagement with Korean counterparts on agricultural biotechnology by sharing policy and regulatory approaches based on science. [494]

The U.S.-Colombia TPA (CTPA)

The U.S.-Colombia Trade Promotion Agreement (CTPA) Committees on Agriculture and Sanitary and Phytosanitary Measures met in December 2020 to discuss preferential treatment under the CTPA corn tariff-rate quota, cooperation on biotechnology, and other sanitary and phytosanitary-related market access issues. [495]

The two counties finalized updates to the CTPA’s ROOs to reflect 2007, 2012, and 2017 changes to the Harmonized Commodity Description and Coding System (Harmonized System or HS) nomenclature and codified these modifications via a formal decision by the U.S.-Colombia Free Trade Commission in February 2020. [496]

Throughout 2020, the United States and Colombia continued efforts to resolve labor issues raised in the USDOL’s January 2017 report submitted under the Labor Chapter of the CTPA. These actions included a sixth round of the USDOL-led Contact Point Consultations under the Labor Chapter, Colombia’s prosecution of cases of homicide cases targeting at union leaders and members, and implementation of an electronic case management system within the Colombian Ministry of Labor. [497]

The U.S.-Panama TPA

Throughout 2020, the central oversight body for the TPA—the U.S.-Panama Free Trade Commission (FTC)—continued to work towards finalizing changes to the ROOs to reflect the 2017 Harmonized System nomenclature changes, with the expectation that modified ROOs will enter into force in 2021. [498]

In September 2020, the U.S. government launched a cooperative labor dialogue with Panama. As a result, officials from the U.S. Federal Mediation and Conciliation Service and Panama’s Ministry of Labor exchanged information on mediation practices. [499] In addition, during 2020, the U.S. Department of Labor funded one active technical assistance project to combat child labor in Panama.

The Secretariat for Environmental Matters received one new submission in 2020 from the public alleging that Panama failed to enforce its environmental laws, and virtually conducted outreach to promote the use of the Secretariat submission mechanism. [500]

Developments in FTA Negotiations during 2020

U.S.-EU Negotiations

USTR initially notified Congress of the President’s intent to enter into negotiations with the EU in October 2018, and published its negotiating objectives for a U.S.-EU FTA in January 2019. [501] Although no official FTA negotiating rounds were held between the United States and the EU in 2020, the two parties did negotiate commitments to lowering or eliminating tariffs on a subset of products. These products included EU imports of lobsters and U.S. imports of certain prepared meals, certain crystal glassware, surface preparations, propellant powders, and cigarette lighters and lighter parts. Implemented by the EU on December 16, and by the United States on December 22, 2020, these tariff changes were retroactive to August 1, 2020. [502] For more information on these tariff changes, see the EU section in chapter 6 of this report.

U.S.-Japan Negotiations

The USTR initially notified Congress of the President’s intent to enter into negotiations with Japan in October 2018, and published its negotiating objectives for a U.S.-Japan FTA in December 2018. [503] Although the two sides did not reach agreement on a comprehensive FTA, they did reach two agreements in 2019 characterized as “early achievements” of the negotiations. These two agreements—the U.S.-Japan Trade Agreement and the U.S.-Japan Digital Trade Agreement—went into effect on January 1, 2020. [504] A joint statement by President Trump and Prime Minister Shinzo Abe at the signing of the agreements in fall 2019 noted that the parties intended to enter into further negotiations in the areas of customs duties and other restrictions on trade, barriers to trade in services and investment, and other issues. [505] For more information about these agreements see Japan section in chapter 6 of this report.

U.S.-Kenya Negotiations

On February 6, 2020, President Trump announced U.S. intent to initiate trade agreement negotiations with Kenya. USTR notified Congress of this intent on March 17, 2020, per procedures under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. [506]

In a March 23, 2020 Federal Register notice in advance of an intended public hearing, USTR sought public comments on a potential U.S.-Kenya trade agreement on topics, such as relevant barriers to trade in goods and services, the economic costs and benefits of tariff removal to U.S. producers and consumers, and customs and trade facilitation issues. [507] USTR eventually canceled the public hearing due to uncertainties during the COVID-19 pandemic and extended the deadline for public submissions until April 28, 2020, the original hearing date. [508]

After considering public comments, the USTR published negotiating objectives for a U.S. trade agreement with Kenya on May 22, 2020. [509] They largely mirror those set by the United States in its negotiations with the EU, UK, and Japan. Exceptions include language on enhancing customs procedures to facilitate e-commerce and small business trade, promoting the interoperability of data protection regimes and improving mechanism to facilitate cross-border information transfers, providing a framework for effective cooperation on matters related to IPR protection and enforcement, and addressing money-laundering and corruption. [510] Kenya released its own proposed negotiating objectives in July 2020. Among Kenya’s specific negotiating objectives is to ensure that the future agreement provides U.S. market access at least the equivalent to which Kenya enjoys under the African Growth and Opportunity Act (AGOA), and that there is no disruption to this market access when AGOA expires on September 30, 2025. [511]

Negotiations were officially launched between the two countries on July 8, 2020, following a joint statement by Ambassador Robert Lighthizer and Kenyan Cabinet Secretary for Industrialization, Trade, and Enterprise Development Betty Maina. In the statement, Ambassador Lighthizer highlighted that the agreement, once negotiated, would serve as a model for future U.S. trade agreements with other African countries, and would complement Kenya’s existing regional economic integration commitments, including under the East African Community (EAC), and the African Continental Free Trade Area (AfCFTA). [512] Two rounds of negotiations were reported as of November 2020, with all rounds held virtually. [513]

The February 2020 announcement of the intent to initiate free trade agreement negotiations was delivered while the United States and Kenyan officials met in two bilateral forums in Washington, DC. The U.S.-Kenya Trade and Investment Working Group (TIWG) met for the third time, [514] and representatives made progress on a number of issues, including Kenya’s approval of phytosanitary protocol which provides access to the Kenyan wheat market for U.S. growers from Washington, Oregon, and Idaho, and the development of a technical assistance and capacity-building plan to maximize Kenya’s utilization of its trade preferences under AGOA. [515] In addition, USTR, the USDOC, and the U.S. Small Business Administration also convened a small and medium-sized enterprises (SMEs) roundtable in February with U.S. and Kenyan government officials and over 90 U.S. and Kenya SME stakeholders in attendance. At the roundtable, participants discussed ways to increase cooperation in the SME sector and the benefits to SMEs of reducing barriers to trade between the two countries. [516]

U.S.-UK Negotiations

USTR initially notified Congress of the President’s intent to enter into negotiations with the UK in October 2018 and published its negotiating objectives for a U.S.-UK FTA in February 2019. [517] In 2020, the United States and United Kingdom held five rounds of trade negotiations virtually: on May 5–15, June 15–26, July 27–August 4, September 8–18, and October 19–30. [518] As reported by the UK government, negotiations reflected a mutually high ambition for services, investment, and digital trade disciplines. [519] Between the third and fourth rounds of negotiations, the United States and UK exchanged their initial market access offers in terms of tariff concessions. [520]

No comprehensive FTA between the two countries was concluded in 2020. However, through an exchange of letters, five agreements entered into force on December 31, 2020, covering several products and services that are covered in existing agreements between the United States and the EU. They include two bilateral agreements on wine and insurance/reinsurance, as well as three mutual recognition agreements on certain distilled spirits/spirit drinks; marine equipment; and telecommunications equipment, electromagnetic compatibility (EMC), and pharmaceutical good manufacturing practices (GMPs). [521]

The UK published its objectives for FTA negotiations with the United States in March 2020. While the UK negotiating objectives cover many of the same areas as those put forth by the United States, the UK objectives also intersect with the government’s internal commitments on gender, international development, and the environment. Specifically, there are objectives to advance women’s empowerment and access to the economic benefits under a U.S.-UK agreement, to support the UK government’s own objectives with regard to trade and development and the delivery of the United Nations’ Sustainable Development Goals, and to further the UK government’s ambitions to achieve net-zero carbon emissions by 2050. [522]

Chapter 6
U.S. Trade in 2020

This chapter provides an overview of U.S. trade in goods and services in 2020. It also reviews U.S. bilateral trade relations with selected major trading partners in 2020: the European Union (EU), [523] China, Mexico, Canada, Japan, the United Kingdom (UK), and India. These trading partners were selected based on the size of their U.S. bilateral trade value in goods and services, as well as recent trade policy activities. For each trading partner, the chapter summarizes U.S. bilateral trade in goods and services, and reports major developments in bilateral trade policies and programs during 2020.

U.S. Merchandise Trade

Overview

The value of total U.S. merchandise trade [524] was $3.8 trillion in 2020, a 9.0 percent decrease from the 2019 level. The value of U.S. merchandise exports decreased by 12.9 percent to $1.4 trillion, while the value of U.S. merchandise imports decreased by 6.4 percent to $2.3 trillion. As a result, the U.S. merchandise trade deficit increased by almost 6 percent to $905 billion in 2020 (figure 6.1). [525]

In billions of dollars. Underlying data for this figure can be found in appendix table B.20 .

Source: USITC DataWeb/Census, accessed February 25, 2021.

Due to the global COVID-19 pandemic, in 2020, U.S. exports and imports both experienced marked quarterly declines compared to their 2019 levels, with the exception of imports in the fourth quarter. The decline in U.S. exports was most apparent during the third quarter (Q3) (figure 6.2), driven by major decreases in transportation equipment, electronic products, chemical products, as well as energy-related products. The decline in U.S. imports was most notable during the second quarter (Q2) (figure 6.3), primarily driven by the decrease in transportation equipment and energy-related products.

In billions of dollars. Underlying data for this figure can be found in appendix table B.21 .

Source: USITC DataWeb/Census, total exports, accessed April 19, 2021.

In billions of dollars. Underlying data for this figure can be found in appendix table B.22 .

Source: USITC DataWeb/Census, general imports, accessed April 19, 2021.

U.S. Merchandise Trade by Trading Partner

In 2020, the EU, as a single entity, was the United States’ top trading partner in terms of two-way merchandise trade, followed by China, Mexico, Canada, and Japan. The United States had the largest bilateral merchandise trade deficit with China (table 6.1).

Table 6.1 U.S. merchandise trade with top five trading partners, 2020

In billions of dollars.

Source: USITC DataWeb/Census, accessed February 25, 2021.

Canada was the leading market for U.S. merchandise exports, followed by the EU and Mexico (figure 6.4). China surpassed the EU to become the leading source of U.S. merchandise imports in 2020, followed by the EU, Mexico, and Canada (figure 6.5).

In percentages. Underlying data for this figure can be found in appendix table B.23 .

Source: USITC DataWeb/Census, total exports, accessed February 25, 2021.

In percentages. Underlying data for this figure can be found in appendix table B.24 .

Source: USITC DataWeb/Census, general imports, accessed February 25, 2021.

U.S. exports to most leading trade partners decreased from 2019 to 2020. Among the exceptions are U.S. exports to China, which were boosted by record sales of soybeans to China. U.S. exports to Mexico, Canada, and the EU experienced the largest decreases in terms of absolute value, while U.S. exports to India experienced the largest percentage decrease (table 6.2). Exports to FTA partners accounted for 45.5 percent of U.S. total exports, decreasing from 46.6 percent in 2019. [526]

U.S. imports from most leading trading partners decreased from 2019 to 2020. U.S. imports from Taiwan and Vietnam were among the few exceptions (table 6.3). The increase in U.S. imports from Taiwan largely came from semiconductors, computers, and telecommunications equipment. The increase in U.S. imports from Vietnam was largely driven by electronics and parts, telecommunications equipment, furniture, and textiles and apparel. Imports from U.S. FTA partners accounted for 33.7 percent of total U.S. imports, decreasing from 35.0 percent in 2019. [527]

Table 6.2 U.S. merchandise exports, by leading trading partners, annual, 2019–20

In billions of dollars and percentages.

Source: USITC DataWeb/Census, total exports, accessed February 25, 2021.

Table 6.3 U.S. merchandise imports, by leading trading partners, annual, 2019–20

In billions of dollars and percentages.

Source: USITC DataWeb/Census, general imports, accessed February 25, 2021.

U.S. Merchandise Trade by Product Category

Electronic products overtook transportation equipment by a small margin to become the largest U.S. export sector in 2020. Electronic products and transportation equipment sectors together accounted for about 17 percent of U.S. exports. Other top exports included chemicals and related products (16.1 percent) and energy-related products (11.2 percent). All sectors experienced a decline in U.S. exports from 2019 to 2020, except for agricultural products, which increased by 4.8 percent (table 6.4 and the interactive dashboard). [528]

Electronic products and transportation equipment continued to be the top two sectors for U.S. imports, accounting for 20.7 percent and 16.4 percent of 2020 U.S. imports, respectively. Seven sectors experienced a decline in U.S. imports, of which transportation equipment had the largest decrease in absolute value. Five sectors showed increases, including miscellaneous manufactures, and chemicals and related products (table 6.5 and interactive dashboard of appendix A). [529]

Ten of the 11 broad sectors that make up U.S. merchandise trade had a trade deficit in 2020. They are agricultural products, forest products, chemicals, textiles and apparel, footwear, minerals and metals, machinery, transportation equipment, electronic products, and miscellaneous manufactures. [530] Energy-related products was the only sector with a trade surplus, of $35.1 billion in 2020, an almost 30-fold increase over the $1.2 billion surplus in 2019. In September 2019, the United States became a net petroleum exporter for the first time since monthly record began in 1973. [531] This trend continued in 2020. Although exports of energy-related products fell by $45.4 billion from 2019 to 2020, imports of those products fell by $79.2 billion over the same period. [532]

Table 6.4 U.S. merchandise exports, by USITC digest sector, 2019–20

In billions of dollars and percentages.

Source: USITC DataWeb/Census, total exports, accessed February 25, 2021.

Note: The category “Special Provisions” represents trade receiving particular duty or quota treatment under HTS chapters 98 and 99.

Table 6.5 U.S. merchandise imports, by USITC digest sector, 2019–20

In billions of dollars and percentage

Source: USITC DataWeb/Census, general imports, accessed February 25, 2021.

Note: The category “Special Provisions” represents trade receiving particular duty or quota treatment under HTS chapters 98 and 99.

U.S. Services Trade

Overview

U.S. two-way cross-border total services trade [533] fell by 21.4 percent to $1.2 trillion in 2020. U.S. total services exports fell by 21.0 percent to $692.1 billion, while U.S. total services imports fell by 22.1 percent to $458.3 billion in 2020. Overall, the U.S. trade surplus in services diminished by 18.6 percent to $233.9 billion in 2020 (figure 6.6). U.S. trade in each of the major services categories experienced decreases in 2020, except for financial services and insurance services. [534]

In billions of dollars. Underlying data for this figure can be found in appendix table B.25.

Source: USDOC, BEA, “International Transactions,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country."

The quarterly trade data from the U.S. Bureau of Economic Analysis (BEA) indicate that total U.S. services exports and imports decreased significantly during the second through fourth quarters of 2020, compared to the same periods of 2019, mirroring the economic impact of the pandemic during 2020 (figures 6.7 and 6.8). For example, in the fourth quarter (Q4) of 2020, U.S. services exports were $168 billion, compared to $221 billion in the same quarter of 2019, representing a 24.0 percent year-over-year decline. Similarly, U.S. services imports were $115 billion in Q4 2020, lower than $148 billion recorded in Q4 2019, a drop of 22.4 percent.

Although the value of two-way services trade increased slightly in Q4 2020 compared to the previous two quarters, it remained lower than the first-quarter peak. Freight transportation services, insurance services, and charges for the use of intellectual property not included elsewhere (n.i.e.) were among the service sectors that demonstrated increases in U.S. exports and imports between the second and fourth quarters of 2020, driving the uptick in U.S. services trade in Q4 2020. [535]

In billions of dollars. Underlying data for this figure can be found in appendix table B.26.

Source: USDOC, BEA, “International Transactions,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country."

In billions of dollars. Underlying data for this figure can be found in appendix table B.27.

Source: USDOC, BEA, “ International Transactions ,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country.

U.S. Services Trade by Trading Partner

The EU as a single entity, was the United States’ largest trading partner in services in 2020. Following its departure from the EU in January 2020, the UK became the second-largest trading partner in services. They were followed by Canada, Switzerland, and Japan (table 6.6). [536]

Table 6.6 U.S. total services trade with top five trading partners, 2020

In billions of dollars. EU data exclude the UK.

Source: USDOC, BEA, “ International Transactions ,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country."

Note: Due to rounding and data limitations, individual trade flows may not sum to total.

In 2020, the top markets for U.S. services exports were the EU, the UK, Canada, Switzerland, Japan, and China (figure 6.9). The leading sources of U. S. services imports were the EU, the UK, Bermuda, Japan, Canada, and India (figure 6.10). [537]

In percentages. EU data exclude the UK; underlying data for this figure can be found in appendix table B.28 .

Source: USDOC, BEA, “ International Transactions ,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country," and Table 1.5 "U.S. International Trade in Goods and Services by Area and Country."

In percentages. EU data exclude the UK; underlying data for this figure can be found in appendix table B.29 .

Source: USDOC, BEA, “ International Transactions ,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country," and Table 1.5 "U.S. International Trade in Goods and Services by Area and Country."

U.S. Services Trade by Product Category

In 2020, other business services [538] represented the largest share, or 26.7 percent of U.S. total services exports. This category was followed by financial services (19.8 percent), and charges for the use of intellectual property n.i.e. [539] (16.5 percent). Between 2019 and 2020, U.S. exports of insurance services and financial services posted modest increases, while U.S. exports of travel services and transport services [540] experienced substantial year-on-year declines in value (table 6.7). The decline in U.S. exports of transport services was primarily driven by air passenger transport services. [541] The decline in U.S. exports of travel services was primarily driven by decreases in education- and health-related travel services. Both of these declines were due to travel restrictions during the pandemic. [542]

In 2020, other business services accounted for the largest share of U.S. total services imports at 25.3 percent. This category was followed by transport services (15.6 percent) and insurance services (13.4 percent). Among the leading categories of U.S. services imports, only insurance services experienced an increase, of 19.4 percent, between 2019 and 2020. The increase in U.S. imports of insurance services during 2020 partly reflected general growth in the demand for life insurance [543] and other insurance products during the pandemic. [544] By contrast, U.S. imports of travel services experienced the largest drop—73.4 percent—in 2020, falling from $135 billion in 2019 to $36 billion (table 6.8). [545]

Table 6.7 U.S. total services exports, by major category, annual, 2019–20

In billions of dollars and percentages. Due to seasonal adjustment and rounding, it may not add up to total shown.

Source: USDOC, BEA, “ U.S. International Trade in Goods and Services—January 2021 ,” March 5, 2021, Exhibit 3 “U.S. Exports of Services by Major Category,” 16.

Table 6.8 U.S. total services imports, by major category, annual, 2019–20

In billions of dollars and percentage. Due to seasonal adjustment and rounding, it may not add up to total shown.

Source: USDOC, BEA, “ U.S. International Trade in Goods and Services—January 2021 ,” March 5, 2021, Exhibit 4 “U.S. Imports of Services by Major Category,” 17.

Developments with Selected Major Trading Partners

European Union

U.S.-EU Trade Overview

In 2020, the EU as a single entity (excluding the UK), remained the largest partner in U.S. merchandise trade. U.S. merchandise exports to the EU fell by 13.3 percent to $232 billion in 2020, while U.S. merchandise imports from the EU fell by 8.1 percent to $416 billion in 2020, resulting in a bilateral U.S. merchandise trade deficit of $184 billion (figure 6.11). The top U.S. exports to the EU included aircraft and aircraft engines and parts ($22 billion), crude petroleum ($13 billion), and medicaments ($7 billion). The top U.S. imports from the EU included medicaments ($40 billion), immunological products ($25 billion), and passenger motor vehicles with cylinder capacity between 1,500 and 3,000 cubic centimeters (cc) ($21 billion). [546]

In 2020, the EU was also the largest partner in U.S. total services trade. U.S. services exports to the EU fell by 13.6 percent to $173 billion in 2020, while U.S. services imports from the EU fell by 25.4 percent to $109 billion in 2020, resulting in a bilateral U.S. services trade surplus of $64 billion (figure 6.12). The top U.S. services exports to the EU were other business services ($68 billion), charges for intellectual property use ($40 billion), and financial services ($25 billion). The top services imports from the EU were other business services ($32 billion), transportation services ($20 billion), and charges for intellectual property use ($16 billion). [547]

In billions of dollars. EU data exclude the UK; underlying data for this figure can be found in appendix table B.20 .

Source: USITC DataWeb/Census, accessed February 25, 2021.

In billions of dollars. EU data exclude the UK; underlying data for this figure can be found in appendix table B.25 .

Source: USDOC, BEA, “International Transactions,” March 23, 2021, Table 1.3 "U.S. International Transactions, Expanded Detail by Area and Country."

Major Trade Developments in 2020

This section summarizes the major trade events in the U.S.-EU trade relations in 2020. While the transition of the UK out of the EU (“Brexit”) [548] loomed large over all EU trade activities in 2020, the U.S.-EU trade relationship in 2020 was also characterized by areas of cooperation as well as disputes in other areas. For major U.S.-EU disputes over large civil aircraft and digital services taxes, see chapter 2 and chapter 3 of this report.

Among the major trade development in 2020 between the United States and the EU were:

• A new tariff-rate quota (TRQ) governing EU imports of U.S. high-quality beef went into effect on January 1, 2020. The TRQ was a result of successful negotiations between the two parties to resolve concerns in a 20-year-old trade dispute. On the same day, the United States concluded its proceeding under its section 301 investigation connected with this dispute, determining it would not reinstate action on the EU. [549]

• On January 14, 2020, trade ministers from the United States, the EU, and Japan met in Washington, DC, to discuss various issues surrounding third country industrial subsidies and forced technology transfer, and progress on joint actions pertaining to these issues at the World Trade Organization (WTO) and other multilateral forums. These discussions were a continuation of those that preceded the release of a May 2018 joint scoping paper and statements on state-influenced market-distorting behaviors. [550] More information on this meeting is available in the Japan section later in this chapter.

• In response to the expanded product list subject to U.S. import tariffs under section 232 of the Trade Expansion Act of 1962, [551] the EU imposed an ad valorem tariff of 20 percent on cigarette lighters and 7 percent on certain furniture fittings imported from the United States, effective on May 8, 2020. [552] The value of U.S. exports of these products to the EU totaled $23.3 million in

  2019. [553] For more information on the related section 232 investigation, see chapter 2 of this report.

• On October 26, 2020, the Joint Committee of the U.S.-EU Agreement on Prudential Measures Regarding Insurance and Reinsurance (the U.S.-EU Covered Agreement) held its third meeting, conducted over video conference with U.S. and EU government officials and insurance industry representatives in attendance. Meeting discussions included updates on the implementation of the U.S.-EU Covered Agreement, focusing on the removal of collateral and local presence requirements for reinsurers, and the provisions on group supervision and on exchange of information. The U.S.-EU Covered Agreement was signed by the United States and the EU in 2017. [554]

Other major trade developments included the elimination of EU tariffs on imports of U.S. lobsters and the invalidation of the U.S.-EU Privacy Shield as a mechanism for U.S. companies to comply with EU data privacy requirements, as discussed below.

EU Tariff Elimination Related to U.S. Lobster Exports

In 2017, U.S. exports of lobster to the EU were approximately $110.6 million. In 2019, the value decreased to approximately $56.9 million. [555] A Presidential Memorandum, released on June 24, 2020, noted that U.S. exports of lobsters to the EU “appear to have been significantly and negatively affected” by the implementation of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, which entered into force in September 2017. [556] Under that agreement, EU duties on imports of Canadian lobster and lobster products were eliminated via tariff phaseouts beginning in 2017 and continuing through 2022. [557] At the time of the memorandum, EU most-favored-nation (MFN) duties (which applied to imports of U.S. lobster and related products) ranged from 6.0 to 20.0 percent. [558]