The U.S. Mexico Canada Agreement (USMCA) was signed on December 2019 and went into effect on July 1,
2020. It revised the NAFTA text on important topics and added new concepts, such as an expiration date, at
the end of its 16th year. Below are some highlights.
In IP, the USMCA requires national treatment for copyrights, procedural safeguards for recognition of new
geographical indications, more enforcement provisions for IP protection, among others. On digital trade, it
prohibits the application of customs duties and other discriminatory measures to digital products distributed
electronically; ensures that data can be transferred across borders; permits the use of electronic
authentication and electronic signatures; cracks down on data localization measures; promotes collaboration
in addressing cybersecurity challenges; and protects against forced disclosure of proprietary computer source
code and algorithms, among others.
Environmental provisions have been incorporated into the core text of the agreement and are now subject to
dispute resolution. The same goes for labor provisions and eleven other chapters of the agreement. While
regional content for most products is set at 60 percent (transaction value method) or 50 percent (net cost
method), for the automotive industry, USMCA increases the regional value content to 75 percent North
American, establishes that 40 to 45 percent of auto content be made by workers earning at least $16 per hour
and stipulates that at least 70 percent of a producer’s steel and aluminum purchases must originate in North
America1
.
USMCA is now the new starting point, not the template, for trade agreements with the U.S. For countries
outside the agreement, the impact will continue to be negative for exports to USMCA markets, especially in
products where regional content was increased (auto parts, steel and aluminum, for example) and in
agricultural products, where MFN tariff and non-tariff protections in the U.S. are the highest. The full text is
available here.
Section 232
On June 2, 2020, the Department of Commerce initiated a new Section 232 investigation, based on National
Security grounds, adding Vanadium to the list of investigated products (steel and aluminum are others).
Vanadium is a chemical often found with titanium and iron in their ores and that is used in the production of
steel alloys for manufacture of extremely tough plates and tools. According to “Mining Weekly”, in 2019, the
U.S. produced 470 tons of contained vanadium while its apparent consumption was 8,300 tons, making it
almost entirely dependent on imports. Eight countries2 are the main exporters of vanadium in its different
forms to the U.S. market. In the case of Brazil, this investigation adds to steel and aluminum, which have been
1
It is worth noting that it is unclear whether exporters will choose to export under USMCA provisions, as many economists consider
that these provisions are too cumbersome to avoid a tariff of 2.5%. However, exporting under USMCA would be interesting if the US
eventually applies Section 232 tariffs in auto.
2
(Ferrovanadium from Austria (48%), Canada (22%), Russia (14%), Korea (11%) and other countries (5%); and Vanadium Pentoxide
from South Africa (44%), Brazil (29%), China (11%), Taiwan (6%) and other countries (10%).
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Aluisio de Lima-Campos, Renata Amaral, Barbara Medrado, Lucas Queiroz Pires, Marcia Pulcherio
under Section 232 sanctions in the U.S. for a while. On August 28, 2020 the White House reduced the import
quota on semi-finished steel from Brazil, scheduling to hold consultations in December 2020.
Biden’s Trade Policy
A potential Biden win in November is not likely to immediately alleviate U.S. trade tensions. An analysis of
Biden’s official campaign promises reveals that U.S. trade policy led by Biden will offer a similar approach in
terms of dealing with China and trade remedies. In trade negotiations, however, a Biden administration will
likely bring environment and labor provisions to a higher priority.
In terms of similarities, Biden promises to strengthen “Buy American” rules. Trade remedies are likely to be
used with the same intensity as the Trump administration. Biden envisions a “future made in America” and
suggests that this “requires fighting back against unfair trade practices.” Regarding China, the friction will
likely remain at similar levels as Biden’s campaign observes Trump did “nothing to curb Beijing’s trade abuses”
and that “China’s government continues its trade abuses and is failing to live up to its commitments.”
Biden’s Tax and Trade Strategy include the following actions: (1) take aggressive trade enforcement actions
against China or any other country that engage in unfair practices (e.g., currency manipulation, dumping,
state-owned company abuses, or unfair subsidies.); (2) confront foreign efforts to steal U.S. intellectual
property; (3) address state-sponsored cyber espionage against U.S. companies. Biden is also likely to stick to
U.S. Trade Representative Robert Lighthizer’s efforts to persuade U.S. companies to reshore. Biden plans to
establish a “claw-back” provision to force a company to return public investments and tax benefits when the
company transfers U.S. jobs to other countries and to reverse tax policies that encourage outsourcing.
Biden program diverges from the Trump administration’s approach to trade in three main issues. First, Biden
proposes to rally U.S. allies in a coordinated effort to pressure the China. Second, Biden proposes to apply a
carbon adjustment fee against countries that are failing to meet their climate and environmental obligations.
Third, Biden proposes to enforce existing labor provisions and aggressively push for strong and enforceable
labor provisions in trade deals his administration negotiates.
US-China Deal and Agricultural Goods
The six-month review of the U.S.-China phase one trade deal was held on August 24, 2020. According, to the
USTR, both sides see progress and are committed to taking the steps necessary to ensure the success of the
agreement. While there was a significant increase of China’s purchases from the United States, particularly of
agricultural products, China’s total imports from the U.S. was $48.5 billion through July 2020, which is less
than half needed to be on track to meet its commitments, as the PIEE points out. The pandemic spread right
after the phase one deal went into effect also contributed to the reduced demand for many agricultural
products.
It remains to be seen whether current U.S. supply of agricultural products will fulfill the ambitious
commitments of the U.S.-China deal and how other major agricultural players like Brazil will be affected.
Through July 2020, China received 40% of the agricultural products from Brazil, the highest share of China in
Brazil’s agricultural exports to date.

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Aluisio de Lima-Campos, Renata Amaral, Barbara Medrado, Lucas Queiroz Pires, Marcia Pulcherio

As Brazil becomes a new coronavirus hot-spot, on May 25th, president Trump announced travel
restrictions affecting the country. Pursuant to the Presidential Proclamation, the decision to restrict travel
of foreign nationals of any nationality from Brazil is due to the potential for undetected transmission of
the virus by infected individuals, deemed necessary to prevent the transmission in the United States.
Although unclear when restrictions will be lifted, the measure does not seem to deter the relationship
between the two administrations. In an interview following the measure, Trump mentioned Brazil’s
difficulties amid the coronavirus crisis, acknowledged that Brazil had taken a different path in combatting
the virus but avoided any criticism against Bolsonaro.
The cooperation between the U.S. and Brazil moves forward in some fronts. Last month, the U.S.
government announced assistance to mitigate the health and socioeconomic impacts of COVID-19,
totaling over US$ 12.5 million. A shipment of 2 million doses of the antimalarial drug hydroxychloroquine
and 1,000 ventilators to Brazil is on the works. The U.S. private sector in Brazil has also actively assisted
Brazil through a series of initiatives totaling approximately US$ 37.5 million.
The U.S. – Brazil trade talks continue to gain momentum. On June 4, Chargè d’Affaires at the Brazilian
Embassy, Nestor Forster, stated that talks with U.S. officials were advancing towards achieving a
meaningful trade and economic package by the end of this year. On May 21, the governments issued a
joint statement highlighting the commitment to reduce trade barriers and to increase bilateral trade and
investment. Topics were trade facilitation, regulatory practices, technical regulations, standards and
conformity assessment procedures, intellectual property, and digital trade.
In the U.S., stakeholders stressthe Brazilian pension and tax reforms and environmental protection efforts
as preconditions for furthering negotiations. Digital trade is a sensitive topic. While both countries agree
to avoid trade barriers and exchange best practices on AI, IoT, cross-border data flows, and e-commerce.
Regarding the last topic, a bill (No. 2,358/2020) was introduced in Brazil’s Congress proposing the creation
of a digital tax – the so-called “CIDE-digital”. The USTR alluded to such bill in its initiation of a Section 301
investigation into digital services taxes against Brazil and several other U.S. trade partners, including the
EU, India, Indonesia, and the UK.
At the WTO, the month was marked by the announcement of the early departure of Director General
Roberto Azevedo. Amid a global epidemic and notorious stalling of the Organization’s dispute mechanism,
Azevedo did not attribute his departure to tensions with any government. Instead, he argued that his
decision would give Members more time to coordinate efforts to replace him before the next Ministerial
Conference.
On a better note, Brazil submitted its application to join the WTO’s Government Procurement Agreement
(GPA), after almost three years of holding the status of observer. Brazil hopes to present its initial market
access offer and to reply to a checklist of issues about its government procurement legislation as soon as
the COVID-19 crisis tones down. Brazil’s interest in modernizing the economy and improving management
of public resources may pave the way for better governance and for curbing corruption, in tune with
Brazil’s commitments to align its policies with OECD’s best practices, which receives growing support from
the Trump administration.

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Aluisio de Lima-Campos, Renata Amaral, Barbara Medrado, Lucas Queiroz Pires, Marcia Pulcherio

In March 2020, President Trump and President Bolsonaro reaffirmed the strategic alliance between the
United States and Brazil, instructing trade officials to deepen discussions for a bilateral trade package.
Officials stated that political will in both countries could lead to a trade deal this year. It remains to be
seen if and how the impact of the COVID-19 global pandemic will affect this timeline.
Throughout 2020, Brazil and the United States have the chance to focus on key aspects that could pave
the way toward a comprehensive long-term free trade agreement. For one, Brazilian officials have already
informed the U.S. side that the USMCA model is acceptable. According to a report by the Atlantic Council
and Apex Brazil, recommendations include a multi-chapter trade enhancement agreement that would
cover bilateral rules on customs administration and trade facilitation, good regulatory practices, technical
barriers to trade, digital trade, anti-corruption, among others. The study shows that the agreement could
make U.S. exports more competitive by reducing the importation costs of U.S. goods to the Brazilian
consumer. The deal could also contribute to an increase in Brazilian exports of several goods such as
machinery, apparel and clothing, footwear, steel products, stones, wood flooring and furniture, aircrafts,
and auto parts.
A potential challenge for the conclusion of this agreement is the current MERCOSUR legal framework –
specifically, CMC Decision 32/00 – that requires its members to negotiate free trade deals as a bloc.
However, Brazilian officials have stated that Brazil is willing to pursue this agreement even if it comes up
to adjust MERCOSUR rules to allow the bilateral deal.
Another challenge for the bilateral negotiations is the COVID-19 pandemic. While there is no broad rule
that federal workers must work from home, agencies are implementing their own rules regarding remote
working. Even if USTR workers are working remotely and not experiencing productivity disruptions, their
efforts might have shifted to COVID-19 related issues such as the Section 301 additional exclusion requests
on Chinese-origin products to address the COVID-19 pandemic, addressing immediate supply chain
disruptions and export controls on medical items, PPE, and food products around the world. It is not clear
when negotiators would be able to meet in person and how effective remote meetings will be.
In addition to the worrying effects on human life, the novel strain of COVID-19 has the potential to
significantly slowdown the global economy. The trade and economic effects of the pandemic can be
followed through international organizations which have dedicated platforms with daily updates, such as:

WTO (COVID-19 and world trade), OECD COVID-19, UNCTAD COVID-19, IMF COVID-19, World Bank COVID-
19.

See also:
• G20 leaders committed to enhance global cooperation to fight the COVID-19 pandemic, pledging
to ensure any “emergency” trade measures are targeted, proportionate, transparent, and
temporary. See statement here.
• President Trump reiterated the U.S. support for Brazil beginning the accession process to the
OECD, urging OECD partners to work towards this goal in order to help grow Brazil’s economy and
competitiveness.
• Brazil establishes exceptional and temporary criteria to facilitate trade for medicines and
biological products due to the international public health emergency of the COVID-19. It was the
first WTO member to notify a TBT measure related to COVID-19.

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Aluisio de Lima-Campos, Renata Amaral, Barbara Medrado, Lucas Queiroz Pires, Marcia Pulcherio

Recent Amendments in US CVD investigations: What changed?
Currency Manipulation
This month the U.S. Department of Commerce (DoC) published its final rule on the treatment of currency manipulation as
an actionable subsidy in countervailing duty (CVD) investigations, which will go into effect on April 6, 2020. It (i) introduces
a new definition of specific industry to include companies predominantly international trade oriented, (ii) clarifies the role
of the Department of Treasury (DoT) in CVD investigations, (iii) sets out its methodology to calculate the subsidy margin
for currency undervaluation. The final rule is available here.
The specific industry change was necessary in order to comply with the legal requirement that actionable subsidies must
be specific to an industry, in addition to the requirements of being a financial contribution and conferring a benefit. The
new rule now allows the DoC to consider firms engaged in international trade as a group for that purpose. Given its
expertise on matters of currency, the DoC will rely on the DoT’s “evaluation and conclusion as to undervaluation,
government action and the bilateral U.S. dollar rate gap during a CVD proceeding.” However, the DoC “will not delegate
to Treasury the ultimate determination of whether currency undervaluation involves a countervailable subsidy in a given
case.”
The undervaluation is measured by taking a reference exchange rate – which can be a real equilibrium exchange rate
(REER) or equivalent – and comparing it with the nominal exchange rate used by the companies under investigation. On
the subsidy margin calculation, the DoC follows a benefit approach by measuring how much more domestic currency was
the investigated company able to obtain from export sales as a result of the undervaluation subsidy.
Special and Differential Treatment
Also this month, the USTR changed the list of developing countries entitled to special and differential (S&D) treatment in
CVD cases, by reclassifying the more advanced among those as developed countries. All countries that satisfied any of the
following criteria are no longer eligible to S&D treatment: (1) per capita GNI of $12,975 or above, (2) share of world trade
of 0.5% or above, and (3) other factors such as Organization for Economic Co-operation and Development (OECD)
membership or application for membership, European Union (EU) membership, and Group of Twenty (G20) membership.
This measure directly affects Argentina, Brazil, India and many other countries by lowering the thresholds for de minimis
subsidy margins (from 2% to 1%) and negligible volume of imports (from 4% share of total imports individually and 9%
collectively to 3% and 7%, respectively) in CVD cases. This change has no impact on CVDs in force, but will affect new
investigations and possibly sunset reviews. The text released by the USTR is available here.
We do not expect the amendments above to drastically change the Administration’s approach towards Brazilian exporters
and their outcomes in U.S. CVD investigations.
See also:
• U.S. Congress issues report on Brazil and U.S. relations
• USTR Issues Report on the WTO Appellate Body
• USTR Announces Formation of Bilateral Evaluation and Dispute Resolution Office Pursuant to U.S.-China Phase
One Agreement
• USTR Revises $7.5 Billion Award Implementation Against EU in Airbus Case
• CIT Bars Collection of New 232 Duties on ‘Derivatives’ of Steel and Aluminum from two Importers. See here and
here.

This month the USTR released the text of the first phase of the Economic and Trade Agreement between
the United States and China. The 91-page deal is structured in 8 chapters, covering Intellectual property
(“IP”), technology transfer, food & agricultural, financial services, macroeconomic policies, expansion of
trade, financial services, and dispute resolution. While the agreement did not foresee the truce on the
existing additional tariffs against China, it set out relevant commitments by China.
Rebalancing trade with China is one of the clear goals of the deal. Specifically, the sixth chapter on
balancing trade aims to reduce U.S. trade deficit with China, with the voluminous figure of $200 bi on
Chinese purchases of U.S. services and products such as manufacturing goods and agricultural products.
If implemented, this commitment could potentially divert China’s purchases from other origins, such as
soybeans from Brazil. Trade diversion is a serious risk of this commitment.
The deal’s dispute settlement chapter establishes a process of bilateral consultations within each party’s
“Bilateral Evaluation and Dispute Resolution Office”, composed by a designated Deputy USTR in the case
of the United States and by a designated Vice Minister in the case of China. There is no neutral third-party
arbitrator in this mechanism. Although this could prevent immediate retaliations due to the agreed
consultation procedure, the deal still ultimately allows for one party to potentially retaliate in case it
deems that the other party is not complying with its commitments under the agreement.
On the tariffs front, following the signature of the deal, the USTR announced the reduction from 15% to
7.5% on $120 billion of Chinese imports (products listed under the so-called Section 301 List 4A).
Nonetheless, most of the tariffs are still in place, as the additional 25% tariffs on over $250 billion worth
of Chinese products (Lists 1 to 3) remain in force.
Finally, the current deal does not cover relevant topics. While there is a chapter outlining commitments
on the technology transfer front, we should expect more work on this front in the next phases. We should
also expect provisions on government cybertheft, industrial subsidies, and state-owned enterprises, as
the current deal did not address these “hot topics”. In parallel, the US, Japan and the EU met to discuss
ways to strengthen WTO rules on industrial subsidies (see link below)
Overall, the deal takes significant steps to reform China’s trade practices by attempting to reduce nontariff barriers to U.S. exports, IP rights’ violation, and forced technology transfer. The agreement would
enter into force in mid-February, unless parties agree in writing to an earlier date. Actual implementation
of these commitments in US and China laws, enforcement, and actions remain to be seen.
Full text of the agreement available here.
See also:
• USMCA passed in the U.S. Senate on January 16, 2020
• 232 case update at U.S. Court of Appeals for the Federal Circuit
• New CFIUS regulation for Reviewing Foreign Investment in U.S. Businesses
• Statement by Ministers in Davos on the WTO Dispute Settlement System
• Joint Statement on Industrial Subsidies of the Trilateral Meeting of the Trade Ministers of Japan,
the United States and the European Union