We recently hosted our 9th annual Retail and Consumer Markets Summit, our yearly client-focused event that canvasses the most timely and relevant developments facing this industry. Welcome to a series of blog posts that highlight some of the key take-aways from the Summit. This first post discusses the navigation of a shifting trade landscape, where our experts John Boscariol and Martha Harrison review the most significant practical implications for the retail and consumer markets sector. Watch this space for future posts on other learnings from the Summit.
The past year has seen significant developments on the international trade front, particularly in relation to the new and evolving trade and investment agreements that are reshaping the trading landscape. Specifically, the terms of the new United States-Mexico-Canada trilateral agreement (USMCA), the Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada and ten other countries in the Asia-Pacific Region (CPTPP) have practical and concrete implications for companies transferring goods, technology, intellectual property, services and people across borders. Indeed, having now negotiated preferential trade and investment agreements with the European Union, the United States, and the TPP countries, no other industrialized country in the world has better access to international markets than Canada at this time.
Too often disregarded as complex and high-level legal instruments, these agreements can be leveraged to address market access issues for importers, exporters or investors or achieve preferential trading terms that contribute directly to a retailer’s bottom line. For instance, the CPTPP in particular establishes less onerous rules of origin for textile and apparel items that allow these products to be imported from significant textile production jurisdictions like Vietnam at substantially reduced rates of duty. The CETA, which is currently in force on a provisional basis, provides mechanisms by which agricultural and food products previously subject to prohibitive rates of duty can be imported into, or exported from, Canada under preferential terms.
Businesses in the retail and consumer markets (RCM) industry should also be cognizant of changes to rules of origin effected by the USMCA, and should verify that goods imported from or exported to the United States or Mexico are classified appropriately.
Despite Canada’s success in negotiating trade and investment agreements with its major trading partners, challenges continue to grow for the RCM sector. In particular, steel and aluminum tariffs imposed on Canada by the United States, purportedly for national security purposes, have triggered retaliatory surtaxes across a wide swath of US imports into Canada, and in particular against retail and consumer products. Firms have been pursuing a number of strategies to mitigate these impacts, including changes to their supply chains and taking advantage of existing and new remission programs.
Previously thought to be unfathomable, a no-deal Brexit is an increasingly real concern that could have significant and abrupt repercussions for Canadian companies engaged in trade with Britain. In the absence of a back-stop deal (and at present none is in place), a hard Brexit would mean that Canadian companies engaged in trade with or operating in the UK could immediately lose the benefits of the CETA’s preferential trading terms. In the context of trade with Britain, goods that were imported on a duty-free or reduced-duty basis under the terms of the CETA could, immediately after a hard Brexit occurs, be once again subject to higher rates of duty. Accordingly, those with trade interests in Britain should turn their minds to navigating a no-deal Brexit environment.