U.S. announces trade talks with Japan, the EU, and UK; Action will benefit semiconductor industry

Last week, the Office of the U.S. Trade Representative (USTR), on instruction from President Trump, notified Congress that the administration intends to begin bilateral trade negotiations with Japan, the European Union(EU), and the United Kingdom.

SEMI stands strong for free trade and open markets, and roundly supports efforts to increase market access and tap into more foreign economies, especially economies like Japan and the EU, both of which are central to the semiconductor industry. The semiconductor industry, which enables the $2 trillion electronics market, is built on global commerce. SEMI members rely on a vast network of supply chains that span the globe, bringing together components and tools made all around the world and assembled into a single sub-system that is then integrated into a larger tool used in the chipmaking process.

These free trade agreements will reduce tariffs, which will result in cost savings and productivity gains, and allow SEMI members to expand and grow. But the benefits of modern free trade agreements extend well beyond tariff reduction. Indeed, these trade deals will establish and enhance global trade rules that enable companies to innovate and compete fairly on a level playing field. Trade agreements strengthen certainty and further business continuity.

While the exact nature and negotiation timelines for the talks remain unclear, SEMI will engage the administration, urging it to maintain high standards in these agreements, such as:

• Maintain strong respect for intellectual property and trade secrets through robust safeguards and significant penalties for violators

• Remove tariffs and non-tariff barriers on semiconductor products as well as products that depend on semiconductors

• Simplify and harmonize the customs and trade facilitation processes

• Combat any attempts of forced technology transfer

• Prevent use of data localization measures and enable the free flow of cross-border data flows

• End discriminatory and/or burdensome regulatory practices

• Ensure standards in all forms are market-oriented

• Create rules for state-owned enterprises to ensure fair and non-discriminatory treatment of all companies

According to Trade Promotion Authority (TPA), the U.S. law that guides trade votes in Congress, negotiations with each country can only begin 90 days after last week’s notification. During that period, there will be intensive consultation with Congress and stakeholders. This means, at the earliest, talks can start on January 14, 2019. (Bear in mind that discussions with the UK can only begin in earnest once the UK has formally left the European Union on March 29, 2019.)

The Trump administration’s announcement comes after the U.S. imposed or threatened tariffs on imports on all trading partners, including the EU and China. All told, the U.S. has imposed tariffs on more than $300 billion worth of goods. SEMI has weighed in on the detrimental nature of tariffs, arguing that tariffs on China will ultimately do nothing to address the concerns with China’s trade practices. This sledgehammer approach will introduce significant uncertainty, impose greater costs, and potentially lead to a trade war, ultimately undercutting the ability of semiconductor companies to sell overseas, stifling innovation and curbing U.S. technological leadership.

Elsewhere, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the multilateral trade deal that links 11 Asia-Pacific economies, is well on its way to taking force. Canada will be taking its final steps to ratify the deal, joining Mexico, Japan and Singapore. The deal, formerly known as the Trans-Pacific Partnership, should take effect by the first half of 2019.