Canada-U.S. Blog Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

The Bumpy Ride Continues!

Posted in Antidumping, Border Security, Corporate Counsel, Cross-border deals, Cross-border litigation, Cross-border trade, Customs Law, Legal Developments, Politics, Trade Agreeements, Trade Remedies, World Trade Organization

Originally published by the Journal of Commerce in May 2018  as part of its 100 Top Importers and Exporters Edition

Old movie buffs immediately recognize the inspiration for the title. There was a movie released in 1950 starring Bette Davis called All About Eve. Its most famous lines have bearing on current events impacting global trade. To paraphrase them – “Fasten your seatbelts. It’s going to be a bumpy [ride].”  Since the start of the current Administration, the U.S. has withdrawn from the Paris Accord and the Trans-Pacific Partnership, KORUS and NAFTA have been or are being renegotiated, 232 steel and aluminum tariffs were imposed, 301 triggered duties on Chinese goods from China, and renunciation of the Iran JCPOA deal occurred, to list the most significant international actions to date.

The bottom line for this Administration is America first, but in a way that seems to turn us inward, with a longing for the good old days, when American was self-sufficient, thereby wholesale ignoring the world is now totally interconnected.

Ironically, just as the U.S. has essentially ticked off all our friendly trading partners, China has stepped up: “We are seeing profound changes in economic globalization  …   We should uphold multilateralism, pursue shared growth through consultations and forge close partnerships.” President Xi delivered these remarks at November 2017 APEC CEO Summit.

It seems as though we are seeing life imitate art. In 1995, Michael Douglas starred in a movie called An American President. The closing scene finds Douglas’ character – the President – stating:

“We have serious problems to solve, and we need serious people to solve them. And whatever your particular problem is, I promise you, Bob Rumson [his opponent from across the aisle] is not the least bit interested in solving it. He is interested in two things and two things only: making you afraid of it and telling you who’s to blame for it. That, ladies and gentlemen, is how you win elections. You gather a group of middle-aged, middle-class, middle-income voters who remember with longing an easier time, and you talk to them about family and American values and character…”

This point was underscored yet again by Commerce Secretary Wilbur Ross’ [no relation] speech to the National Press Club on May 14, 2018. Mr. Ross states: “Does anyone doubt that China’s trade surpluses with us have boosted their economic growth? Second question: If their surpluses with us have been good for China, how can our trade deficits with them not be bad for us? I believe that deficits do matter? But not all trade deficits are the same.” He then mentions the U.S. is not oil self-sufficient and so any country providing the U.S. with “our needs” is part of a “blameless deficit”. All other forms of trade deficit are actionable.  So, obviously the boon to American consumers of cheaper products is irrelevant!

Mr. Ross goes on to say: “Both China and Europe eloquently espouse free-trade rhetoric, but – in actual practice – are far more protectionist than the United States. Our trade policy’s main objective is to make their real-world behavior match their free-trade speeches. A second objective is to have our trading partners abide by the rules … Instead, of the 424 trade actions the U.S. has in effect against violations of the rules, half are antidumping or countervailing cases against China. They have subsidized their industrial expansion far in excess of demand. And have disrupted global markets … China has forced technology transfers from companies wanting to sell to its vast market, and it has stolen intellectual property … A third objection of our trade policy is reforming prior errors made by our government.”  Mr. Ross then goes on to list U.S. efforts to open markets, such as the establishment of GATT and then the WTO, and complains others have taken advantage of the U.S.’s open system to its detriment.  He goes on to complain that Mexico is part of NAFTA, but Mexico also has a free trade agreement with Europe. So, Mexican made vehicles going to Europe are free of duty, but those made in the U.S. are subject to Europe’s 10% duty rate.   Next, he complains that the U.S. only has one vote at the WTO and again is being taken advantage of! Stop whining! If the U.S. has stuck with the TPP and completed efforts at the free trade agreement with Europe, things would be much different!

Secretary Ross then states the U.S. has the largest trade deficit in the world and it is “unreasonable” for it to “bear the burden of bolstering the economic fortunes of the entire planet.”   One has to agree with him here, the U.S. should not shoulder the entire burden, but it is?  If we consider the value of services exported by U.S. companies– what does the trade deficit look like then? By at least one estimate, the value of services exported in 2017 was $780.88 billion!  Since the value of goods exported is in the trillions, the trade deficit will not be wiped out, but at least draw an accurate and complete picture!

While every Administration has the right to review existing policies and procedures, this is the first one in recent memory that has come in with a chip on its shoulder and basically told business, we will totally disregard what our actions do to you and your workers! Against that backdrop,  here is a list of actions businesses might consider:

1)         If you are a member of a trade association, get active with it, bring issues of concern to the right committees and get those associations to take action, including filing comments with the Administration, but more importantly, keep in regular contact with your Member of Congress and Senators.  If you are not already a member of at least one trade association, get cracking!

2)         Members of Congress and Senators prefer to hear from constituent outside the beltway, so  when you can, join association members and visit D.C., or visit with your Member and Senator in their district offices. Congress does not vote on all trade policy, but it still has influence through the purse string. Does anyone think the push to renegotiate NAFTA by the end of May isn’t drive by the political calendar – elections are in November!

4)         Take another look at your roster of advisors.  Do you have the right mix to keep you informed and help support any advice and counsel you may need?

5)         Dust off and update your strategic plan. As various trade remedies are announced, when was the last time you looked to see if you could identify a vendor in a different country with whom you could do business?

6)         Finally, keep innovating – whether with new products, new designs, new methods of production or in any other manner – stay competitive.

The one word answer to what things will look like for the next year is – unpredictable! It has been that way since January 20, 2017. No reason to think things will change anytime soon!