A New Era for U.S. Trade Policy PPT for Mexico... · Mr. Porter helps clients maintain uninterrupted access to the U.S. and other markets. Ranked as a leading International Trade

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A New Era for U.S. Trade Policy:What To Expect from Trump Trade

January 2017

Curtis, Mallet-Prevost, Colt & Mosle LLP

Daniel L. Porter

Mr. Porter counsels clients on the myriad of U.S. laws that affect the cross-border shipment of goods, including trade remedy provisions (e.g. antidumping and subsidy), export controls, and Customs regulations.

He has assisted and defended numerous clients with exporting operations in China, Canada, Japan, Korea, Brazil, Indonesia and Vietnam.

Mr. Porter has been active in several WTO disputes across a range of issues. He also advises companies making submissions to CFIUS, and confronting international trade regulatory issues in their cross border M&A transactions.

He has particular expertise in assisting companies that need to import products from China. Working with Curtis’ mandarin-speaking attorneys and local Chinese counsel, Mr. Porter helps clients maintain uninterrupted access to the U.S. and other markets.

Ranked as a leading International Trade lawyer in both the U.S. and in the Asia-Pacific region by Chambers Global, Chambers Asia-Pacific and Chambers USA. Chambers writes that he has “an excellent reputation for handling high-profile matter” and is “commended by both peers and clients for his extensive knowledge of respondent work in US trade remedies cases.” Mr. Porter is also recommended for his work in International Trade, particularly for his experience in East Asia, by Legal 500 USA.

Partner

Head of International Trade Group

Washington, D.C.:

+1 201 452 7373

[email protected]

Education

Cornell, J.D.

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Discussion Topics

Thoughts on U.S. Election Results

Changing Views About U.S. Trade

Important Context: Broad Authority for U.S. President

Trump Trade Policy: New Structure

Trump Trade Policy: New People

Trump Trade Policy: What to Expect

o New Negotiation of NAFTA

o China Currency Manipulation

o Let’s Make A Deal

• Thoughts on ISDS

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Election Results: Surprise and Shock

For Washington professionals, complete surprise and total shock:

Complete surprise all the polls and pundits were so wrong

Total shock that about what was important to Americans outside the Beltway

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Total Shock That Donald Trump Could Win

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• Absolutely no experience in government at all

• Broke all historical norms about how to campaign

• Voters cared more about attitude and image than content

“I disagree with a lot of what he says, but I like that he speaks

his mind.”


Inside the Beltway Perspective

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Washington D.C.

Clinton:91%Trump: 4%

Entire United States:Clinton: 48%Trump: 46%


Changing U.S. Views About Trade

The “more trade is good” consensus has traditionally rested on three premises:

1) more trade was generally good for the economy as whole

2) although some may be hurt by trade, there are ways to compensate those hurt by trade and mitigate the pain of the transition and

3) U.S. leadership in promoting more open trade represented a critical part of overall U.S. global leadership

Each of these premises, however, has come under serious stress over the past few years.

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• “Trade is good for the “economy as a whole” no longer resonates because many Americans believe that the economy as a whole does not work

o Rise of the top 1 percent

• Political stalemate in Washington has reduced policies that might have helped those displaced by increased trade

o Funding for Trade Adjustment Assistance has lagged

• The perceptions of trade as an essential part of U.S. global leadership have weakened

o Afghanistan and Iraq have made Americans weary of engaging with other countries


65 percent of Americans chose (a)


April 2016 Gallup poll asked:

With which do you agree?

a) U.S. trade policy should have more restrictions on imported foreign good to protect American jobs; or

b) U.S. trade policy should have fewer restrictions to enable American consumers to have the most choices at the lowest prices.

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2016 Election:

• First in modern era (since 1930’s) in which trade policy was a major issue

• First in modern era in which both primary candidates were decidedly anti-trade

• Donald Trump very well understands these changing U.S. views on trade


Important Context: U.S. Laws Give President Broad Authority To Act

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Section 125 of Tariff Act of 1974: : Gives President authority to “terminate” a free trade agreement; also gives authority to President to increase tariffs by revoking previous presidential proclamations that reduced tariff levels (pursuant to the FTA) in order to “exercise rights of United States”

Section 301 of the Trade Act of 1974: Gives President broad authority to respond to “unfair trade practices” which can include a violation of trade agreement or “any act, policy or practice of a foreign country” that is “unreasonable” and “burdens U.S. Commerce”

International Emergency Economic Powers Act of 1977 (IEEPA): Authorizes President to regulate all forms of international commerce (and to freeze assets) whenever President finds that there is “unusual or extraordinary threat” to “the economy”

Various U.S. laws give the President very broad authority to regulate international trade without new legislation from Congress


Past Examples of IEEPA

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Burma: In 2013, President Obama invoked his IEEPA authority to prohibit the importation into the U.S. of any jadeite or rubies mined or extracted from Burma.

Rough Diamond Trade Controls: In 2003, President Bush invoked his authorities under IEEPA to prohibit the importation of any rough diamond (from whatever source) unless the rough diamond has been controlled through a special certification scheme.

Continuation of Export Control: In 1983 President Reagan invoked IEEPA authority to continue in force export controls and regulations because Congress had failed to act.


Section 301 of Trade Act of 1974

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• Section 301 provides broadest flexibility to President to regulate imports without first finding “extraordinary or unusual threat”

• Two types of “unfair trade practices” (a) violation of trade agreement and (b) any policy or practice of foreign government that is “unreasonable”

• After creation of WTO DSU, USTR adopted policy of using WTO cases (instead of Section 301) to address any possible violation of any of the WTO Agreement

• Second clause of Section 301 has never been used since 1994 since all claims have been deemed to be covered by some WTO Agreement

• President Trump might adopt different view of what is and what is not covered by a WTO Agreement

• Limitation of Section 301: Any retaliation action taken must be in an amount equivalent to the burden being imposed on the U.S. by the unfair trade practice


Trump Trade Policy: New Structure

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Creation of “National Trade Council”

o Will reside and operate inside White House

Stated mission:

“to advise the President on innovative strategies in trade negotiations, coordinate with other agencies to assess U.S. manufacturing capabilities and the defense industrial base, and help match unemployed American workers with new opportunities in the skilled manufacturing sector.”

Appears mixture of trade and traditional industrial policy

The creation of this new Washington trade apparatus strongly suggests that, unlike most other Presidents, Trump intends to run trade policy out of the White House

oPossible turf battle with USTR


Trump Trade Policy: New People

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Policy is Personnel

Peter Navarro Director of National Trade Council

Robert Lighthizer United States Trade Representative (USTR)

Jason Greenblatt Special Representative for International Negotiations

Wilbur Ross Secretary of Commerce

Steven Mnuchin Secretary of the Treasury


Trump Trade Policy: What to Expect (campaign statements)

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“Rip up” existing

trade agreements

(March 2016)

Impose 35% duty on all imports from

Mexico and 45% duty on all imports from

China

(June 2016)

Renegotiate

NAFTA

(June 2016)

Trump proposed the following trade policy actions items during the campaign:


Trump Trade Policy: What to Expect (advisor position papers)

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Seven point trade action plan:

1. Withdraw from TPP

2. Appoint tough and smart trade negotiators to fight on behalf of American workers

3. Direct the Secretary of Commerce to identify every violation of trade agreements, and also direct all appropriate agencies to use every tool under American and international law to end these abuses

4. Tell NAFTA partners that we intend to immediately renegotiate (and eliminate Mexico’s one-side backdoor tariff through VAT and end sweatshops in Mexico that undercut U.S. workers)

5. Instruct the Secretary of the Treasury to label China a currency manipulator

6. Instruct the U.S. Trade Representative to bring (WTO) trade cases against China

7. Use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities, including its theft of American trade secrets - including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962


Trump Trade Policy: What to Expect (Washington insiders)

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1. New negotiation of NAFTA

2. Some action addressing China currency manipulation

3. Enhanced enforcement of trade remedy laws (including Section 201 safeguards) to force a “deal”

4. Jawboning individual companies to bring back jobs

Each of these:

Centerpiece of Trump’s campaign rhetoric

Favored by Trump’s identified trade advisors

Supported by many in Congress


Trump Trade Policy: New Negotiation of NAFTA – Specifics

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The most specific proposals for changing NAFTA have come from the labor union, AFL-CIO

AFL-CIO advocates six specific changes:

1) Eliminate investor state dispute mechanism

2) Improve the labor and environment side-treaties

3) Address currency manipulation by creating binding rules

4) Upgrade NAFTA’s rules of origin particularly on autos and auto parts

5) Terminate the procurement chapter that undermines “buy American” laws

6) Terminate special chapter for review of AD-CVD

There is no indication that the Trump Trade Team would disagree with any of these proposals; however, politics may require that they adopt them as their own.


Trump Trade Policy: China Currency Manipulation - Specifics

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Option 1: Have Treasury Department designate China a “currency manipulator”• May be difficult to justify given past

Treasury findings and recent trend in value of RMB

• Changing standards to permit such labelling may have unintended consequences; such as having to include other countries and possibly allowing others to apply label to U.S.

• China might well undertake immediate retaliation

Option 2: Instruct Commerce Department to accept investigation of currency manipulation as possible export subsidy in new CVD case

• No need for legislation; Commerce arguably has authority

• Can create appearance of doing something, but then have actual effect be subject to CVD administrative process


Trump Trade Policy: Let’s Make A Deal

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Trump Trade Policy: Let’s Make A Deal

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The Trump Administration will be very “deal focused,” constantly looking for ways to create leverage

o Trump sees trade as a zero sum gain, where some countries win and other countries lose

o Trump has repeatedly stated that the primary problem with past U.S. trade policy is “poor negotiators”

The Trump Administration would be looking for ways (1) to better exploit existing U.S. leverage, and (2) to create new sources of leverage


Trump Trade Policy: Let’s Make a Deal - Specifics

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• Enhanced enforcement of trade remedy allows the opportunities for a deal

• There are existing regulatory mechanisms that create the opportunity for a deal


Trump Trade Policy: Let’s Make a Deal - Specifics

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AD-CVD Cases:

• Allows for “suspension agreements”

• Tomatoes from Mexico and Sugar from Mexico recent examples

• Magnitude of AD-CVD might be constraining

Global Safeguards (Section 201)

• Section 201 is a WTO-consistent mechanism to impose tariffs and quotas against imports from all sources when they are increasing so rapidly as to be a significant cause of serious injury to competing U.S. industries

• Domestic industries like this trade remedy because it imposes a remedy on all imports, in one proceeding (and less expensive to prosecute)


ISDS - Will Rising Opposition Affect U.S. Position

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• ISDS provisions in NAFTA (Chapter 11) arguably resulted in path-breaking cases for investor-state disputes.

o As of 2016, about 80 Chapter 11 cases have been filed against all three NAFTA parties. (Canada has been sued 39 times. Mexico 24 and US 21 times)

o Some of these cases pushed the envelope for protections for investors

o These arguments led to increased investor cases against other countries.

• Last few years has seen a rising populist backlash against ISDS, as critics complain that important government regulations were being undone by unelected arbitration tribunals

o Phillip Morris case against Australia and Uruguay complaining about cigarette packaging became poster child

• Criticism of ISDS could be seen in U.S. presidential election

o Bernie Sanders explicitly referenced ISDS on the campaign trails in his criticism of TPP

• Trump’s position on ISDS is uncertain; but two factors suggest he may not heed to the criticism

o US has never lost an ISDS dispute

o One of his primary trade objectives is to have increase in manufacturing investment from foreigners

Curtis, Mallet-Prevost, Colt & Mosle LLPU.S. Safeguard Cases

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Product Year Initiated ITC Decision Remedy ProvidedTires (China only) 2009 Affirmative 55% for 1st year; 45% for 2nd year; 35% for 3rd year; Expedited

consideration of TAA for firms/workers affected by subject imports

Circular Welded Non-Alloy Steel Pipe

2005 Affirmative Annual quota of 160,000 short tons for 3 years

Uncovered Innerspring Units 2004 Negative None (because of ITC decision)Ductile Iron Waterworks Fittings

2003 Affirmative TRQ: 50% on imports over 14,324 short tons for 1st year; 40% over 15,398 short tons for 2nd year 30% over 16,553 short tons for 3rd year

Brake Drums and Rotors 2003 Negative None (because of ITC decision)Steel Wire Garment Hangers 2003 Affirmative 25% for 1st year; 20% for 2nd; 15% for 3rd

Pedestal Actuators 2002 Affirmative Quantitative Restriction: 5,626 units for 1st year; 6,470 for 2nd; 7,440 for 3rd

Steel 2000 Affirmative (flat-rolled steel) 30% for 1st year; 24% for 2nd; 18 % for 3rd

Extruded Rubber Thread 2000 Negative None (because of ITC decision)Crabmeat 2000 Negative None (because of ITC decision)Wheat Gluten 1999 Affirmative Quantitative restrictions: 126 million pounds for 1st year;

increased by 6% each year for 4 yearsWire Rod 1999 Tie Vote 15% for 1st year; 13% for 2nd; 11% for 3rd; 9% for 4th

Lamb Meat 1999 Affirmative TRQ: 20% over 78 million pounds for 1st year; 17.5% over 81.5 million pounds for 2nd; 15% over 81.5 million pounds for 3rd; 10% over 81.5 million pounds for 4th

Circular Welded Carbon Quality Line Pipe

1999 Affirmative TRQ: 30% duty over 151,124 tons for 1st year; increase quota by 10% each year for 4 years

Broom Corn 1996 Affirmative For 3 years increase rate of duty on imports produced in Mexico receiving tariff preferences under NAFTA to column 1 general rate of duty

Fresh Winter Tomatoes 1995 Negative None (because of ITC decision)


Top Ten U.S. Trading Partners without FTAWith Largest Merchandise Trade Deficit

(2015 data, million dollars)

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Country Imports Exports Balance

5700.--China $481,880.80 $116,186.30 ($365,694.50)

4280.--Germany $124,139.30 $49,946.70 ($74,192.60)

5880.--Japan $131,119.80 $62,471.80 ($68,647.90)

5520.--Vietnam $37,993.10 $7,071.70 ($30,921.40)

4190.--Ireland $39,355.30 $8,945.70 ($30,409.60)

4759.--Italy $44,004.90 $16,249.20 ($27,755.70)

5330.--India $44,741.40 $21,529.60 ($23,211.80)

5570.--Malaysia $33,828.20 $12,292.60 ($21,535.70)

4279.--France $47,644.20 $30,077.20 ($17,567.00)

5490.--Thailand $28,594.80 $11,247.00 ($17,347.80)


Top Ten U.S. Trading Partners with FTAsRanked by Merchandise Trade Deficit

(2015 data, million dollars)

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Country Imports Exports Balance

2010.--Mexico $294,741.10 $236,377.40 ($58,363.70)

5800.--Korea $71,827.50 $43,498.70 ($28,328.70)

1220.--Canada $295,190.30 $280,016.70 ($15,173.70)

5081.--Israel $24,452.40 $13,561.50 ($10,890.90)

2190.--Nicaragua $3,186.10 $1,256.50 ($1,929.60)

5110.--Jordan $1,493.30 $1,367.90 ($125.40)

5250.--Bahrain $902.30 $1,274.10 $371.70

2150.--Honduras $4,758.60 $5,238.40 $479.80

7140.--Morocco $1,010.50 $1,608.40 $597.90

2110.--El Salvador $2,540.20 $3,258.30 $718.00

Based on USITC data: https://dataweb.usitc.gov/scripts/cy_m3_run.asp

ALMATY | ASHGABAT | ASTANA | BEIJING | BUENOS AIRES | DUBAI | FRANKFURT | GENEVA | HOUSTON | LONDON | MEXICO CITY | MILAN | MUSCAT | NEW YORK | PARIS | ROME | WASHINGTON, D.C.

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Documents

A New Era for U.S. Trade Policy PPT for Mexico... · Mr. Porter helps clients maintain uninterrupted access to the U.S. and other markets. Ranked as a leading International Trade