Friday, April 14, 2017

Trade and Security, Hand in Hand in Asia

On Wednesday, President Trump told The Wall Street Journal that he did not plan to name China as a currency manipulator. This makes sense as a matter of economics, at least in the near view: Although China did for years artificially depress its currency to make its exports more attractive, it hasn’t done so since 2014. Naming China as a currency manipulator now seems to be, as my grandfather would have said, “a day late and a dollar short.”

Turning His Back on Campaign Promises

Trump’s statement this week was a stark reversal from his campaign pledges. In November, Trump said in The Wall Street Journal that he would name China as a currency manipulator on the first day of his presidency. That hasn’t happened. Instead, in talks with Chinese President Xi Jinping this week, the Trump Administration committed to a 100-day timeline for comprehensive new trade talks. Secretary of Commerce Wilbur Ross admitted in a White House press briefing that such a schedule “may be ambitious” given the scope of the issues, but called it “a sea change in the pace of discussions” between the U.S. and China and “a very very important symbolization of the growing rapport between the two countries.”

This reversal probably won’t do much to win President Trump favor in my state of West Virginia or in other states heavily dependent on manufacturing that supported him in the election. Recent studies show that as many as 2.4 million jobs were lost in the United States because of China’s past policy of currency manipulation that enabled cheap Chinese imports to undercut their domestic competitors. Moreover, the U.S. economy has failed so far to transition those workers to more competitive industries, as economists had predicted would happen. Instead, high unemployment remains in those regions.

The Legal Basis for Naming Currency Manipulators

Naming China as a currency manipulator wouldn’t necessarily have had any immediate legal ramifications, but it couldn’t have helped that “rapport” that Secretary Ross is talking up. Trump was referring to a provision of the Omnibus Trade and Competitiveness Act of 1988, Section 3304, which requires each Administration to make an annual report to Congress on “whether countries manipulate the rate of exchange between their currencies and the U.S. dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.” No penalties attach to being named a currency manipulator under the law, however. The President is merely instructed to engage in negotiations with the country if they have “material global account surpluses” and a “significant bilateral trade surpluses with the United States.” Notably, there is an exception for cases “where such negotiations would have a serious detrimental impact on vital national economic and security interests.”

The Department of the Treasury now pairs this analysis with the requirements of another statute, Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015, which does include penalties for countries that manipulate their currencies. The 2015 Act requires the President to undertake “enhanced bilateral engagement” and take possible remedial actions against any country that has a “significant bilateral trade surplus with the United States,” a “material current account surplus” and has “engaged in persistent one-sided intervention in the foreign exchange market.” Again, however, the 2015 Act contains a waiver for such actions if they would hurt U.S. economic or national security interests.

China, North Korea, and Keeping Trade in Perspective

This week, U.S. economic and national security interests in Asia are promenading hand in hand through a minefield of North Korean weapons and intentions. In a White House press call today, senior administration officials discussed the Vice President’s upcoming trip to South Korea, Japan, Indonesia, and Australia. The trip, they said, would be focused on creating a “framework” for further discussions, but the three key themes (presented in this order) would be to emphasize U.S. commitment to its security alliances in the region in the face of the threat from North Korea; to demonstrate continued U.S. economic participation in the region despite the Trump Administration backing away from the Trans Pacific Partnership; and to work with countries and regional organizations such as ASEAN to defeat ISIS, denuclearize North Korea, and uphold “the rules-based order.”

It’s no secret that China is best situated to exert pressure on North Korea to reduce the nuclear threat. The Trump Administration has settled on a policy of “maximum pressure and engagement” in North Korea, with the help of China. As North Korea continues missile tests, the U.S. can scarcely afford a trade war with China.

Trump’s statement Wednesday that he will not name China as a currency manipulator is an inevitable recognition that trade policies are not pursued in a vacuum. Fast trade talks of the type hailed by Secretary Ross may produce movement on China’s currency policy, but the U.S. is in no position to take a hard line on this issue in light of the need for China’s cooperation on serious national security concerns. The Vice President’s trip to the Pacific offers a good opportunity for the Trump Administration to establish cooperative relationships throughout the region – albeit not based on a multilateral trade accord like the TPP – that could be beneficial for U.S. economic interests and critical for U.S. national security interests.

April 14, 2017 | Permalink | Comments (0)

Wednesday, April 12, 2017

Welcome to International Trade Law Prof Blog

If you’re not a trade specialist, you’ve come to the right place.

As you’ve probably noticed, international trade law is a different game in 2017.

For at least a generation, the accepted wisdom in legal circles has been that trade liberalization is a Good Thing. Tariffs are bad, investment is good, and the rising tide will raise all boats if states get out of the way. All the Big Economies got that way by liberalizing and the Small Economies need to follow suit if they want to become Big Economies. National economies will reallocate resources to their comparative advantage and overall gains will be sufficient to compensate the losers in the Reallocation Roulette.

Then Britain voted for Brexit. Donald Trump was elected President of the United States. Marine Le Pen gained political momentum in France. And just like that, a half-century of trade liberalization orthodoxy was back on the table.

Feeling Out the Fault Lines in Trade Law and Policy

Trump’s changes and pledges of change would throw open the barn doors on decades of U.S. trade policy. As a candidate and as President-Elect, Trump criticized automakers for moving manufacturing jobs to Mexico and threatened border taxes. Reading Trump’s tweets, Ford Motor Company decided to withdraw plans for a $1.6 billion investment in Mexico and instead invest $700 million in a U.S. plant.

In his first weeks in office, Trump has withdrawn the United States signature from the Trans Pacific Partnership, a trade deal of unprecedented size and scope negotiated by the Obama Administration. He called it a bad deal for American workers. He moved quickly (if not smoothly) to schedule meetings with the leaders of Mexico and Canada on renegotiating the North American Free Trade Agreement. Trump’s Secretary of Commerce, Wilbur Ross, told the Senate Commerce Committee that the Administration planned to level the trade playing field with China, a country that Trump in December said he would name as a trade manipulator.

What does this mean for lawyers and law professors – especially those who are not trade specialists?

A Trade Law Blog for Non-Trade Specialists

Right now, no one can predict the effects of the Trump Administration’s changes and proposed changes to U.S. trade policy, or the effect of Brexit on trade in Europe and the around the world. What is certain is that lawyers and professors who have not specialized in trade law will be fielding questions from clients and students about the effects of these changes on their businesses or practice areas.

How would increased Chinese influence over trade in the Pacific Rim impact human rights in the region? How would a trade war with China alter global enforcement of intellectual property protections? How would changes to NAFTA affect the U.S. food system or immigration law enforcement? Can the Trump Administration legally make Mexico pay for a border wall? And if it’s not legal, could anyone stop him from doing it?

We aim to be a source of information, perspective, and discussion for those of you in the legal community who are thinking more about trade law than you ever did (or perhaps ever cared to) before. Our goal is to spark conversation about how the current political controversy over trade affects many areas of the law.

The editors of this blog come to the study of international trade law from a variety of doctrinal areas: environmental, intellectual property, agricultural, immigration, and administrative law, as well as more traditional international economic law perspectives. We are watching to see how trade law and policy will affect our doctrinal areas of interest and how they will affect yours.

Our goal is not to provide updates on every new development in trade law. That kind of information is already available elsewhere (and if you really get excited about every new anti-dumping investigation you are probably already reading those sources). We will, however, share breaking news when we think it has broader relevance within the legal profession, and will comment on what we think to be its implications.

Nor is our goal to provide detailed, trade-wonky analysis on every issue before the ITC, CIT, or WTO (you’re welcome). But we will go into relevant legal details necessary to understand the larger implications of important law and policy shifts. Want to know if Trump can charge a 20% tax on Mexican imports without violating Most Favored Nation? Want to know what happens under domestic law if he withdraws from NAFTA? So do we.

Much is unknown in this new political landscape, and the ripple effects of trade law and policy on other legal areas can only be monitored in real time. This potential reconfiguration may leave new winners and new losers, and emotions may run high. We hope to offer a forum for thoughtful, informed, and lively discussion about the fault lines in international trade and investment law and policy in 2017 and beyond. Thanks for participating.

April 12, 2017 | Permalink | Comments (0)