The Trump administration prioritized international trade issues and aggressively implemented tariffs and other trade actions that disrupted global trade relations. The Biden administration will inherit a slew of Trump tariffs and trade actions and there are many questions about how it will handle these international trade matters.
Harris Bricken’s international trade law attorneys, Adams Lee and Fred Rocafort, team up with Capitol Hill Policy Group’s Robert Odawi Porter, Todd Bertoson, and Lynn Jenkins to discuss what to expect from the Biden administration on trade issues and how what that administration does will impact your business.
The panelists address the following questions:
- What trade issues will the Biden administration inherit?
- What are Biden’s expected trade priorities?
- How much of Trump’s trade actions will Biden undo?
- Will Trump’s tariffs be lifted? If so, when?
- What role will Congress take on trade issues? What are Congressional priorities on trade?
- How will the change in administration impact U.S. trade remedy actions against imports?
- What trade enforcement changes should you expect from U.S. Customs?
- How do upcoming trade issues impact your business?
- How can trade lawyers and trade policy advocates address key trade issues that affect companies?
- What about China?
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Rob Porter: Greetings, my name is Rob Porter and I’m a managing principal of the Capitol Hill Policy Group. I want to welcome you here today for a discussion on the Biden administration transitions with regard to international trade policy. I’m really honored today to have my colleagues join me for this webinar and share their expertise. I’d like to lead off with former Kansas representative, Lynn Jenkins, a member of our team at the Capitol Hill Policy Group who will kick us off here in a moment. I’d also like to invite Todd Bertoson to participate, Todd is a managing principal with me at the Capitol Hill Policy Group. And our two colleagues from Harris Bricken, an international law firm primarily based on the West Coast and in China.
Adams Lee and Fred Rocafort are two experienced attorneys working this area. We’re really excited to have this chance to be with you, take questions, share with you some good information. As with many things happening in Washington, which is where our firm is based in, at the Capitol Hill Policy Group, there’s a lot happening. No doubt you’ve been following this.
We’re hopeful today that within this hour we’ll be able to give you a little insight from what we see and how we’re interpreting activities in Washington and the new administration, and again hopefully invite a dialogue even afterwards if you’re interested. I’m gonna turn it over to Lynn Jenkins, a representative from Kansas and member of the Ways and Means committee. Lynn, the floor is yours.
Lynn: Thanks Robert, and welcome all. I’m gonna jump right in here and share a quick report regarding some things that I’ve heard from my discussions with former colleagues on Capitol Hill. The most important thing on the Congressional Trade Agenda this year will be the removal of the generalized system of preferences and the miscellaneous tax trade bill. Both of those expired in December, much to the frustration of members of Congress. It’s a high priority for Republican members to reauthorize both programs as soon as possible, but it’s still unclear at this point if it’s a priority for Democrats. I think the House and the Senate Democrats are gonna focus on climate change as an element of trade policy, rejoining the Paris Agreement under which countries set their own greenhouse gas emission reduction goals, will be cast by the Biden administration as a first step in its climate plans. Look for a special presidential envoy for climate John Kerry to launch new negotiations to build on Paris with a view toward the UN climate change conference. Most believe a closer collaboration between governments and businesses will be essential to tackling climate change. Trade promotion authority expires on July 1st, a quick process to pass a new TPA bill seems unlikely in the current political alignment but the work could begin this year. As the pandemic and the recession hopefully begin to give way to vaccines and recovery in 2021, the US Chambers international affairs division focused on the issues that will dominate international economic policy in the months ahead. Following are some thoughts on some of the key dates, deadlines, and decisions that will loom large for the business community, the new US administration and the international economy in the year ahead. First off, President Biden has signaled that the United States will re-engage in multilateral organizations and agreements on day one, the camber will support US moves to rejoin the Paris Agreement and re-engage with the World Health Organization from which the Trump Administration had initiated but had not concluded US withdrawal. On the World Health Organization, the US will seek reforms as well as re-engagement. The US Chamber has recommended reforms to enhance collaborations within the WHO with industry governments and international organizations and academia to begin high-performing transparent science-based global health body the world needs. NATO defense ministers will meet in February to discuss the next step for their two decade-long missions in Afghanistan and many other issues, and a leader’s summit to include Pres Biden is expected shortly thereafter. This could take place in conjunction with the proposed springtime senior officials only iteration of the Munich Security Conference. Many tariffs were imposed using executive branch authority over the last several years, so there will be plenty of decisions to be made by President Biden to keep in place some or all of them. For tariffs that remain in place, decisions on what products exclusions to grant or extend will also be significant. There are also ongoing investigations of digital services taxes in 11 countries, as well as two investigations related to Vietnam currency and furniture. In all cases the USTR and the president will have a lot of decisions to make on the outcome of the investigation and what remedies to impose. There’s been a lot of progress and bilateral negotiations with the UK but the timeline for closings still unclear. There has been much less progress in bilateral negotiations with Kenya, but that could eventually be an important first trade agreement with a Sub-Saharan African country. As to the administration, we really don’t know. The President has talked about focusing on domestic priorities first, so we don’t know what that means with trade agreements and China. According to some transcripts published on the international economic law and policy blog, there’s a very clear emphasis placing priority on the American worker, on the building up of prosperity for the individual American and different American communities. If we look at the plans that the campaign that have been put out, there’s one on building back better, essentially making things in American manufacturing, and all those supply chains. Biden hasn’t yet put forth a plan implying that trade and investment policy might be approached in a more holistic manner. The approach to the WTO will be interesting since Democrats have found some common ground with the Trump Administration on trade in the last few years, although no one would admit to doing things the same way that the Trump Administration has. Now that the appellate body isn’t operating, and negotiations haven’t slowed, there’s much interest in achieving reforms if possible to energize the organization. If you look at the substance of the confers and issues that the administration’s been raising in Geneva and here at home, I think you’ll find very little difference in the substance from the kind of concerns and interests that previous administrations from both parties have had. And so, this is one of those issues that hasn’t been a partisan one, I really hope it doesn’t become a partisan issue. Most do acknowledge the need for changes in the WTO after 25 years, because the world is quite different now. There is a parallel to USMCA, we just went through the whole exercise with them where there were supporters of the renegotiations of NAFTA because of the passage of time and the need for modernization but there also was importantly an element of re-visitation and a course correction. Regarding enforcement, one change in USMCA versus NAFTA that many members found especially helpful was the improved dispute settlement mechanism to resolve disputes in a timely way. USTR is entered into consultations for its first USMCA dispute, it was with Canada over dairy policies, and there are a number of concerns in Mexico that could result in disputes this year if they aren’t favorably resolved. NAFTA, the WTO agreements are from the same era of our economic global history, so in addition to digitalization of our economy and changes in technology in the way we communicate with each other and the way we transact commerce, the one important and incredible development has been the economic growth and the rise of China in the global economy. China also so far has not been a partisan issue. 2020 really gave everybody a run for their money in terms of dynamics around China trade, but this is an issue where I really hope that it doesn’t become partisan because it really is so important not just for the US but for the whole global economic community in terms of dealings with the ways in which the WTO has disappointed expectations or the ways in which the WTO has not been effective over the course of the past 25 years. I believe we need to approach the China challenge with very clear eyes, we’re hoping the Biden administration comes in and really crystalizes the questions that we’re asking, which is what is the nature of Chinese challenge and the threat? And then, has that lead us to conversations around what are the measures, and what needs to happen to manage risk and threat. Without a clear process, what makes us nervous about the China dynamic is that what we experienced in 2020 is that restrictions become highly emotional, highly political, and risk becomes either ineffective at either addressing the risk or threat, which is bad, but even worse is the threat that the actions and measures that we take are not just ineffective but actually do harm to the goals that we have. So that’s one piece of it, which is to ask the right questions that will lead to the right kind of measures. With that, I’ll turn it back to you Robert, and I’ll stand ready to answer some of your questions.
Rob: Thanks so much for that, Lynn. I think just for everyone’s benefit, we’re having a lot of questions come in, and we’re hoping our presenters can all see those questions and will have a chance to tackle them. If we don’t for some reason, and you feel comfortable resending your question just to freshen it up by the end of the webinar, that would be welcome as well. We’ll leave it to the speakers to tackle any question in the course of their remarks, or we can certainly have some time at the end to address some of the questions as well. I’d like to turn it over to my colleague Todd Bertoson, Todd is a former staff director of the US Senate Commerce Committee and has worked on a number of different issues relating to that committee’s work, including trade policy. I’m gonna turn it over to Todd, we can go to the next segment.
Todd: Thanks. I’m going to start just going over some of the key players in the administration and talk a little bit about how to advocate on trade policy in Washington DC. First player, Katherine Tai, she’s the nominee to be the US trade ambassador. When confirmed, she’ll be the point person on trade policy, but you’ll also have to contend with other senior officials, and the Biden administration will want to play a role on trade. She’s currently the chief trade counsel and advisor for Democrats on the House Ways and Means committee and was the lead house staffer on TPP for the Democrats. She’s a former USTR attorney and was previously the chief counsel for China Trade Enforcement at USTR. She has a great reputation for being knowledgeable and also calm, and a good-natured negotiator, expect her to be responsive to the Hill, especially House Democrats who knew her well from her time on the Committee. She’s currently doing meetings with Senate Finance in anticipation of her nomination hearing, but expect that she will be pretty easily confirmed, and that should happen in the next couple weeks. Second, we have secretary of the Treasury, Janet Yellen. A well-known player in Washington DC, former member of the federal reserve board of governors for a number of years, was former chair of the FED for a number of years, from 2014-2018, she was recently confirmed as secretary by a very strong bipartisan majority, and as far as trade goes she’ll be really influential and work on international monetary policy. She’s also, China is going to be a big theme in this, through her confirmation hearing she recommitted her stance maintaining a pretty hardline stance on China policy. Next, we have secretary of commerce nominee Gina Raimondo, she’s been the governor of Rhode Island since 2014, brilliant background in venture capital, in the healthcare space. Not a lot of experience on trade issues, but commerce has a pretty big role with international trade administration under their jurisdiction, and will be a key player on trade enforcement, anti- dumping, countervailing duty cases. Expect her to have an easy confirmation as well, her Senate hearing went really good, she should be coming up for a vote if not this week then early next.
Next, we have secretary of homeland security nominee, Alejandro Mayorkas, I have him as nominee because this was written a couple days ago, but he was confirmed last night. Pretty partisan vote, some controversy about him, only five Republicans voted for him. He previously served in the Obama administration, which you’ll see that a lot of these officials coming in for Biden, a lot of people in DC are calling it Obama’s third term, they have a lot of really experienced people that have served in government and served at the highest levels. His previous experience, he was the head of immigration and customs enforcement, he was also the number two deputy security of Homeland Security. I think a lot of his issues to focus on right out of the gate will be focused more on immigration, but he does have within department of homeland security, customs and border protection. We don’t have a nominee yet for that position, but just like anything in this administration, domestic issues are going to take focus at first, at least. If you look at some of these executive orders that came out, really focused on getting the domestic side of the House in order. Obviously, people have been watching how they pursue trade enforcement actions through DHS. There’s also a whole host of other political appointees that are going to be coming in the administration. I really see it is a big change from how it was handled in the Trump Administration. The people you have now have more experience especially on the junior political appointee level. Like I mentioned before, a lot of people from the Obama administration, a lot of people from Capitol Hill, I know the #2 person at USTR, they’re looking at people from Senate finance committee, I know a lot of House staffers that have worked with Ways and Means Committee on the Democratic side are moving over to junior-mid level political appointees, and those are really important people to get to know, they’re going to be the people who are more outward facing, and easier to engage with when you have issues on trade policy. So, we’ll be watching some of these jobs like CBP will be coming up, probably in the springtime we’ll see some of these confirmations happening. IT takes a while to get some of the team in place, but I think over the next few months we’ll see these things fall into place. Next slide, please.
Showing this, key committee in the House of Representatives with jurisdiction over trade is the Ways and Means committee, and not a lot of changes on this from last Congress. As most people know, Democrats still control the majority in the House. But, with a much smaller majority than they had in the last Congress, but in this committee as far as the leads, it doesn’t change. Richie Neil from Massachusetts will continue to be the chair of this committee, Kevin Brady, Lynn’s former colleague, Lynn failed to mention that she was a member of the Means and Ways Committee for many years. Kevin Brady from Texas will continue to be the lead Republican on that committee. As far as their agenda, a lot of their focus at the beginning is going to be on tax. Some people heard that they’re looking to possibly repeal some of the 2017 tax changes and do a new tax bill through reconciliation, so I expect the Ways and Means committee will be heavily focused on that, but trade and China are going to be big issues where they’re going to want to exert some oversight. Next slide, please.
In the Senate, key committee is the finance committee. Senate does jurisdiction by issue areas, so even if you have a commerce committee, the trade functions of these departments all kind of fall within the finance committee’s jurisdiction. There’s been a couple changes in this since the Senate announced, organized yesterday so there’s a couple of new additions to the finance committee, but generally what’s here is accurate. The chairman of the Committee and the Senate flipped, it’s 50/50 but via the vice president’s vote, the Democrats are in control. Ron Wyden, who was the lead Democrat in that committee is now the chair. We have a new lead Republican, with Mike Crapo from Idaho. Chuck Grassley, due to Republican rules, you can only serve a number of years as the lead for your party on any given committee, so Mike Crapo moved over from banking committee to the finance committee. I think similar to the House, tax issues are going to be front and center, and the top focus, but these trade issues are so big and so important that you’re gonna see that. Also in the Senate, different than the House, the political appointees, many of them, need to be Senate-confirmed, so right out of the gate they need to get through these nomination hearings, process the nominees, they’ve already done Treasury, they still have to do Catherine Tai for USCR, as well as deputy secretaries at these agencies, and some of the agency leads like CBP will run through them as well. Next slide, please.
So, Trade advocacy. A lot of companies big and small engage in DC on these issues, some don’t. It’s an important piece of your company’s profile agenda, and both big and small companies can have an influence on trade for a whole host of different issues. First thing to discuss is trade advocacy directly with the trade administration. While it’s sometimes difficult to meet with the top-level officials, building relationships with mid-level political or career employees is really important, especially the careers are really happy to meet. We assume that these people know a lot about your industry, they know a lot about your product flow or how you do business, but unless you tell them and talk to them, they’re not going to focus on it. They have so much stuff to do that it’s really important to get in front of them. Sometimes you don’t even have to have a big ask, just explain who you are, seek advice, what you do. It’s whether it’s negotiations in a trade agreement and you want to talk about your specific commodities you deal with, or even an exclusion request. Did a lot of meetings on those, and it’s important because a lot of times they make assumptions and sometimes with the sheer volume, I noticed that through this last process they were so overwhelmed, and the amount of exclusion they had to do, they turned stuff over to contractors or people who don’t know really understand this stuff, so finding the right people, making sure you get attention to your specific issue, is really important. And you have to understand, when you’re meeting with these people, they have a lot of stuff on their plate, so important to be really concise, get your issues down to a one-pager, but supplement it with background material that attorneys can come up with, broader stuff, but you have to really assume that you have 10-15 minutes to make a pitch, to explain why you’re talking to them, your issue and your ask. One other thing on administration, you have to understand that other agencies that you may not think are that involved in trade actually are. For example, agriculture products. USDA’s main mission is in trade, but people there interact a lot with USTR, they’re kind of the substantive experts to try to educate them, so don’t forget about them as well. It may seem daunting, there’s so many places, it’s hard to navigate DC, but I wouldn’t discount direct advocacy with the administration. Next, direct advocacy with Congress. We had some of the committees up there, Ways and Means, Finance, if you’re lucky your business will have a footprint on the chair and ranking members of those committees, but also the other members and rank of file members of Congress. We’ve had a lot of success in the past of getting members engaged on our issues. I know as a staffer, when free trade agreements were being negotiated, they talked to staff throughout the process and kind of bounced ideas off you. A lot of these things will come up for a vote in Congress, and they want to make sure that as they’re negotiating, they can have a position that’s going to be able to pass Congress. So, they’re willing to work with you, it’s important to let members of Congress know. In some of the exclusions I worked on last Congress, getting these members engaged, we had a number of members of Congress that had ambassador Lighthizer on speed dial, asking for updates, making sure that our issues were at the top of the pile there. Don’t shy away from using your member of Congress to help you out on trade issues. I think the other option in DC is working through… a lot of you are members of different trade associations, a lot of trade associations have whole teams depending on the industry and size that focus on trade. A lot of them has existing relationships. Some of this, a lot of the trades will work on broader policy issues, but they can be helpful on giving advice or connecting you on more discreet issues as well. Coalitions around other issues can be helpful to share strategy, to build momentum for whatever policy agenda you have. As far as advocacy goes, I think these three pathways are effective and encourage you to use them, and happy to answer any questions.
Rob: Todd, before we turn to Adams, one quick question that came into the feed relates to the timing of Catherine Tai’s confirmation. Is that likely to happen before March 1st? And what’s the relationship between her confirmation and any changes possibly on reviewing exceptions for the China tariffs?
Todd: I think it’s possible that she gets done, there’s a little bit of a wrinkle that most of you might’ve heard. The impeachment trial of former president Donald Trump, expecting to start next week, will effectively shut down the entire Senate. I haven’t seen her hearing scheduled, which has to happen, and obviously that’s not going to happen next week. The trial could take a week, so maybe we have a hearing the following week. Once they do that, they usually have a day or two to respond to questions from committee members. So, if they have a hearing, they could vote on her next week. I’d say it’s possible, 50/50 chance. As far as the impact of exclusions, I’ve spoken to a number of members of Congress, because they’re getting hit up like crazy by their constituents to see if this exclusion process is gonna start. I honestly don’t think it will start until she is in place. There’s a huge focus on it, I know a lot of people have ones that expired December 31st, I have some clients that had that happen to, but I don’t expect that process to start up until she’s been confirmed, to be honest.
Rob: Thank you very much, Todd. I’m going to turn it over to Adams Lee from Harris Bricken to share with us his thoughts and observations on how the law and policy will evolve.
Adams. Thanks. I think the Biden administration on trade is really going to be defined by how they’re different from how Trump handled trade. Trump was very disruptive in trade and on so many other issues, in many ways his trade actions were very disruptive. And so, I think the Biden administration is coming in and their job one is going to be taking stock as to what to do on trade. Where are we in terms of what has Trump left us to deal with on trade issues? It’s kind of like a hurricane having come through on trade. Trump disrupted the whole landscape, and now Biden’s coming in and trying to figure out how are we going to rebuild all of the trade regulations that Trump destroyed for us. It’s easy for a hurricane to blow through and knock things down, but it’s going to take a lot more effort to rebuild those strained relations. Biden has campaigned on doing less unilateral “America first” type actions that Trump preferred. Instead, he’s going to try to do more multilateral, bilateral trade actions. It’s interesting to note that one of the first trade actions that Biden came out with was an executive order basically saying he’s going to do a “buy American” policy, pushing for a lot of government procurement favoring “buy American” type policies. And then yesterday, his other trade action was that he rescinded an exemption that Trump gave to the UAE on some steel restrictions. So, it’s interesting that Biden’s first trade actions are actually more restrictive, similar to how Trump handled it, in that maybe he’s laying the groundwork to say, “look, I’m not just going to unfold all of Trump’s actions.” He will continue taking a protectionist America-first type trade policy at some level. I think Biden has been gifted a wonderful set of circumstances where he could practically do nothing and that will still be viewed as progress on trade policies in some ways. Instead of being outright hostile against trade partners, if Biden is just coolly indifferent, I think our trade partners will probably welcome that as an improvement over how the past 4 years have been for trade. In terms of approaching the WTO, there’s big issues as to whether the WTO is fixable, whether it’s worth fixing, but there are basic things just to keep the WTO running that Biden could step in and do. He could stop blocking the director general appointment for the WTO, he could also stop blocking the appointment of a new appellate body panelists. At this point, the US has been a roadblock in terms of the day-to-day functions of the WTO, and if Biden wants to let the WTO keep functioning in whatever way that it is, he has a great opportunity to let the WTO continue. Same thing with TPP, that was the first action that Trump took to basically withdraw from the TPP actions, negotiation in the trans-Pacific partnership. Big question, I know some of you guys mentioned if and when Biden will get back into TPP. Hard to say. Multilateral negotiations are highly complex, and it’s uncertain if and when the US is going to jump in. There’s going to be a lot of deliberation from the Biden administration just to see what they gain from it, what they can contribute. IT’s going to take a while before the TPP comes back to the floor.
Jumping ahead, I guess the big question that we’ve seen so far, a lot of people are asking what to do about the China trade tariffs. So many tariffs, starting with 50 billion dollars’ worth, jumped to over 300 billion dollars’ worth. They’re still in place. Moreover, a lot of the exemptions that were granted expired, so I think there’s a lot of people out there who have serious questions on what is Biden going to do with Trump’s tariffs? So far, Biden has basically signaled he’s not going to move fast on this. Basically, he’s going to take stock on it. There are a lot of political landmines when dealing with the tariffs. On the one hand, you have a lot of domestic industries who really favor those tariffs because by hindering Chinese imports, it makes their products a little more competitive in the US market. IF you lift those tariffs, you’re going to have a lot of pissed off US domestic industries, steel, aluminum, and other folks. There’s also a pragmatic standpoint. You have a lot of people who did put in the time and effort to find new supply chains, they went out and found new suppliers in Thailand, Vietnam, Malaysia, Southeast Asia, and they went through all of that effort to rebuild their supply chains out of China. They’re not going to be that thrilled if Biden lifts the tariffs and let’s everyone go back to business as usual dealing with China, because currently they have an advantage that currently the folks paying the China tariffs don’t. So, they’re in no hurry to lift the tariffs, either. So, I think there’s a lot of stickiness. Tariffs are like taxes, and once taxes are imposed, it’s often harder to lift them because they do get sticky. Part of this process is trying to take stock and see which tariffs can be lifted without causing too much grief. In terms of identifying possible baby steps that Biden could take, there’s a few obvious things that they’re low-hanging fruit that Biden could lift some tariffs and win some points with alloys and with the US manufacturing interests. For example, he could end the section 232 investigations on autos and auto parts. That was a big deal because no one in the US auto industry was in favor of those tariffs, and it pissed off all the European allies, Japan, so if Biden just chooses to stop that investigation, that’s an easy win for him without ruffling anyone’s feathers. Similarly, section 232, the national security interest on steel and aluminum, one of the interesting things coming out of those proceedings is that the Canadian aluminum case, you actually had the American unions, the United Steelworkers union, they came in with a letter that said they wanted an exemption granted for Canada, they said look, we like Canadian aluminum imports because those are good imports as opposed to all the bad imports.
So that’s potentially one area where Biden could say, look, we’re going to give Canada aluminum exemption. That’s something that will make Canada happy, maybe they’ll work better with us on other issues. That’s an easy get for them.
The other big thing is there were a number of court cases filed challenging the legality of the China tariffs, for example, and also on the steel national security tariffs. You have those cases pending, and in some cases the courts have actually issued rulings that really did call into question that maybe these tariffs were illegal. The China tariffs, there’s over 3000 cases that were filed saying that the list 3 list 4 tariffs are illegal. The Biden administration could see that and say look, we’re going to lift those list 3 list 4 tariffs. We don’t really want to defend Trump’s tariffs on that, but maybe it’s a way for Biden administration to say, look, we’ll give you something on the China tariffs, we’re not going to get rid of them completely, but it may have the side-benefit of eliminating a lot of litigation risk that the US is facing in the court systems right now. Next slide, please.
Rob: Hey Adams, one of the questions that came in just as a sub-question related to the tariffs, relating to wine, spirits, any forecast on how that might be dealt with in any way as it affects interest in the Northwest?
Adams: Wow. I think there’s so many different interests, that was the beauty of Trump’s tariffs, they hit across the board across so many industries that it’s going to be hard to parse it out into a specific industry. I think USTR, all the various agencies are going to have a hard time sorting through all these various interests. They’re going to be approached from so many different angles, I think it’s going to take a while for them to sort through how to coordinate their response on this. They give a response for just wine, how’s that going to affect their policy on sugar? Or some other industry. Say, look, you gave them the benefit, are you going to give us a benefit too?
So, turning to China, that’s the big thing. Stylistically, the biggest change is that the Biden Administration has an opportunity to work better with its allies. I think within the US, democrats and Republicans, there’s an increasing consensus that China is a problem. Globally, if you look at the position that a lot of countries are taking, they also see China as a problem. Now, there’s still a lot of business being done with China, but overall, there’s a lot of hand-wringing on what are we going to do with China. No one is entirely comfortable dealing with China. No one sees them as a true ally on all their issues. That is going forward going to be the biggest issue. China has become the 800-pound gorilla that you have to deal with, but you’re going to have to dance with them somehow. Dancing with an 800-pound gorilla is always going to be a tricky situation. Looking at what we’re dealing with right now, we have the U.S. China Phase 1 deal, that’s kind of established the status quo of where we are. But fundamentally, that China Phase 1 deal was set up to fail. The buying targets that China, the phase 1 deal set up, that China was supposed to buy all these goods, they were so realistic even before the pandemic. And now, with the pandemic, there’s absolutely no way China is going to hit these targets. So, the question now is, so what? China’s going to fail, so what is the US going to do about it? It’s really unclear what the US is going to do. Are they going to just bail out of that deal? Are they going to reimpose tariffs? What’s going to happen? In terms of granting exceptions on a lot of tariffs, I think the Biden Administration will hopefully acknowledge that the China tariffs are taxes, and China isn’t paying those taxes, someone in the US is actually paying that. So hopefully, the Biden administration will actually recognize that, in terms of the intended target for those tariffs, its actually hitting more American interests than Chinese interests at this point. So maybe they’ll see that lifting those tariffs or granting more exceptions might be a better way to deal with China, and so finding something else other than tariffs. And so, looking at other issues with China, Trump activated a lot of issues. A lot of trade issues with China. Huawei, dealing with Chinese semiconductors, Drones from China, trying to block apps like Tik Tok, Alipay, WeChat pay, all those started with Trump, but those are still going to be active. Biden’s going to have to figure out what to do with them. The issues with China are still very real in terms of the IP issues, but those are really tough questions that Biden’s going to have to figure out how he deals with it.
The other issue is that China has a forced labor issue, in Xinjiang the Uyghur minorities, the Trump administration said on their way out that China was basically committing genocide in the Xinjiang province. So, there’s a lot of pending action that would threaten to block any Chinese imports that would use forced labor from Xinjiang province. So that’s a big issue that we’re going to have to look forward to dealing with here.
In terms of what the US can do, there’s a lot of, since so many countries are having problems with China, the US has a golden opportunity to step up and help the other countries in terms of how they’re dealing with China. In many ways, Australia is front and center. Right now, China’s biggest trade enemy is not the US actually, even with all the Trump tariffs going on.
China has really targeted Australia as their number one enemy. They’ve blocked basically all imports from Australia, they’ve sent military exercises near Australia. They’re really aggressive against Australia. They’ve taken really aggressive measures against Korea, Taiwan, basically ordering all Chinese tourists to not go to Korea or Taiwan in certain instances. In terms of economic leverage against those other countries, China’s been very aggressive against these other countries. So, to the extent the US wants to step up and help those other countries, there’s a lot of opportunity in terms of what the US can do, in terms of ganging up to deal with China.
Rob: Adams, wondering if we can transition over to Fred here in a moment?
Adams: Sure. I’d like to wrap up. Next slide. Typically, trade actions are small industry specific battles. Those are anti-dumping, countervailing duty cases, one industry complains about imports from another. Unlike Trump’s tariff war there, they’re very localized. You have issues dealing with department of commerce, international trade commission, customs even, on a very localized level. Usually that’s the kind of work we’re dealing with, just trying to get the industry specific facts. In terms of dealing with customs, I’ll hand it over to Fred talk about what to expect on trade issues on customs going forward.
Rob: Thank you very much Adams. Fred, the floor is yours.
Fred: thank you very much. So, there are two main points that I’d like to make. First of all, the focus on the meat and potatoes issues that customs looks at when dealing with let’s say China trade policy or some of these big picture topics, it’s easy to overlook the day-to-day work that is taking place at ports of entry that can be just as if not more important to importers. I made the same point yesterday during an event on cannabis law. It’s easy to lose sight of the fact that beyond the big picture policy, there’s a practical work that has to be done to avoid issues. So, what are we talking about? Illegal trans-shipment, for example. This is a big issue that customs has been looking at, in parallel to the issue of tariffs. One of the ways that some importers have tried to evade tariffs is through trans-shipment. They send their products to places like Malaysia, like Vietnam. In some cases, there is legitimate transformation of the country of origin, but in some cases, there isn’t. They’re simply taking products that were made in China and simply putting them in a different container in a Southeast Asian country. This is the sort of thing that customs, that I can tell you customs is looking very closely at this issue. While it’s important to keep track of what’s happening at the policy level, it’s also important for importers to ensure that if they are working with a supplier in Indonesia, because they want to avoid the China tariffs, make sure that those products are in fact being made in Indonesia. Because if not, if this is just China product being put on a different boat in Jakarta, there’s a good chance that customs is going to pick up on that. And in fact, what we’ve seen sometimes is that customs will air on the side of caution, and if there’s any whiff of China manufacturing, they’re going to put the burden on the importer to demonstrate that the product is not Chinese product and proving that can be very difficult.
Undervaluation. There’s a lot of fraud involving undervaluation, for the purpose of paying less duty, less tariffs. Happens in contexts that are not China, but again this is the sort of thing where if you have products coming in, make sure that your manufacturer or your agents, brokers, are not playing any games. We’ve seen cases where the factories in China or elsewhere think they’re helping you by providing artificially undervalued invoices. They’re not. Customs is going to look at this issue, and if it determines that you undervalued, not only are they going to make you pay the duty and or tariffs based on the right value, you could also be penalized for that.
Misclassification. It often happens in a relatively innocent way, where the importer or their agents might not know what the proper classification is for a product. But because this can have implications for duties and tariffs, customs again looks very closely at these issues. We saw a lot of focus during the last administration, and we anticipate that this will continue to be the case. It might actually be a way for customs, which does have a very important revenue collection function, to offset, perhaps, some of the lost revenue because of tariff elimination or rollback. Next slide, please.
But the big issue that I’d like to focus on today is forced labor, and Adams already focused on that issue. In a way, you could add the forced labor issue to the last list, it’s yet another consideration that needs to be taken into account when importing products. But it’s worth looking into a little bit more. I’ll start by making my usual disclaimer about forced labor. First of all, it’s not a China only issue. Far from it. But even in the Chinese context, it’s not a Xinjiang only problem. There are laborers from Xinjiang that are working elsewhere in the country, and there are forced labor problems in China that have nothing to do with Xinjiang.
There’s a lot of prison labor, there are programs or indication that there are similar programs in Tibet. So, this is not strictly a Xinjiang problem, though that is where the problem is most visible. Related to this, and just as forced labor has an impact on trade, and I’ll flesh that out in just a second, but the overall issue of human rights abuses in Xinjiang feeds into all of this. It’s simply not possible to divorce what happens on the trade front regarding Xinjiang and forced labor and everything else that is happening there, and that is going to in my opinion be the case increasingly. Yesterday, some of you might have seen this, some very very troubling allegations involving sexual abuse in Xinjiang were reported by the BBC. With every bit of information that comes out, this issue is becoming an even heavier gorilla for the US government to deal with.
Under the Trump Administration, when I say that I’m referring to the time period, because there was really a bipartisan focus on this issue, there were bills introduced in Congress, two of them that are currently in the Senate pending committee action, there have been sanctions imposed by the Treasury Department, customs have made findings involving forced labor, they have also issued a number of what they call withhold release orders, WRO’s, which are basically exclusion orders to keep certain products out of the United States. And if you look at the progression of how WRO’s have been issued, there’s a very clear pattern. We don’t know if it will continue during the administration, but if it does, this something that anyone who is importing products from China needs to pay a lot of attention. During, let’s say, the last year, we saw orders being imposed on products from specific companies, then we saw cotton that was produced by the Xinjiang production and construction corps, which is sort of a cross between a massive state- owned enterprise and an occupation force, that’s really the best way to describe it, there’s really nothing in our own experience that would describe it. Very involved in the cotton industry.
Customs said none of their products can come in, and that affects a lot of the cotton that comes into the United States from any source, not just China. Then we saw the next step, an order affecting all cotton from Xinjiang and tomatoes from Xinjiang. Now, the logical step would be to continue issuing orders of growing scope, and the reality is, and a lot of people don’t want to face this squarely, the reality is that if we theoretically were honest about dealing with the problem of forced labor, there would be a lot more we would be excluding. Again, this is not a Xinjiang problem only, not a Uyghur problem only, there are people making products under forced labor conditions throughout China. And what’s more, the Chinese government wants this. This is exactly what they want. They want the international community to get its hands dirty.
They want the world to become so dependent on a supply chain that is built on forced labor that eventually the world just turns away and gives up on this. So, as more revelations come out, my estimation is that the Biden administration will find itself having a hard time going back on any of the actions that were undertaken during the last administration. There were already hints of efforts to try to scale back the genocide classification, although Secretary of State Blinken responded, no, we still think it’s genocide. But any efforts to go soft on this issue of forced labor, and these efforts are there, we’ve seen efforts from big companies like Nike, Coke, Apple, trying to lobby against these bills in Congress, are going to have to compete against the increasing horror that Americans might feel as more of these revelations come out. So, this is an issue that, again, anyone importing products from China has to keep on their radar, and if you’re thinking that moving production to places like Vietnam, or Thailand, or Mexico, presents problems, those problems might actually be much smaller than what could happen if the government gets serious about the issue of forced labor. Thank you.
Rob: Thank you very much, Fred. We’ve got a little less than 5 minutes to wrap this up. For everyone participating, we wanted to put this panel together with our two firms because, as you can see with perhaps your own business activity, there are a lot of issues that can be resolved with your own lawyer, exercising legal skills to deal with issues in terms of a challenge to the impact of tariffs or regulations on your business. But there are also times when in fact direct engagement with policy changes, legislation in DC could also be perhaps a better solution. But working together, our overall thinking was that, if presented with particular challenges brought to us by clients, we would be able to work together to figure out what’s the best way to solve that problem. Is it something that can be handled in a traditional legal fashion? Is it something that can be handled through changes in legislation or changes in regulation in the agencies? That’s really the foundation that we’ve tried to deal with this. Many of the questions that have come into the feed, many have been covered but a few have not. We have some of these questions that do relate to timing and transition, and I suppose at the end of the day, none of us have a crystal ball. We certainly on the basis of expertise know that there’s going to be things happening here in the future, and there’s opportunities associated with those chances, some of which can be stimulated through good advocacy. For example, I bring it to Lynn. Through the trade subcommittee or the Ways and Means committee as a whole, do you see something like the forced labor issue really being embraced by both parties as an issue that needs to be dealt with? Or perhaps are we at risk of some partisan aspect of this? How might that be influenced even by some of the super large corporations, international corporations, who may not want to see regulations on that human rights front?
Lynn: I think it’s a great question, I think it remains to be seen. It’s too early to tell at this point, the environment in the committees to-date has not been encouraging, there have been a lot of distractions. I think we’ll all have to stay tuned and see how all of this is going to unfold.
Rob: Right. Some of the issues relating to the tariffs, is there anything that you could share that related to what you see happening with some of the other interests, the organizations, the trade associations, is there any consensus emerging about what might be? How to influence that process?
Todd: There’s been a lot of talk on obviously that question, but before on how the exclusion process is going to move forward. Towards the end of 2020, a big push by pretty much every trade association in DC to just unilaterally extend these exclusions that had expired on December 31st, spoke to Democrats, spoke to Republicans on it, a lot of the Democrats I spoke to on it were for free trade, but they said we have a lot of members in our caucus that like these tariffs, that are supportive of them, and we don’t want to just give a rubber stamp to the exclusions that were given, we’re concerned some of these exclusions may have been politically motivated, we don’t know, we’re going to wait for Biden’s people to come in and essentially Congress is saying we’re going to take our cue from the administration. The administration hasn’t come out with a firm policy on it, I think a lot of it will take shape once the people are in place. But a lot of them said, well, even if they’re put in on another date, we start grading these, you’ll get payments retroactive and it’s not going to be a big deal. I think there’s a little bit of a misunderstanding, but also just waiting for leadership from the executive branch.
Adams: Yeah, I mean, the trade tariffs exemption issues, it’s so messy because there are so many interests involved and trying to come up with one single uniform policy to deal with so many interests is going to be really tough. So, trying to thread that needle, it’s going to be the big challenge for the administration here.
Rob: Looks like we’re at the chosen time to come to an end. We do have contact information for us. Naturally, our business is to solve problems and to help you with your issues of concern. If there’s anything you think we might be able to do to help you, we’d be glad to talk to you further about it. We have our contact information, and we want to thank you for your time. Your time is valuable, and I want to thank you from all of us for letting us share some of our thoughts on these really pressing and exciting issues relating to changes in trade policy. Thank you very much and have a great day.