The effects of the Trump Administration on international trade: three days in the life of a Washington, DC international trade lawyer
This article provides a snapshot of the issues an international trade lawyer in Washington, DC, has faced since the presidential election of Donald Trump in November 2016. The article considers the major questions posed by clients, and also discusses the possible future implications for international trade following the Trade Policy Agenda released by President Trump's Administration on 1 March 2017.
Questions on election day
Tuesday 8 November 2016. The texts and e-mails came in rapidly after the second Tuesday of November, the same day every election cycle that the US votes for its next President. To the surprise of many in the US and around the world, Donald J Trump was declared the winner. The uncertainty that had simmered during the Presidential campaign came to a boiling point. Multinational entities from around the world wanted answers on what would happen next affecting international trade. Fellow partners from global offices reached out on behalf of perplexed clients.
Traditional sources of insight were insufficient for the circumstances. As I had not been gifted a crystal ball over the holidays, I brushed off trade statutes that had seldom been used in recent times, shared meals with seasoned attorney friends from Capitol Hill and Latin America, tuned in to nomination announcements and Senate hearings and worked with talented, energetic young attorneys to research and draft talking points. But I also had to say something. Clients needed answers. So I shared guideposts from the past and present that shed light on around-the-corner developments.
What will happen to the Trans-Pacific Partnership (TPP)?
The TPP had already effectively flat lined under the Obama Administration. President-elect Trump will make it official during his first days in office. He has the authority to do so without any act of the US Congress.
What is going to happen with the North American Free Trade Agreement (NAFTA) and import tariffs?
NAFTA has been a fall guy in virtually every Presidential campaign since NAFTA became law on 1 January 1994, and nonetheless has continued and is likely to continue in effect for the foreseeable future. However, changes can be made, and business models heavily dependent on NAFTA preferential treatment should evaluate their situation. Making changes over 20 years later to a then-groundbreaking agreement is not a terribly unconventional notion on its face, but sudden actions are unlikely. Material changes to NAFTA generally need US Congressional action, providing time to chart out strategic business changes. Changes to non-NAFTA import tariffs, border taxes and other cross-border levies can be executed more quickly, and greater agility and advance contingency planning is prudent.
Will the policy change on Iran, Russia and Cuba sanctions?
Developments in international affairs will continue to influence US sanctions policy as much as, if not more than, the change in Administration, but shifts in policy will occur. Most US sanctions on Iran currently remain in place despite the international accord that went into effect at the beginning of 2016, and President Trump has ample authority to impose additional sanctions on Iran without scrapping or violating the international agreement. Sanctions on Russia are likely to continue for the foreseeable future, if there are not material policy changes coming out of Moscow that address the invasion of Crimea which triggered the current sanctions. Cuba policy will likely continue as it is for the foreseeable future, and material changes will be made once the Administration's relevant key players are in place and more fully staffed.
The "Trump effect" on international trade
Friday 20 January 2017. On day one, after being sworn in at noon Eastern Standard Time on 20 January 2017, President Trump's prompt actions conveyed a message that the President is willing to make changes. The January 20 directive to reduce federal regulations, although receiving relatively little public attention, will impact major international trade agencies. Government officials will wonder about moving forward on pending sanctions, export controls, and other efforts, out of concern they may violate the directive.
While no international trade laws changed, clients' questions and pointed concerns made clear that there was in fact a "Trump effect" on international trade, as clients began to re-think how they might do business going forward, with questions such as the following:
"Currently we use maquiladoras in Mexico to produce the majority of our final products for import into the US market; how can we protect ourselves against import duty increases and disadvantages vis-à-vis competitors exporting from China?"
"Our main manufacturing base is in China for sales into the US market; are there supply chain adjustments we should make to decrease our risk of supply disruptions or competitive disadvantages?"
"Our foreign subsidiary has large opportunities in Iran, what are the risks and possible disclosure implications of moving forward?"
The Trade Policy Agenda for 2017
Wednesday 1 March 2017. President Trump's Administration releases the US Trade Policy Agenda for 2017 (with Senate confirmation of the US Trade Representative still pending, the policy is presented as preliminary). Discussions with clients will focus on the practical impact that is likely to follow from the international trade priorities outlined in the report. Key takeaways from the report are:
President Trump's priorities at once look familiar (resembling the priorities of former President Obama and other US Presidents before him) and completely different from the recent past.
In a departure from an emphasis on multilateral trade agreements, including the TPP and the World Trade Organization (WTO), the report's first point is to assert the sovereign right of the United States to act in its best interest even if that means disregarding WTO dispute settlement decisions. The report makes the point that this right is not contrary to but rather embedded within the WTO framework negotiated when the US entered into the WTO. Nonetheless, the practical implications of this shift in policy tone could be significant.
High priority also is given to priorities shared with prior Administrations of the modern trading era, enforcing US trade laws and opening foreign markets to US exports. However, the explicit naming of numerous international trade statutes that can be invoked to limit imports represents another shift in emphasis. In large part, the new Administration's consideration of using these legal authorities has not been unexpected (given the political base that brought President Trump to power) and has been discussed with clients over the past months. Nonetheless, to see these laws given top billing in the new US trade policy agenda will be sobering to many global enterprises.
Although there is no specific mention of trade talks with the UK in contemplation of a post-Brexit world, the report confirms that bilateral trade talks will be given priority. The emphasis on bilateral rather than multilateral trade is not surprising given the Administration's recent public statements. The forcefulness with which the report took aim at China and South Korea, however, under the umbrella theme of "negotiating new and better trade deals," was notable. NAFTA also came under some fire in the report for failing to deliver sufficient benefits to the US. Companies dependent upon sourcing from Asia and NAFTA countries, particularly Mexico, to meet US market demand are expected to accelerate their search for risk mitigation strategies.
With the release of the US Trade Policy Agenda for 2017, a day in the life as an international trade lawyer in Washington, DC promises to be challenging. The trade report expresses many aspirations about the new order of priorities in Washington, DC, but as the saying goes, "the devil is in the details", and the details are still forthcoming. The remainder of 2017 promises to be eventful and fast-paced, counselling clients on the apparent "new normal" of US international trade policy, and also reflecting on key principles in order to inject clarity and calm with respect to a future filled with uncertain actions and repercussions over the horizon of the international trade landscape.
Joanna Ritcey-Donohue, Partner
Kirkland & Ellis LLP
Professional qualifications. Lawyer, US
Education. Georgetown University Law Center, JD, 2002 magna cum laude, Order of the Coif, Law and Policy in International Business (LPIB), Editorial Board; Georgetown University School of Foreign Service, MA, German and European Studies, 1996
Admissions. District of Columbia, 2003; Virginia, 2002.
Areas of practice. International trade and national security; corporate and M&A.
Non-professional qualifications. BA in Political Science, University of Maryland, Magna Cum Laude; NCAA Division I Scholar-Athlete (Field Hockey)
Distinctions. Recipient, District of Columbia Courts Pro Bono Honor Roll, 2013; Recipient, Kirkland & Ellis Pro Bono Service Award, 2013-2016
Advising an automotive parts manufacturer and its private equity sponsor owner regarding a focused assessment of imports by US Customs and Border Protection (CBP), including conducting an internal investigation and counselling the company in connection with a prior disclosure to CBP.
Advising a private equity sponsor on trade and anti-corruption due diligence in connection with its US$2.7 billion acquisition of a flexible packaging materials company, flagging and mitigating potential import and other international trade and national security compliance risks.
Advising a Chinese state-owned enterprise listed on the Hong Kong Stock Exchange regarding disclosure implications and other potential impact of the Joint Comprehensive Plan of Action related to Iran sanctions.
Languages. English and Spanish
Member, American Bar Association, Section of International Law, Committees on Export Controls and Sanctions, International Trade and International Anti-Money Laundering.
Member, District of Columbia Bar and Virginia State Bar.
"President Obama Heeds CFIUS and Blocks Chinese Takeover of German Semiconductor Company", Mario Mancuso, Joanna Ritcey-Donohue and Lucille Hague, Kirkland & Ellis LLP Alert, 6 December 2016.
"US Relaxes Cuba Sanctions, Ends Burma Sanctions, Although Election Uncertainties and Compliance Challenges Remain", Mario Mancuso, Joanna Ritcey-Donohue, Sanjay Mullick and Ariel Lieberman, Kirkland & Ellis LLP Alert, 31 October 2016.