FACE OFF OR FRESH START? INTERNATIONAL TRADE IN TIMES OF TURMOIL.

Date01 January 2018

Moderator: Christopher Sands

Speaker: Terence P. Stewart

Speaker: John M. Weekes

Speaker: The Honorable Alan Wm. Wolff

ASSOCIATE PROFESSOR PARRAN: Okay. If everybody would get back into their seats, this next panel is going to be excellent. Moderating is Mr. Chris Sands from Johns Hopkins [University], and I will turn it over to him.

MR. SANDS: Excellent. Good morning, everyone. I am honored to be on a panel of such distinguished legal experts in the area of international trade.

The first introduction I have to make is to our Henry King awardee, this year Dick Cunningham, who couldn't be here, who is the rightful chair for this panel, really the ghost in the room because he has organized several calls and pulled ourselves together to talk about the themes, and you will see his fingerprints sometimes on the conference and I think the quality of the panelists today.

We have three terrific panelists for you. To my right is Terry Stewart who is managing partner at Stewart and Stewart in Washington, D.C. He has a Harvard MBA and has a law degree from Georgetown. His practice is focused on trade remedies, and he is a legend in the D. C. trade community, having worked both officially and unofficially with the U.S. Government and its various trade bodies as well as in private practice as one of our leading trade litigators.

To his right is Ambassador John Weekes, well known to the CUSLI community, the senior business adviser at Bennett Jones, former Canadian ambassador to the World Trade Organization, proud graduate from the University of Toronto. He was Canada's chief NAFTA negotiator and has been a senior associate of the Minister of Foreign Affairs, long experienced with the [General Agreement on Tariffs and Trade ("GATT")], then WTO, and now serves as occasional panelist, WTO dispute panels as well.

To his right is Ambassador Alan Wolff, a senior counsel at Dentons LLP. He is a graduate of Harvard and has his law degree from Columbia. He is former Deputy U.S. Treasurer Representative and General Counsel at USTR from the days before it was USTR. It was just the Office of Special Trade Representative and served as a lawyer at the U.S. Department of Treasury. He is also--we heard earlier about Governor Blanchard being [a] Super Lawyer; he is also a Super Lawyer, giving him extra powers, I suppose, in these states and has, despite a long and very distinguished career, a particularly important and relevant role, now having been a key adviser in stakeholders during negotiations of the TransPacific Partnership and the Transatlantic Trade and Investment Partnership, yet to be concluded, so three panelists who bring us a tremendous breadth of experience from both sides of our border.

I am going to start with Terry, and we will continue from there.

MR. STEWART: Thank you very much. It is a pleasure to be here with you today and to be on the panel with John and Alan who will carry the heavy lifting. What my job is to try to explain how the Trump administration trade policy such as it is has come to be.

I prepared a paper, which is available to you, that walks through my effort to decipher that, and I think the easy starting point is a slide that I put up, which tracks the U.S. trade deficit in goods compared to the timing of various trade agreements that the United States has entered into. And what you see is, if you go back to the late 1969 when we had a trading surplus, that we have been on a downward spiral, if you will, and major events would have included NAFTA, would have included the Uruguay Round, it would have included China's accession to the WTO is probably the three major points.

Now, one can say who cares? But the fact that we have gone there, a trade surplus to a three quarters of a trillion annual trade deficit in goods has been an issue of great concern to some in the country, including many working class folks in Midwestern states and states that were pivotal in the last election. When you couple that with the fact that if you take a look at non-farm income in the United States on a per capita for a family basis over the last 43 years, there has been a decline in real dollars of more than ten percent. You had a building storm of discontent, and neither political party, Democrat nor Republican, were really postured to understand or grasp that because with the--and trade has been one of those interesting areas where the trade policy folks inside the beltway for both parties have been fairly closely aligned with relatively small differences.

And, so, if you look at the last election, you had two outsiders. You had Bernie Sanders on the left, and you had Donald Trump on the right who raised this issue about the trade in equities in the system, and that resonated with a lot of people. So statistically, you can see where the issue is. The U.S. Government historically has always talked about how many jobs are created by exports, and they have refused to identify any jobs that have been lost to imports, and so for people who like to believe that people who are inside the Beltway are disconnected that face average Americans, stagnant, in fact, declining incomes in real terms and a very large and globally unheard of, a trade deficit over the years would create the kind of environment in which somebody who promised to deal with that problem would receive support, and I would say that the election was a tipping point in terms of making that a central issue. Lots of discussion as to why that's not a valid concern, but for this administration, it is a very important issue. When you take that down to the individual countries where we have large deficits, obviously China is at the top of that list, but other important trading partners where we have big deficits include Mexico, Japan, Korea and Germany, and if you take those countries alone, you will account for the vast majority of the trade deficit, and hence, if you look at the language that has come out from the administration, the early morning tweets and other identifications of countries who are, where we have, quote unquote, bad deals. These are the countries who have been identified, and it is directly tied to the large trade deficit that we have with those countries.

Further building on what the earlier panel this morning had to say, if you take a look at auto and auto parts or motor vehicles and parts for motor vehicles, what you find is, it is the largest part of our trade deficit globally, and for these five countries, it is the majority and in the case of Mexico more than a hundred percent of the trade deficit. So if you try to figure out where the Administration is going and what they are focused on, they are focused on issues that were of concern in the states, that resulted in the president getting elected, the swing states in the Midwest and in the East where manufacturing is important. In fact, it wasn't until the trade policy 2017, presidential trade policy came out that you saw anything coming out from the Administration that went beyond manufactured goods and picked up a small item of agriculture or a relatively minor part of the economy on the services. So that has been where the focus has been, and what that has meant is that the government's focus is on how you make those deficits disappear.

The negotiations that will go on, at least from the Administration's point of view, are intended to try to address that. There had been meetings with industry groups. Autos were one of the early ones that they had, and it is an effort to try to identify what do you need changed in the economy so that you will, in fact, be more like Germany and less like the United States in terms of the large deficit that we run in autos and auto parts since it drives a lot of manufacturing jobs all around the world and certainly in the United States.

So you have those things. If you look at the trade policy, there were four priorities that the Administration identified, the first of which was maintaining sovereignty over domestic trade policy. This is really a reflection of the challenges that the United States and other countries, in fact, have faced in the WTO but what the United States has faced particularly and, in particular, in the trade remedy arena where 60 percent of the cases that had been brought in the WTO have been against the United States, who has brought a total of 12 to 13 percent of the trade remedy cases, despite the fact we were a major negotiator in the Uruguay Round and despite the fact that the agreements in dumping in Canada largely reflected existing U.S. law. And so the fact that there is concern in the United States and has been in the Congress for the last 15 years, that the [WTO] Appellate Body is in some ways uncheckable, which is largely the fault of how we created the system, is a top priority and a major concern.

The second concern priority being enforcement, strong enforcement of trade laws. You can't really have one without the other, but you are seeing executive orders come out that are trying to address some of the problems that industries which have had trade problems face. There was an announcement of one coming out today, that will deal with a problem that has grown exponentially as trade with China has grown, namely evasion of dumping duties and countervailing duties, a relatively minor issue in global trade but an important issue for industries who have trade remedies in place and are not getting effective remedies. Custom services GAO put a report out, I think, last year that identified something like $2.7 billion dollars in duties had not been collected over a ten-year time period. In terms of trans-borders, this is a matter that has been of great concern to the industries who are affected.

While the Administration's trade policy may be transactional in nature, an effort to try to deal with trade deficits, obviously, trade policy negotiations is not limited; it is not controlled by the executive branch itself but...

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