On Thursday, March 31, WITA held a webinar discussing what the new sanctions on Russia means for the re-ordering of trading relationships and the multilateral trading system – including removal of MFN by the US, EU and G7.

Featured Speakers:

Simon J. Evenett, Professor of International Trade and Economic Development, University of St. Gallen; Founder, St. Gallen Endowment for Prosperity Through Trade

Cecilia Malmström, Senior Advisor, Covington & Burling LLP; Nonresident Senior Fellow at the Peterson Institute for International Economics ; former European Commissioner for Trade

Professor Douglas Irwin, John French Professor of Economics, Dartmouth College and Author of Clashing over Commerce: A History of US Trade Policy

Ambassador Rufus Yerxa, Senior Advisor, McLarty Associates; former Deputy United States Trade Representative and former Deputy Director-General of the WTO

SPEAKER BIOGRAPHIES

Simon Evenett is a Professor of International Trade and Economic Development at the University of St. Gallen. He specialises in how governments tilt the commercial playing field in favour of local firms. At the start of the Global Financial Crisis Simon created the Global Trade Alert initiative, the leading independent monitor of protectionism and commercial policy choice based at the University of St Gallen.

Simon regularly engages with private sector practitioners, government officials and other thought leaders. He has taught at the Said Business School at the University of Oxford, the Ross School of Business, University of Michigan (where he was a Visiting Professor of Corporate Strategy three times), and Rutgers University. In addition, Prof. Evenett has served as a World Bank official twice, has been a Non-Resident Senior Fellow in the Economics Studies programme of the Brookings Institution, and a member of the UK Competition Commission. Recently, he was the DLA Piper Distinguished Visiting Professor at the Carey School of Business, Johns Hopkins University. He holds a Ph.D. in Economics from Yale University and a B.A. (Hons) in Economics from the University of Cambridge. Simon has written over 200 articles, book chapters, and volumes. He is regularly quoted in the international media

Cecilia Malmström is a senior advisor at Covington & Burling’s Brussels office. She has devoted the better part of her career to global affairs and international relations and has extensive experience with multilateral leadership and cooperation. Cecilia, a non-lawyer, served as European commissioner for trade from 2014 to 2019 and as European commissioner for home affairs from 2010 to 2014. She was first elected as a member of the European Parliament in 1999, serving until 2006, and was minister for EU affairs in the Swedish government from 2006 to 2010.

As European commissioner for trade, Cecilia represented the European Union in the World Trade Organization (WTO) and other international trade bodies. She was responsible for negotiating bilateral trade agreements with key countries, including agreements with Canada, Japan, Mexico, Singapore, Vietnam, and the four founding Mercosur countries.

Cecilia holds a Ph.D. in political science from the department of political science of the University of Gothenburg.

Douglas Irwin is John French Professor of Economics at Dartmouth College. He is the author of Clashing over Commerce: A History of U.S. Trade Policy (University of Chicago Press, 2017), which The Economist and Foreign Affairs selected as one of their Best Books of the Year.

He is also the author of Free Trade Under Fire (Princeton University Press, fifth edition 2020), Trade Policy Disaster: Lessons from the 1930s (MIT Press, 2012), Peddling Protectionism: Smoot-Hawley and the Great Depression (Princeton University Press, 2011), The Genesis of the GATT (Cambridge University Press, 2008, co-authored with Petros Mavroidis and Alan Sykes), Against the Tide: An Intellectual History of Free Trade (Princeton University Press, 1996), and many articles on trade policy and economic history in books and professional journals.

He is a Research Associate of the National Bureau of Economic Research and a non-resident Senior Fellow at the Peterson Institute for International Economics. He worked on trade policy issues while on the staff of President Ronald Reagan’s Council of Economic Advisers and later worked in the International Finance Division at the Board of Governors of the Federal Reserve System in Washington, D.C. Before joining Dartmouth, Irwin taught at the University of Chicago’s Booth School of Business.

Ambassador Rufus Yerxa served as Deputy U.S. Trade Representative under two Administrations and spent more than a decade as Deputy Director General of the World Trade Organization (WTO). He has also served in the private sector as a trade lawyer and as head of a leading business association in Washington. He has been a prominent figure in international trade policy for more than four decades. His areas of expertise include the functioning of the WTO system and other international agreements, bilateral and regional economic relations, international investment matters and U.S. trade law.

Ambassador Yerxa began his government career as a lawyer with the U.S. International Trade Commission before joining the staff of the Committee on Ways and Means of the U.S. House of Representatives, where he served as Staff Director of its Subcommittee on Trade.

From 1989 to 1995 he served as Deputy U.S. Trade Representative (USTR) with the rank of Ambassador, first as head of USTR’s Permanent Mission to the GATT in Geneva under President George H.W. Bush and subsequently as Washington Deputy during the Clinton Administration. He was instrumental in negotiations to replace GATT with the WTO in 1995 and to create the original NAFTA accord (now USMCA).

After leaving government service he practiced law for a major U.S. firm in Brussels. In 2002 he was appointed to serve as Deputy Director General of the WTO. During his long tenure he helped to broaden its membership and strengthen various aspects of its rulemaking function.

From 2016 to 2021, he was President of the National Foreign Trade Council (NFTC), a Washington-based industry association focused on expanding global markets for U.S. companies and strengthening the rule of law in world trade.

He was a Visiting Professor and Adjunct Professor with the Middlebury Institute for International Studies from 2013 to 2018, where he taught courses on international trade and the WTO system.

Ambassador Yerxa is a native of Washington State. He holds a BA from the University of Washington, a JD from the Seattle University and an LLB in International Law from the University of Cambridge.

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On Thursday, March 10, WITA held an emergency webinar on Russia Sanctions – From Jackson-Vanik to Today. The webinar examined the new sanctions put in place by the United States and its Allies in response to Russia’s invasion of Ukraine, and looked back at the history of sanctions against Russia and the Soviet Union.

WITA Webinar Featuring:

Amb. Alan Larson, Senior International Policy Advisor, Covington & Burling LLP; former Under Secretary of State for Economics and Assistant Secretary of State for Economic and Business Affairs, as well as Ambassador to the OECD

Clay Lowery, Executive Vice President, Institute of International Finance; formerly Assistant Secretary for International Affairs at the U.S. Treasury Department

Maria Snegovaya,  Fellow at the Center for Transatlantic and Trans-European Space Studies at Virginia Tech University, and a Visiting Scholar at the Institute for European, Russian, and Eurasian Studies and the Illiberalism Studies Program at George Washington University.  Co-author of the paper, The Impact of Western Sanctions on Russia and How They Can be Made Even More Effective

Kevin Wolf, Partner, Akin Gump Strauss Hauer & Feld LLP; former Assistant Secretary of Commerce for Export Administration, Bureau of Industry and Security

Moderator: Paula Stern, Ph.D., President, The Stern Group, and former Chair of the U.S. International Trade Commission; author of Water’s Edge: Politics and the Making of American Foreign Policy

SPEAKER BIOGRAPHIES 

Alan Larson is a Senior International Policy Advisor at Covington & Burling LLP. He provides clients with strategic advice, counselling and representation at the intersection of international business and public policy. A Ph.D. economist, decorated diplomat and non-lawyer, Alan advises clients on high stakes international challenges. His trouble shooting takes him to all parts of the world. His practice encompasses international investment and acquisitions; sanctions and trade compliance; international energy transactions, international aviation and international trade. He has helped win approval of the U.S. Committee on Foreign Investment in the U.S. (CFIUS) for some of the highest profile foreign investments in the United States, including several by state-owned companies and sovereign wealth funds.

Alan co-leads Covington’s innovative Global Problem Solving (GPS) initiative. GPS combines expert legal work with sophisticated policy strategies to solve client’s most complex and consequential international challenges. He is Chairman of Coalition for Integrity and a Board Member of Helping Children Worldwide. He previously served in the State Department’s top two economic policy jobs, as Under Secretary of State for Economics and Assistant Secretary of State for Economic and Business Affairs, as well as Ambassador to the OECD. He is a Career Ambassador, the State Department’s highest honour.

Clay Lowery is the Executive Vice President of the Institute of International Finance. Mr. Lowery oversees the departments responsible for macroeconomic analysis, international financial regulation, financial technology, and specific policy areas such as debt policy and analysis and sustainable finance. In addition, he oversees the membership recruitment and retention department. Prior to joining IIF, Mr. Lowery was a founder and Managing Director of the Rock Creek Global Advisors international economic consulting firm. Previously, he served as the Assistant Secretary for International Affairs at the U.S. Treasury Department, where he was the Finance Deputy to the G20, G7, International Monetary Fund, and the Financial Stability Board, chaired CFIUS, and was the point person on U.S. trade policy for financial services and toward Sovereign Wealth Funds. Mr. Lowery served over 15 years in the U.S. government including being the Director of International Finance at the National Security Council. He also serves on the Advisory Board to the Batten School of Public Policy at the University of Virginia and as a Senior Advisor to the Centre for Strategic and International Studies. Mr. Lowery received his B.A. in Economics and Foreign Affairs from the University of Virginia (Phi Beta Kappa) and his M.Sc. in Economics at the London School of Economics.

Maria Snegovaya is a Postdoctoral Fellow in Political Science, a Fellow at the Center for Transatlantic and Trans-European Space Studies at Virginia Tech University, and a Visiting Scholar at the Institute for European, Russian, and Eurasian Studies and the Illiberalism Studies Program at George Washington University. She is also a member of PONARS Eurasia, a George Washington University-based network of academics advancing new approaches to research on politics and society in Russia and Eastern Europe. She earned a Ph.D. in Political Science from Columbia University.

Her research interests include party politics, political behavior and political economy. Maria explores the ongoing democratic backsliding and re-autocratization in Eastern Europe and the tactics used by Russian actors and proxies who circulate disinformation to exploit these dynamics in the region. She also studies Russia’s domestic and foreign policy.

Her work has been published in numerous political science journals, including West European Politics, Party Politics, Post-Soviet Affairs, Journal of Democracy, and Democratization. Maria’s research has been referenced by the New York Times, Bloomberg, the Economist, and BBC. I have also written for the Washington Post, the New Republic, Foreign Policy and others.

Throughout my career I have collaborated with multiple U.S. research centres and think tanks to develop policy recommendations designed to address the challenges of democratic backsliding. These include the Brookings Institution, the Kennan Institute at the Wilson Centre, the Carnegie Endowment for International Peace and Freedom House among others.

Kevin Wolf is a partner at Akin Gump Strauss Hauer & Feld LLP. He has more than 25 years’ experience providing advice and counselling regarding the laws, regulations, policies and politics pertaining to export controls, sanctions, national security reviews of foreign direct investments and other international trade issues. His practice focuses on Export Administration Regulations (EAR, International Traffic in Arms Regulations (ITAR), and regulations administered by the Office of Foreign Assets Control (OFAC) and Committee on Foreign Investment in the United States (CFIUS).

Mr. Wolf previously served as Assistant Secretary of Commerce for Export Administration (2010- 2017) with the Bureau of Industry and Security, where he developed and implemented policies pertaining to export administration issues, particularly the licensing requirements of EAR. Mr. Wolf has not previously testified before the Commission.

Paula Stern, Ph.D., is President of The Stern Group, and former Chair of the U.S. International Trade Commission. Dr. Stern also serves as Senior Strategic Advisor to the National Center for Women & Information Technology (NCWIT).

She is a member of the board of directors of the Washington Institute of Foreign Affairs, Legacy Trustee at the Committee for Economic Development (CED), Lifetime Director of the Atlantic Council, and member of the Council on Foreign Relations, the Inter-American Dialogue. Dr. Stern formerly served on the public Board of Directors of CBS, Infinity, Duracell, Harcourt General, Hasbro, Scott Paper, Walmart, Westinghouse, Avaya, SSMC, the Neiman Marcus Group, and Avon, as well as a member of the International Advisory Board of LafargeHolcim.

Dr. Stern’s past public service also includes serving on the U.S. President’s Advisory Committee on Trade Policy and Negotiations; co-chairing the International Competition Policy Advisory Committee for the Attorney General and U.S. Department of Justice Antitrust Division; chairing the Advisory Committee of the U.S. Export-Import Bank; and being a Presidentially appointed/Senate confirmed Member of the Board of Directors of the Inter-American Foundation. She also was a Member of the US Secretary of State’s Advisory Committee on International Economic Policy and Member of the US Department of Commerce’s Advisory Committee on Renewable Energy and Energy Efficiency.

Dr. Stern began her Washington career as Senior Legislative Assistant to U.S. Senator Gaylord Nelson . She was a Guest Scholar at the Brookings Institution, where she wrote a definitive book on Congressional-Executive foreign policy making, titled Water’s Edge: Domestic Politics and the Making of American Foreign Policy. She also served as Senior International Affairs Fellow at the Council on Foreign Relations, Senior Associate at the Carnegie Endowment for International Peace, Senior Fellow at the Progressive Policy Institute, and member of The Trilateral Commission. Dr. Stern also held the Alkire Chair in International Business at Hamline University, St. Paul, Minnesota.

Dr. Stern has a B.A. from Goucher College, an M.A. in Regional Studies from Harvard University, a Ph.D. in International Affairs from Tufts University’s Fletcher School of Law and Diplomacy, and honorary degrees in Law from Goucher College and Commercial Science from Babson College. She is a recipient of the Alicia Patterson Journalism Award and the Joseph Papp Award for Racial Harmony from the Foundation for Ethnic Understanding. She has two children and four grandchildren.

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On Monday, February 8th, and Tuesday, February 9th, 2021, WITA hosted its third annual Washington International Trade Conference (WITC) for the first time virtually. This conference brought together leaders in both the public and private trade sectors to discuss pressing issues and trends surrounding trade policy. 

The event began with remarks from Kenneth I. Levinson, Executive Director of WITA, as he introduced the first group of panelists: Wendy Cutler, President and Managing Director at the Asia Society Policy Institute, Susan Shirk, Research Professor at the UC San Diego School of Global Policy and Strategy, Aaron L. Friedberg, Professor of Politics & International Affairs at Princeton University, and Ambassador Kurt Tong, Partner at The Asia Group, who shared their thoughts on how trade fits into the overall US-China relationship. 

The U.S. China panel was primarily focused around the overall US-China relationship and how trade fits into the larger picture. From joining the WTO to now, China has significantly increased its dominance in global trade, economic, and financial markets and has now become a credible threat to U.S. hegemony due to large economic pressure.

Looking forward to the Biden administration, the panelists discussed where we are now in our relationship with China, how the Biden review will be conducted, and how trade fits into this multi-faceted relationship. Over the past few months we have seen RCEP signed, the development of the China EU investment deal, and we have now heard talk about China reviving trilateral negotiations with Japan and Korea. The panelists explored the potential impact of the Biden review and present internal focus on China’s growing hegemonic status. 

The Trade & Environmental Sustainability Panel focused on the growing global concern of climate change and how this issue intersects with trade. As the United States has most recently rejoined the Paris Accords and a variety of new executive orders have underpinned the Biden administration’s focus on mitigating climate change, there has been a shift in the international system on the pertinence of this issue. It is important to recognize where the U.S. and its allies now stand on sustainable policies that influence trade and consider how realistic it would be for less developed countries to accommodate the necessary standard to fight climate change. 

The discussion focused on both the EU and New Zealand’s positions on climate change as they relate to trade and what we should center our negotiations on going forward. Although there is promise with the Biden administration on these issues, it is undetermined what the administration’s nationally determined contribution in the Paris agreement will be which will be an important indicator of the level of emissions and leadership role on climate change. The panelists were Amb. Robert Holleyman, Partner at Crowell & Morning LLP, C&M International, Amb. Vangelis Vitalis, New Zealand Ministry of Foreign Affairs & Trade, Madelaine Tuininga, DG Trade Head of Unit in the European Commission, and Himamauli Das, Senior Managing Director at K2 Integrity. 

The next panel centered around finding a way forward on digital trade and delved into the intersection between trade and technology. As more and more countries are considering how they may tax or regulate the space, this issue has become of increasing relevance. As digital tools are a crucial driver of U.S. economic growth, it is clear they present both an incredible opportunity for progress and new challenges. The panelists featured were Arrow Augerot, Director of America’s Public Policy at Amazon, Jason Oxman, President & CEO of the Information Technology Industry Council, Sahra English, Vice President of Public Policy at Mastercard, and Peter Swire, Senior Counsel at Alston & Bird LLP. 

The final panel of the day was the Ambassadors Trade Roundtable with panelists: Amb. Susan Schwab, Mayer Brown LLP, Dame Karen Pierce DCMG, British Ambassador to the USA, Amb. Nestor Forster Brazil’s Ambassador to the USA, Amb. Stavros Lambrinidis EU Ambassador to the USA, and Amb. Arthur Sinodinos Australia’s Ambassador to the USA. The ambassadors shed light on the trade landscape from their perspectives and offered insight into what is important in their countries in dealing with the U.S. and other trading partners. The discussion later touched on the future of the WTO and what each ambassador saw as top priorities for the organization to address.

The second day of WITA’s virtual conference program opened with remarks from Kenneth I. Levinson, Executive Director of WITA and Amb. Alan Wm. Wolff, Deputy Director General of the WTO. Amb. Alan Wolff shared his thoughts on necessary reform and revitalization of the WTO and how its role should evolve. Terence Stewart, author of the blog Current Thoughts on Trade, joined the discussion and gauged Amb. Wolff’s perspective on the WTO’s interest in engaging in more sectoral and regional trade agreements. 

The following panel built off of the previous discussion into a more in-depth conversation about WTO Revitalization & Reform from a broader group of perspectives. Many of the panelists highlighted the importance of improving our relationship with China, getting our dispute settlement system back on track and addressing pertinent 21st century issues such as those involving digital trade and climate change. The panelists featured were Amb. Rufus Yerxa, National Foreign Trade Council, Jennifer Hillman, Council on Foreign Relations, Simon Evenett from the University of St. Gallen, Switzerland, and Hiddo Houben, EU Mission to the WTO.

The next panel centered around the question: “What would a Neo-Progressive Trade Agenda look like?” with panelists from around the world. The panel opened with an introductory discussion of how the WTO has lagged in recognizing the intersection of trade with other issues today and the importance of looking at things in a more wholistic way. Some of the speakers brought up issues related to the environment, gender and labor that requires a new model of trade in order to create shared prosperity and growth. The panelists featured were: Catherine Novelli, Listening For America, Beth Baltzan, American Phoenix Trade Advisory Service, Catherine Feingold AFL-CIO International Department, Katrin Kuhlmann, New Markets Lab, and Kimberley Botwright from the World Economic Forum. 

For the closing keynote and discussion of the conference, WITA was pleased to present Chairman Neal of the House Ways & Means Committee who offered his insight into the contours of trade policy in 2021 and Steve Lamar of the American Apparel & Footwear Association and WITA’s Board President. The Chairman stressed the importance of using trade tools to address many of the issues we face today and the promise of the Biden administration to tackle inequities and reassert U.S. leadership.  

The post 2021 Washington International Trade Conference Recap appeared first on WITA.

US-China Relations 

• Moderator: Wendy Cutler,President and Managing Director, Asia Society Policy Institute, former acting Deputy USTR
• Aaron L. Friedberg,Professor of Politics and International Affairs, Princeton University
• Ambassador Kurt Tong,Partner, the Asia Group, and former Principal Deputy Assistant Secretary of State for Economic and Business Affairs
• Susan Shirk,Chair, 21st Century China Center and Research Professor, UC San Diego School of Global Policy and Strategy, former Deputy Assistant Secretary of State

To view more information on the event, please click here. 

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On January 27, 2021, WITA held an event looking into the U.S. ban on cotton products and tomatoes produced in China’s Xinjiang Uyghur Autonomous Region.

U.S. law prohibits the importation of any product that is mined, produced, or manufactured wholly or in part by forced labor, including forced or indentured child labor.

In 2020, the United States Department of Labor released two reports and updates to its efforts to combat international child labor and forced labor, including a list of goods produced in China under conditions of forced labor in violation of international standards.

This month, the U.S. banned imports of cotton products and tomatoes produced in China’s Xinjiang Uyghur Autonomous Region over reports of the use of forced labor in production of those products.

The post WITA Webinar: The U.S. Moves Against Forced Labor in Xinjiang appeared first on WITA.

Featuring:

Clete Willems, Deputy Assistant to the President for International Economics and Deputy NEC Director at The White House in a discussion with Michael J. Smart, Managing Director, Rock Creek Global Advisors

To view more details about the event, visit the event page here.

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WITA held an event where an expert panel discussed developments in National Security and International Trade. They specifically addressed how Congress is working to rewrite the laws concerning foreign investment and export controls, and how new and renewed sanctions are in place against countries such as Iran and Russia.

National Security & International Trade: Overview

By Oliver Colletti and Matthew Style

Introduction

On Tuesday September 18th, The Washington International Trade Association held a panel discussion on the new proposals by Congress to address national security concerns over foreign investment as well as a discussion on on-going sanctions imposed by the US on other countries. The event was broken up into three discussions, first a keynote address from Heath Tarbert, the Assistant Secretary for International Markets and Investment Policy at the United States Department of Treasury. The ensuing panel was a discussion centered around changes in provisions around foreign investment and CFIUS reform. The event concluded with a panel discussion regarding provision of sanctions against countries who may be deemed national or global security threats.

Keynote Address

WITA had the great pleasure in hosting Assistant Secretary Heath Tarbert to discuss how the Department of Treasury, as well as Congress, was responding to the changing climate around foreign investment. Tarbert was joined by David Marchick, who served as a moderator in a sit-down discussion between him and the Assistant Secretary. Heath Tarbert began with an introduction of the Committee on Foreign Investment in the United States, otherwise known as CFIUS. He cataloged the changes to CFIUS by the Foreign Investment Risk Review Modernization Act (FIRRMA) signed into law by President Trump.

This change was born by the need to update how we approached Foreign Investment as there has been both an increase in the quantity and variety of cases under review within the last couple of years. He notes that relevant cases are no longer the prototypical instances where foreign actors invest in companies used for military procurement and contracting but now companies such as Silicon Valley tech firms can pose security concerns given the overlap of usage of goods between military and commercial usages. Given these changes in the landscape of investment and technological change, there has been a great need to update CFIUS.

FIRRMA achieves this by both strengthening and modernizing CFIUS. It helps to strengthen CFIUS by giving authority to review a wider variety of transactions while still maintaining an overall open investment environment. This includes investigating real estate and land purchases which may pose a threat to critical national infrastructure such as seaports, airports, and military bases. It also allows for the ability to monitor firms which has sensitive information or technology to make sure they are not compromised. With an eye towards modernizing, FIRRMA changes the process by allowing investors and firms to submit a five-page declaration form opposed to much lengthier paperwork, increase the review time limit from 30 days to 45 days to give CFIUS and the intelligence community more time to thoroughly investigate, as well as give CFIUS hiring authority to recruit top talent to review cases.

Discussion with David Marchick

Assistant Secretary Tarbert further outlined what the process would look like in the implementation on FIRRMA. This included formulating rules and programs within the next 18 months to have an effective program, in the meantime testing pilot programs. When asked if these new restrictions were going to be aimed at China or any specific country, Tarbert emphasized that the goal of FIRRMA is to, “build an investment regime which lasts for the 21st Century” opposed to targeting any one country. He noted that the US has long held an open investment policy, welcoming all investment as long it does not pose any national security threats.

As the environment changes due to this legislation, Tarbert notes that there will an uptick in the number of cases which CFIUS will review but the exact increase will be determined by the rules as they work towards an ideal process of detecting credible threats to national security without inhibiting the market. This is seen in the provision of language to specify critical technology transfers in joint ventures as well as using the new declaration process to move cases through quickly which clearly do not pose a threat to national security to avoid any slowdowns in the investment landscape.

Panel 1: Investment and CFIUS Reform

On Tuesday, September 18th, the Washington International Trade Association held an event discussing developments in National Security and International Trade. Specifically addressing how Congress is working to rewrite the laws concerning foreign investment and export controls.

The distinguished panellists, who addressed the first topic of Investment and CFIUS reform, consisted of Clay Lowery, Nancy McLernon, Chris Padilla, and David Marchick.

The discussion started with Clay Lowery, who serves as the Assistant Secretary for International Markets and Investment Policy, U.S. Department of the Treasury. Lowery begins the conversation by commenting on how U.S. Trade Policy negotiators are facing the most difficult economic landscape in recent decades. Lowery’s experience working with CFIUS meant he was able to provide confident insight on issues that may be faced when working towards reforms. He noted that 25 years ago the most strenuous part of CFIUS reforms was going through the interagency process. He believes these difficulties will resurface with the reforms occurring over the next 18 months. Lowery comments that the FIRRMA reforms are largely benefitting both U.S. Industry and Government, due to new legislation counteracting the lengthy CFIUS refiling process, as CFIUS now has 10 days to accept or decline, meaning a more streamlined process for foreign goods. Lowery also comments that, “Information exchanging between allies is going to be a very positive thing”, as it will help make the CFIUS process easier, and encourage foreign direct investment into the U.S. Clay Lowery finalised his talk by addressing what he deemed the toughest issue surrounding the reforms, which was how to define goods under CFIUS. He described how technological advances have left CFIUS outdated, with the likes of critical infrastructure, critical technology, and sensitive personal data not being defined under current CFIUS legislation, which could cause long endured difficulties for those working with these goods.

Next to speak was Nancy McLernon, the President & CEO for Organization for International Investment. McLernon focused her discussion on the benefits of Foreign Direct Investment, and why the CFIUS reforms are imperative for supporting U.S. workers and industry. McLernon described the impact Foreign Direct Investment has on the U.S. economy. Examples of this included the 6.8 million workers across the U.S. that receive a paycheck from international company, and that 54% of new manufacturing jobs in the U.S. are created by International Companies. McLernon believes that if there is to be a resurgence in U.S. manufacturing it will be from international companies coming to the U.S., and therefore CFIUS reforms must occur to make this process easier, as to encourage these companies to migrate. Nancy McLernon made it clear that herself, as well as the Organisation for International Investment, were indefinitely in favour of CFIUS reforms. To support this statement, she remarked, “They need to implement FIRRMA in a way that leaves the U.S. open for FDI, as it makes the U.S. more resilient, it puts foreign companies and companies on the same side of the Economic Ledger as the U.S., and it is an enormous boost to the U.S. workforce.”.

The panel was finalised by Chris Padilla, who serves as the Vice President of IBM Government and Regulatory Affairs and was the Former Under Secretary for International Trade for The U.S. Department of Commerce. Chris Padilla spoke mostly on how the CFIUS reforms signified that complex issues could be solved successfully on a bipartisan basis. He gave much credit to Chairmen Royce and Engel, for the remarkable accomplishment of leading the first modernisation on export controls in decades, and stopping the President instating IEPA to impose blanket sanctions on China. Padilla spoke strongly on how these sanctions would’ve caused the largest expansion of unilateral export controls in 70 years. He then explained how the introduction of the proposed laws would mean CFIUS would review inbound investment in U.S., as well as outwards ventures. Padilla then asserts that this would have been detrimentally unilateral, as they would’ve stopped U.S. companies from investing technology abroad. He continued this by saying those who testified against these changes, including himself and the other panellists, were told they were therefore against National Security, making it a strenuous battle to stop the bill. Chris Padilla finalised the panel by declaring the overall process a success, as the updated CFIUS bill strengthened both CFIUS and Export Control, and the process, “avoided (an) outcome that could’ve been much substantially worse, completely unilateral, and it could’ve significantly discouraged investment in this country”.

Panel 2: Sanctions

The final discussion of the day revolved around the ever-changing landscape of diplomacy and how the role of sanctions factored into national security and specifically trade. This panel had the privilege of hosting years of expertise within both the public and private sector to weigh in on the strategy and potential outcomes of sanctions. Guiding this discussion was Bill Reinsch, Senior Advisor and Scholl Chair in International Business at the Center for Strategic International Studies. He began the discussion with a few brief concerns surrounding sanctions such as collateral damage delivered by sanctions, as well as complexity in language posing potential compliance issues, which the panel followed up providing great insight.

Brian Fleming began the panel discussing both his current and past roles in observing the impact of potential complexity in sanction compliance on behalf of firms. Fleming, a member at Miller & Chevalier, previously served as the Counsel to the Assistant Attorney General for National Security at the Department of Justice. He began to discuss the impact such as recent one-year-old legislation, the Countering America’s Adversaries Through Sanctions Act (CAATSA) which targeted countries such as North Korea, Iran, and Russia. As the sanctions are being put in place, even the most well-meaning companies are finding it difficult in maintaining compliance with the expanded sanctions of Russia. He notes that given the provision of secondary sanctions being imposed on those who engage in significant transactions with the targets, there are many questions asking what constitutes a significant transaction. The murkiness of this criteria has led to uncertainty for both financial institutions and supply chains, many of which are starting to lower risk by avoiding dealings with those who could end up on sanctions lists.

As for the sanctions reinstated on Iran after the US leaving the Nuclear Treaty, Fleming noticed that many firms beginning to wind down activity by subsidiaries within Iran due to provisions to sever those relationships under the sanctions. Much of this desire to wind down dealings is for firms to both maintain image and manage risk.  many though have found the winding down process to be complex and challenging as well given different contractual agreement which may be already in place. By and large the regulators are expecting corporations to self-police and to a large extent Brian sees that happening now.

The next discussant, Peter Harrell, is an Adjunct Senior Fellow at the Center for New American Security. He recounted both his time working in the Obama Administration to the empirics we now see of the Trump Administration, that there is an increase in the use of tariffs to achieve objectives. The administration has shown an interest in unilateral action while they have had some instances of utilizing multilateral action, but they appear content on using unilateral. As for the “Russian oligarchs” sanctions, the Trump Administration was a little surprised by aluminum price spikes as well as other unintended costs. Through general licenses agreements, they have mitigated the collateral damages for the most part. Brian earlier mentioned the role of unintended consequences from these tariffs and the uncertainty delivered by expiring general licenses.

Harrell than delved into the role of Congress in actions. Recent events have shown an active participation on behalf of Congress on sanctions imposed on Russia. After the election as we get into the next legislative session he thinks that Congress imposes another round of sanctions on Russia. As for enforcement of sanctions, OFAC is engaging in several enforcement actions over the years and for the most part they appear to be reasonable. Many OFAC fines are typically in the hundreds of thousands of dollars but the figures do not appear to be two extreme. This may encourage companies to self-police into compliancy without imposing a burden on them. Another difficulty within this space is that OFAC is entering some markets such as aluminum where they do not have a great deal of experience. As a result, they are grappling with issues such as supply chains which they have not been exposed to much in the past.

Our final speaker of the day, Suzanne Maloney, Deputy Director of Foreign Policy at the Brookings Institute, rounded out the group. She focused specifically on the sanctions imposed on Iran, cataloging the history of sanctions imposed on Iran for decades and what these sanctions look like in the present. She notes that due to size of Iran’s energy market, many allies avoided sanctions on Iran as the US unilaterally opts for action against Iran. This in turn has created some pressure between the US and allies. Today we see a disconnect between the US and the rest of the world towards Iran. Many analysts believe that unilateral approach is that we would be ineffective. The US market has responded to pressure by rapidly wind down from dealing with Iran as “businesses are voting with their feet”. She argues that some of our allies wanted to preserve the deal to maintain economic ties but still find economic incentives to encourage Iran to avoid constructing nuclear weapons. Concluding that moderate results with limited damage only increases the infatuation with the use of sanctions. Observing that the Trump administration plans on using sanctions more openly and total restrictions in a quick rate, while the Obama administration sought tactical sanctions and slowly move in on Iran. China and India have not been encouraged to go to zero, but Japan and Korea have started moving towards the maximalist zero. Many see this as a success of the tariffs as there has not been blowback in the oil markets the first time around.

The strategy of the sanctions has failed, sanctions are a policy tool not the policy themselves. Asking do they want Iran to capitulate on all of 12 Secretary Pompeo’s demands? Does President Trump expect Iran to come back to the table? The use of sanctions combined with reneging on the nuclear deal with Iran has made Iran reluctant to negotiate. Noting a possibility is that the administration wants to pressure Iran for the sake of applying pressure, or they want a regime change which Iran will not negotiate. Negotiations are unlikely to solve Iranian economic short-run problems, and they do not have many places to maneuver. Her final points were that the possible avenue of response from Iran is retaliation, especially within the military realm to express disapproval with the status quo. This in turn could yield collateral damage towards US and allied interests.   

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Two Big Trade Issues, One Big Event: NAFTA & China

By: WITA Staff

On Thursday, June 21st, 2018, the Washington International Trade Association hosted “Two Big Trade Issues, One Big Event,” with panels to discuss two of the mostly timely trade issues: NAFTA and China. The first panel on NAFTA, featured distinguished panelists Kellie Meiman Hock, John Bozzella, and Jim Mulhern, with the moderator Eric Farnsworth. This first panel discussed the future of the NAFTA agreement and what it means to have a “modernized” NAFTA. The second panel of esteemed China experts consisted of Charles Freeman, Mary Lovely, and Derek Scissors, moderated by Bruce Andrews. Identifying the most challenging aspects of US-China relations, the panel commented on what future relations may entail.

This panel on NAFTA was moderated by Eric Farnsworth, Vice President of the Council of the Americas. He plays an important role as a leader and advocate on a broad range of issues such as US relations with the Western Hemisphere, economic development, trade and global governance. Farnsworth began the discussion talking about how NAFTA is a work in progress – it’s a durable platform to expand trade and investment, but it is outdated and needs to be updated for today’s climate and needs. The question that was posed is whether Mexico, Canada, and the US can successfully get this update done.

John Bozzella, President and CEO of Global Automakers was first to speak following Farnsworth’s opening remarks. He served as Senior Operating Executive for Cerberus Operations and Advisory Company, LLC since 2009, gaining experience and insight into a range of public policy and economic development matters. His experience working for Chrysler (2007-2009) and with Ford Motor Company (1994-2005) gave him an in-depth look into the automotive industry and public policy. As the first speaker, Bozzella talked about the importance of NAFTA to the automotive industry, describing it as a “seamless NAFTA industry”. He mentioned that half of US automotive imports come from Mexico and Canada and that he is concerned about the unwinding of NAFTA and the talk of bilateral agreements. He said that bilateral agreements would create more uncertainty and will lead to less investment and opportunity for the automotive industry. He concluded his statement by saying “we all share that sort of sense of uncertainty [about NAFTA] and that should be concerning to all of us. We do need to figure out how to get to yes [on an updated agreement] and it’s critically important not only to the auto industry, but also to the US economy that we maintain our regional platform.”

Following Bozzella’s remarks was Kellie Meiman Hock, managing partner at McLarty Associates. Having led the Brazil & Southern Cone and trade practices for McLarty Associates since 2000, she is well versed in various aspects of national industrial policies, trade negotiations, and obstacles to market access and investment. Hock urged us all to put ourselves in the shoes of the Trump Administration and understand that they are motivated by trade deficits. Despite this, we all have to focus on building a consensus on trade and not be motivated by what she called “noise factors” such as the midterms and trying to pressure our trading partners. In her opinion, there are 3 ways that the NAFTA negotiations could go. 1) The talks strike out or talks continue with no progress in sight. 2) President Trump will withdraw from the NAFTA agreement in the run-ups to the midterm elections. Within this second options, she sees the possibility of him splitting NAFTA into two bilateral agreements. 3) There is some sort of accord and there is a patched-up skinny NAFTA that calls for modernization.

The last speaker on the panel was Jim Mulhern, President and CEO of the National Milk Producers Federation. With more than 30 years working in Washington DC, Mulhern is a veteran on agriculture and food policy strategy. He helped direct the industries work on the 2014 Farm Bill and led numerous other efforts to combat issues on trade, food labeling, animal care, and immigration reform. Mulhern talked about how critical modernization of NAFTA is for the US dairy industry. From the US, 30% of cheese exports go to Mexico, but there is a big problem with trade with Canada – the tariff wall. The tariff wall between the US and Canada has a 200-300% tariff on dairy. For him, modernization of NAFTA is critical to bring down that tariff wall and integrate dairy into NAFTA just as the rest of US agriculture has been integrated. This tariff wall combined with the increasing milk fat consumption around the world has led Canada to increase production quotas for dairy on farms generating a 16% increase in production quotas over the past 4 years. This increase in production, causes them to dump skim milk, which doesn’t have as high of demand, into the world market, hurting the US as the largest export of non-fat skim milk. Mulhern stated that modernization of NAFTA is critical for the dairy industry and Trump’s focus on dairy is right on target. He believes in strengthening the ties with the Mexican market and making sure that Canada becomes an equal partner by bringing down this tariff wall.

WITA’s panel on NAFTA thoroughly reviewed the future of the NAFTA agreement and how modernization could impact the trajectory of the dairy and automotive industries. The event provided an all-encompassing view of the downfalls of NAFTA and 3 possible trajectories that it could go on. Eric Farnsworth started out by saying that “NAFTA is a work in progress” and the three panelists did a thorough job in providing the trade community with an image of what that progress would look like.

Kicking off the second panel of the event, Charles Freeman, U.S. Chamber of Commerce, comprehensively outlined the challenges of trade with China. Identifying three primary categories, he commented that beyond the bilateral trade deficit, theft of intellectual property and technology is an increasingly contentious issue, made more difficult by the challenge of reciprocal market access.

Derek Scissors, American Enterprise Institute, outlined the Chinese perspective. The two identified primary events in Chinese reform are the status of the state corporate center and rural land rights. China promised to combine rural and urban property land rights, a necessary step in order for individuals to become more profitable. While urban areas have pretty secure property rights, this is not the case in rural China where over 600 million people don’t have property rights to their most valuable asset. Aside from the priority of property rights, China is also struggling with a second area of reform: they recognize that their economy is increasingly reliant on innovation, yet when competition is suppressed for the sake of the state section, this results in less innovation and an increased incentive to steal intellectual property. This development model of coercion indicates a future of more problems to come.

Mary Lovely, Peterson Institute, questions whether the current punitive tariff approach to Chinese trade relations are helpful in bringing about desired changes. She discusses why the current tariffs are not an effective tool for internal change in China, citing the popular, but incorrect view that we should maximize the pain we can cause China. Thinking that the U.S. imports from China are several times larger than Chinese imports of U.S. products, it is not true that China will more quickly run out of items to tariff. A large share of U.S. imports are from multinational organizations beyond China alone. An estimated 60% of Chinese imports to the U.S. are from China, including iPhones, American made computer chips, and other electronic products. Tariffs on these items don’t hit domestic Chinese firms, but rather foreign multinationals. With little Chinese value added, the tariffs are hurting multinational companies more than China. Lovely believes tariffs won’t help us win the trade war or even hurt China, but instead will only harm our own economy. She ends by reminding the room that the more serious problem is a lack of discussion on Chinese violation of international norms.

Bruce Andrews, Rock Creek Global Advisors, credits the administration for recognizing that we need to take a stronger approach with China. Learning from the frustration of trying to cooperate with China in the last administration, the current administration has no doubt that Chinese practices merit much more attention than in the past. Outlining Chinese negotiating strategies, Andrews notes that they are organized, focused, and strategic in their negotiations. The challenge is that China is good at knowing what they want to give: they will only go as far as they are prepared to go and only moves forward if it is in their favor. Andrews notes that to be successful in negotiations, we need to push them. To be more successful in the future, the U.S. needs to identify a clear end goal. China is getting better at using the tools of global trade, and as the U.S. is walking away from using the WTO to our advantage, China is getting better at this.

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