April 23, 2018

Beyond the rhetoric, state of U.S-China trade relations emerges as a big unknown

International trade experts address the ABA Section of International Law Annual Conference in New York

Lindsey B. Meyer is busy these days as an international trade lawyer and a licensed U.S. Customs broker in Washington, D.C. Amid recent rhetoric regarding U.S.-China trade relations, she sums up the current state this way: “We are at an interesting time when you are talking about trade and tariffs,” she said. “This is the first time that my children understand what I do.”

The subject of trade is hot and not always understood, panelists observed on April 18 at the American Bar Association Section of International Law 2018 Annual Conference in New York. Four experts, including a lawyer who has practiced in Shanghai, China, for 20 years, described in some detail the evolution of trade between the two countries and offered their assessments of what might happen next at a panel titled, “Trumpeting New U.S.-Sino Trade Relations.”

As outlined by the group, on one side is U.S. President Donald Trump, whose comments have reflected something of a roller coaster ride on U.S. positions on trade with China as well as with other countries. On the other side are the Chinese, who are known for an approach on trade that is slow, patient and methodical.

The Chinese follow a five-year plan, and today are adhering to the 13th such plan in the past several generations, said China-based lawyer Robin Gerofsky Kaptzan.

“The Chinese throughout history think: Where do they want to go, how are we going to get there. And they do that every five years,” said Gerofsky Kaptzan, senior foreign legal counsel at Duan & Duan Law Firm, the oldest law firm in China.

How the differing approaches interact, for now, is only a guess, the panelists concede. There was even speculation that Trump and Chinese President Xi Jinping, who reportedly have grown close, were jockeying publicly about tariffs to play to their supporters at home, while privately they have no intention for a real trade war.

Generally on trade, the Trump administration has looked “inside the tool kit” to deploy some levers in creative ways dealing with tariffs and other actions, said Meyer, who heads the international trade practice at Venable. As examples, she pointed to recent examples of U.S. tariffs and other moves on solar cells and washing machines as anti-dumping actions.

At times, panelists provided a tutorial on arcane but important aspects of foreign trade. Anne Salladin, a lawyer with Stroock & Stroock & Lavin LLP in Washington, D.C., discussed, for instance, how nine different agencies come together to review foreign investment in the U.S. for national security purposes through the Committee on Foreign Investment in the United States, also known as CFIUS .

Salladin, who served for nearly 20 years in the Office of the Assistant General Counsel for International Affairs of the U.S. Department of the Treasury, said there has been increased enforcement under the Trump administration. Many of the proposed investments that have been blocked involve Chinese companies making a minority investment in an American firm, presumably to harvest intellectual property.

Paul Edelberg of Fox Rothschild LLP in New York observed that Trump’s recent comments about accepting the Trans-Pacific Partnership trade deal – when previously he staunchly opposed it and withdrew U.S. involvement from it early in the administration – might be a ploy to assist with negotiations with the Chinese. China was not a partner in the 11-country agreement when adopted by the Obama administration.

“The Chinese are not too excited about TPP,” Edelberg said. While he admitted he was just speculating for now, Edelberg thought raising the possibility of the United States rejoining the TPP was a maneuver by the Trump administration to “get more leverage with China” in overall trade negotiations.

“I don’t think there are any winners in a trade war,” he said. He added that “one of the victims” of a deterioration in trade relations with China might be reduction in foreign direct investment rather than trade itself.

At the end of the day, Edelberg continued, noting previous reports of their personal closeness, the two leaders might say, “We are going to work it out because we are best friends.”