2017 Annual Review
2017 Annual Review

Potential US trade policy changes may bring worldwide effects

Businesses and governments can take steps to get ready for possible trade policy shifts under the new US administration

No one should be surprised when other WTO members point to the administration's own statements to show that [this response to alleged unfair trade] . . . violates the WTO.
White & Case partner Detlev Gabel, Bloomberg

The Trump administration took office in January 2017 following a campaign that promised to significantly revise US trade policy. Exactly how the US approach to international trade will change remains unclear. Yet, despite this uncertainty, there is still time to prepare for the risks and opportunities that US trade policy changes may create.

Several US law provisions could permit the Trump administration to raise tariffs, restrict imports or withdraw from US trade agreements—even unilaterally, without congressional approval. Less controversial actions might include encouraging the US Department of Commerce and the US International Trade Commission to seek trade remedies and enforcement actions under current US anti-dumping and countervailing duty laws; attempting to renegotiate existing free trade agreements (FTAs), such as the North American Free Trade Agreement (NAFTA); and altering the scope and targets of US economic sanctions, as well as reviewing inbound foreign direct investments by the Committee on Foreign Investment in the United States (CFIUS).

Businesses that rely on open trade with countries that could rank high on the Trump administration's list of potential targets for unilateral trade measures—such as China or Mexico—should pay particularly close attention to any US trade developments. Companies and investors that rely on FTAs between the US and other countries for critical parts or components, investment sources or other aspects of current or planned business operations may be particularly vulnerable to US trade policy changes.

In light of the uncertainty, forward-looking companies are finding alternative options for supply chains, business operations or investment sources and exploring avenues for legal recourse, such as US court litigation or World Trade Organization (WTO) proceedings. Some business leaders are discussing their position with similarly situated companies, Trump administration officials and government officials in other nations.


Trans-Pacific trade issues and cross-border business

One of the Trump administration's first actions was to withdraw from the Trans-Pacific Partnership (TPP). Later in the year, the remaining 11 parties to the TPP, which had spent over ten years negotiating the US-led trade deal, agreed to “assess options” for bringing a "TPP-11" into force without the US. Still, the volume of trade among the TPP-11 would be barely a quarter of what it would have been under the original TPP.

Some of the TPP's achievements may carry over into new trade agreements. In addition, another Asian trade agreement, the Regional Comprehensive Economic Partnership (RCEP), is still under negotiation. The RCEP includes members of the Association of Southeast Asian Nations (ASEAN), China, Japan, Korea, Australia, New Zealand and India—but not the US, Canada and Mexico.

Current conditions could also be right for countries in the Asia-Pacific region to negotiate individual new free trade agreements with the US, as the administration has signaled a willingness to work with bilateral trade partners.



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