As the American Lawyer detailed in a recent article, US President-elect Donald J. Trump has said he would impose a 45% tariff on goods manufactured in China and declare China a currency manipulator. He also threatened to withdraw America from the World Trade Organization (WTO).
Some economists, the American Lawyer detailed, have warned these actions would set off trade wars — which would result in harm to the US economy while prices for goods sold in the US would soar.
Pascal Lamy, former Director-General of the WTO, addressing the possibility of a new era of American trade protectionism in a recent interview with Reuters, noted the reliance by US corporates on global supply chains as a catalyst for a watering-down of these potential new moves by a Trump Presidential Administration (most of which would require Congressional approval).
Given the uncertainty at present of how deep a US retreat from international trade may go – there are two prime implications for US law firms in Asia. Here they are:
As the American Lawyer detailed, US-based law firms with Asia practices are taking a wait-and-see approach to how the US trade posture may develop. Firm leaders told the American Lawyer, however, that if the US Presidential Administration of Mr Trump does take a protectionist stance on trade — these policies would result in more work for firms with trade practices while having little effect on the transactional work associated with the facilitation of foreign investment.
In particular, Duane Layton, head of Mayer Brown’s government and global trade group indicated that a raising of tariffs is likely to lead to lawsuits by Chinese exporters. He also noted that lawyers representing clients before the WTO in Geneva, the US Department of Commerce and the US International Trade Commission in Washington will be busy as a result.
Certainly, too, US law firms with public policy and public affairs practices in addition to regulatory and litigation practices, are likely to be very busy with a range of political-strategic advisement on behalf of governments, trade organizations, foreign companies and regional and national economic development organizations.
Loss of market access
If the US chooses to begin placing restrictions on trade counter to WTO agreements — or leave WTO altogether — US law firms could face restrictions on their ability to operate in the Asia-Pacific jurisdictions where they have been able to forge market access over recent years.
The General Agreement on Trade in Services (GATS) is a 1995 WTO treaty resulting from the Uruguay Round negotiations. This treaty contains provisions related to mutual access for professional services in foreign markets — that along with bilateral agreements like the Korea-US Free Trade Agreement (KORUS) have helped US law firms expand into a number of legal markets in the Asia-Pacific region.
But should the US be the subject of a WTO injunction based on a tariff violative of their treaty obligations, “the WTO can authorize the offended parties to retaliate” according to a recent article in Qartz. “Retaliation”, Quartz explains, “could take the shape of tariffs or quotas on professional and financial services”, which may be seen (like US manufactured medical devices) as maintaining a comparative competitive advantage in global markets and therefore be an ideal focus of retaliatory restrictions via WTO action by countries that might be the focus of US tariffs.
Too, if the US withdraws from the WTO and bilateral FTAs like the Korean-US Free Trade Agreement altogether, market access won by US firms would be at risk as they would not then enjoy a mutually recognized right of access.
Pascal Lamy’s assessment that there may be some limitations on US action based on a push-back by WTO member countries exporting to the US and by US multinationals making their voices heard more loudly, particularly in the US Congress – may see a soft landing to US trade policy as a result. However, as Quartz noted, there is currently significant anti-trade sentiment in the US, including in Congress – which might provide support to a more expansive trade protectionism.
So for the short term, there will be some uncertainty about just how expansive US opposition to trade and the international framework that supports it will be. US law firms in Asia would be wise, therefore, to both plans for new work in their American offices related to trade – as well as for the more remote possibility that their access to Asia-Pacific legal markets may be curtailed should heated trade wars occur.