The International Who’s Who of Trade & Customs Lawyers has brought together six of the leading practitioners in the world to discuss the key issues facing trade & customs lawyers today.
PROTECTIONISM AND INTERNATIONAL TRADE
Who’s Who Legal: At the G20 summit in London on 2 April, delegates agreed to “promote global trade and investment, and reject protectionism” as part of the Global Plan for Recovery and Reform. How do conditions in your home jurisdiction meet or fall short of this commitment, and what effect does this have on legal work?
Ed Sim: In Asia, we have had somewhat of a mixed bag on protectionism. For example, China criticised the US for its “Buy American” clauses in its stimulus packages yet China’s central government proceeded to direct the provincial and municipal governments to avoid imported goods in their own purchases. Commitments to free trade and investment are always tempered by domestic political concerns, and it is no different in Asia. The difference in Asia is that many protectionist measures are not codified into law or regulation, making it that much more difficult for the practitioner to deal with these issues on behalf of her or his clients.
John Sutham: I think we have to take the rejection with a grain of salt and maintain a healthy degree of scepticism. As everyone knows, trade protectionism is actually on the rise, and India, as a G20 leader, is leading the pack in new anti-dumping and safeguard investigations initiated in the first half of 2009. More worrisome than anti-dumping is the surge in safeguard investigations by India during the past few years. And here we are only talking about the codified protectionist measures, and, as Ed Sim mentions, the real culprit may not be the trade remedy measures but all sorts of non-tariff barriers and illegal subsidies. On the home front, Thailand is doing its best to avoid having to resort to trade remedies. The Thai government has rolled out the economic stimulus programme and has taken interest again in bilateral free-trade agreements, but it may be fighting a losing battle on the trade remedy front as there is a lot of pressure from various sectors of domestic industry, which are in need of urgent import reliefs. In short, I think there is a considerable gap between rhetoric and reality.
Lawrence Friedman: The Bush administration agressively pursued bilateral and regional free-trade agreements in the name of opening markets for US goods, but also to spread trading rules in lieu of the stalled Doha Round. The Obama administration has taken a cautious approach to free-trade agreements, and the negotiated deals with Colombia, Panama, and Korea appear to be low priorities. In that environment, the US stimulus package’s inclusion of a “Buy American” provision was viewed globally as a sign of growing protectionism. While I think that is an overstatement, it remains to be seen exactly how the current president views trade.
Gary Horlick: The World Bank, Global Trade Alert and the WTO itself have reported a rise in protectionist actions in the past year in varying forms of discrimination against ‘foreign’ goods and services. The WTO Agreements themselves do not ban protectionism – many forms of discrimination are expressly endorsed by the WTO, and most of them are in use now, including raising tariffs through safeguards, anti-dumping; ‘buy national’; subsidies; and so on. As President Obama pointed out in February, it is not enough to comply with the WTO to avoid protectionism. The WTO has no enforcement powers, and the individual member governments have chosen not to challenge each other when they violate WTO agreements with crisis measures – perhaps because ‘they all do it’ and perhaps because the the dispute resolution process takes four to five years for compliance and has no compensation effect (unlike normal public international law).
Jasper Wauters: I would be inclined to separate the two aspects of the pledge made at the G20 London meeting – first, the positive promise to promote global trade and investment, and second, the negative commitment not to fight the crisis through imposing trade barriers. In respect of the latter pledge to resist protectionism, I would say that at least that undertaking made at the London meeting was not immediately contradicted or made ridiculous by a slew of protective measures by the G20 countries themselves, as happened after the Washington G20. The WTO’s reports on protectionist measures suggest that, despite some backsliding, the line has held reasonably well since the London Summit. It could be that this is only because we seem to have the worst of the crisis behind us, and maybe this conclusion is based on incomplete information as the data on all of the trade remedy action (new initiations as well as new measures) is yet to be released for the period relating to the first half of 2009.
With respect of the first promise, to promote trade and to promote the conclusion of the Doha Round, the G20 statement seems to have been made without much conviction. There has clearly been no sign of movement or flexibility on the part of G20 members since, and the mood in Geneva among delegations and experts is painfully cynical. The G20 itself is harmed when its pronouncements on major issues are seen as empty and insincere, and it is doubtful whether it will be able to replace and improve on the elitist G8 formula this way. Of course, the big strategic question remains whether one should indeed link the promotion of global trade and investment with the conclusion of the Doha Round, given its relatively small impact on everyday trade. The stakes are high for the WTO, and its director general, Pascal Lamy, took a big gamble by over-emphasising the importance of the Doha Round such that its failure will be seen as a failure of the entire WTO system. As a Geneva-based international trade lawyer, it is certainly incorrect to limit the WTO to the Doha Round of negotiations. Dispute settlement and WTO Committe–related work are as important, as is our advisory work in respect of the existing rules and their application in practice. That has not slowed down because of the crisis.
Anuradha R V: The economic crisis has witnessed protectionist trends worldwide, notwithstanding the hortatory statements from G20, or any other country. Gary has highlighted studies from the WTO, World Bank and Global Trade Alert. The Bank’s study illustrates a multitude of actions by both developed and developing countries (including anti-dumping actions, increased grant of subsidies in key sectors – especially in developed countries – non-tariff barriers such as standards and licensing requirements, and import bans on diverse products).
Trends in India include recent increased rebates on duty drawback system for exporters (a fact evidenced in China as well); increased anti-dumping and safeguard duty actions; India’s controversial import ban on Chinese toys, etc.
At the same time, the recent conclusion of free-trade agreements by the government of India with ASEAN and with Korea, and the sustained negotiations with other key trading partners such as the EU and Japan, and initiation of ‘joint studies’ in the run up to potential negotiations with Australia and New Zealand, also reflect the policy imperatives favouring more liberal trade relations.
For the few Indian law firms specialising in trade law and policy, all these developments have translated into more work in diverse areas of both trade remedy litigation and trade policy advisory services.
Who’s Who Legal: Which jurisdictions or type of infringement are providing you with the most work at the moment? Have any recent legislative measures had an impact on work in your jurisdiction? Are there any planned changes pending?
Ed Sim: The global recession has impacted manufacturers everywhere, but the expected increase in trade remedy cases has not yet arrived in the US. Many expected the Obama administration to take a more aggressive approach on anti-dumping and countervailing duty cases, but his new team is not yet fully in place. In the EU, the replacement of Peter Mandelson by Baroness Ashton may have had a similar effect, but all signs are that the European Commission will initiate many new cases after the summer. Meanwhile, in Asia, we did not have to wait for changes in government for the increase in trade remedy cases. We have been quite busy handling anti-dumping cases conducted by China, India, Thailand, Russia, Korea and Indonesia.
Anuradha R V: Anti-dumping duty and safeguard investigations have dominated the Indian trade remedy landscape, with a significant increase in both types of cases since 2007. There has, however, been no countervailing duty investigation so far against subsidised imports. A new development under the recently announced Foreign Trade Policy of 2009, is the announcement of a new Directorate of Trade Remedy Measures whose purported role is to “enable support to Indian industry and exporters, especially the small and medium enterprises, in using trade remedy instruments.” The nature and role of this body is yet to be formally notified.
John Sutham: Obviously anti-dumping still constitutes the bulk of our trade work, although we are seeing more work in the areas of safeguards. In terms of the jurisdictions, at this moment I have to say that India, Brazil and Thailand are providing us with the majority of our trade work. In Asia, I would say that new legislation has no impact on our work.
Lawrence Friedman: The customs practice is fairly busy because of increased enforcement and new regulatory requirements such as the Importer Security Filing and the Lacey Act. Both of these require importers to gather and report new data elements and have proven cumbersome. There has also been increased enforcement through inquiries to importers that have resulted in internal corporate compliance activity. There is a Senate bill making its way through the legislative process requiring US Customs to refocus on the facilitation of legitimate trade. It will be interesting to see if that passes and what impact it has on the practical administration of the ports. Also, Customs still lacks a commissioner who will bring with him or her a tone to the office. The past several commissioners have come from law enforcement and that showed in how the agency approached its job.
Gary Horlick: There were no trade remedy cases in the US from October to March, one of the longest such periods in history. My guess is that clients told everyone – including their lawyers – to spend no cash in that period, indcluding on filing cases. But there have been 15 cases since then, and more seem likely as the data necessary to show injury accumulate. In additon there have been a fair number of new WTO cases over the past year.
Who’s Who Legal: What effect has the global financial crisis had on trade and customs litigation? What types of cases are coming to the fore? Are there any trends in settlements?
Lawrence Friedman: Customs litigation over routine classification and value matters has been perceived as dwindling as a result of overall lower rates of duty. However, interesting issues continue to arise including questions on the classification of festive articles, the constitutionality of different rates of duty for men’s versus women’s products, the authority of the US to attach retaliatory duties to certain products, etc. So, while classification and value cases continue, novel cases are also being brought.
Jasper Wauters: Focusing on our international trade dispute settlement practice, the crisis has not had any negative effect. On the contrary, there is a feeling that the risk of increased protectionism that was discussed before, whether through trade remedy action, or other types of tariff and non-tariff barriers, will soon lead to more disputes being initiated before the WTO when it becomes clear that certain temporary measures are there to stay. Add to that the lack of progress in the Doha Round and the end of the Peace Clause in respect of agricultural subsidies, and it seems fair to say that litigation is and will remain a very important part of our work. That is probably the only thing we, as lawyers, can be certain of – there will always be disputes. One very interesting development to watch will be to what extent the “rescue packages” of today will be the WTO subsidies disputes of tomorrow. There are interesting lessons to be learned from the way certain countries handled the last major financial crisis, in the second half of the 1990s with spillovers until the early years of this decade. Will the same policies lead to the same response in terms of countervailing measures and multilateral challenges of the measures taken to save certain national champions now that the affected countries are mainly developed economies? Or will the developed countries have learned from the case law they helped to establish by designing their rescue operations in such a way that they avoid falling afoul of the strict disciplines of the WTO Subsidies Agreement?
Ed Sim: As discussed, we haven’t seen an upsurge in anti-dumping and countervailing duty cases in the Western countries, but I expect that to change in the EU soon and perhaps in the US after the Obama team gets settled in and the US petitioning industries manage to prove a causal link between the imports and their poor operating conditions. The developing world, which depends more on customs duties for revenues than the Western countries, has stepped up customs enforcement. Trade remedy cases in the developing world are also on the rise.
Who’s Who Legal: Recently it appears that there is a slight but discernible shift in the initiations of trade remedy cases from major users in North America and Europe to fast developing countries such as India, Brazil and China, as well as smaller developing countries such as Thailand and Pakistan. How does this growth in “third-country” trade remedy cases affect the practitioners in the traditionally major legal markets and the new markets in certain developing countries?
John Sutham: First the fact. In 2009 to date, developing countries account for 73 per cent of total initiations of trade remedy investigations, while developed economies are only responsible for the remaining 27 per cent of investigations. For a while now there has been a discernible shift in the number of cases being initiated from the traditional major users such as the US and the EU to developing countries, in particular, the fast developing countries such as India, China and Brazil. Over the years, our firm has come to realise that this trend is probably irreversible and has adapted its resources and practices to third country trade remedy cases accordingly.
Five years ago, roughly half of the cases we handled would be cases in which we were co-counsel with US, EU or Canadian law firms in our networks. Currently most of the cases we handle are third country trade remedy investigations including our key role as Thai domestic industries’ trade counsel. This is not to say, however, that there will not be a renewed enthusiasiam for a new spate of trade remedy work in the US or the EU – I am sure the cases will eventually come – but the rise in third country trade remedy investigations, including use of CVD and safeguard cases by developing countries (including Thailand) which previously have not been the trade instrument of choice, is here to stay.
Ed Sim: Our team at Appleton Luff has devoted itself to the third-country trade remedy cases. Our lawyers have participated in cases conducted by China, Thailand, Malaysia, Indonesia, Korea, Russia, Mexico, Turkey, India, South Africa, Japan, Venezuela and Chile. The key for the practitioner in handling such cases is to maintain the high standards developed in our home jurisdictions in the US and Europe but balanced with flexibility and understanding of local conditions. To use a sports analogy, Tiger Woods plays golf worldwide but he doesn’t play the same shots at the British Open that he does at the Masters. You have to adapt your game.
Jasper Wauters: As was correctly noted by John Sutham, the use of trade remedies by developing countries is not a new development. During my time as a lawyer in the WTO Secretariat, I travelled to various developing countries to train the trade remedy investigators and to assist developing countries in drafting or revising their trade remedy laws and regulations. It is clear that developing countries see trade remedies as one of the few policy tools still available to them. Of course, the complexity of the rules, which are mainly a codification of the practice of developed countries and are based on the resources available to developed countries, is a problem and further puts in doubt the legal and economic soundness of the trade remedies regime in today’s global environment. At any rate, our firm has always been very active in defending the interests of our clients in trade remedy investigations, whether conducted by developed or developing countries. Our important Latin American and Asian client base requires us to be at the forefront of both domestic trade remedy action and WTO trade remedy dispute settlement.
Anuradha R V: I agree with most of the comments made. I do not believe there is a significant shift; while developing countries such as India, Brazil, China and Indonesia have started initiating more cases, there has not been a ‘drop’ in actions in the developed world. The US and EU still remain significant users of trade remedy actions. (The WTO presents interesting statistics that the US in fact reported 21 measures in the latter part of 2008, as compared with India’s 13). India has been a major user of AD actions since 1995. I would view the increased use of such measures in developing countries as a consequence of greater awareness of the availability of trade remedy instruments.
Gary Horlick: The key point running through all the comments is that trade remedy cases require both a high degree of expertise in the trade remedy field and excellent local legal and political skills. Those two prerequisites can be supplied cost-effectively in several ways. In the first case in any jurisdiction, one needs an outside trade remedy expert and a good local law firm. As there are more cases in a jurisdiction, some local offices develop good expertise, but others will want to ‘import’ the necessary expertise. Even the most experienced may want to import someone with WTO expertise. I have worked on cases in 14 countries (including the first in China, Thailand and Indonesia) and have played every possible role – it all depends!
Who’s Who Legal: What factors make for an effective trade and customs department within a law firm? For instance, is it an advantage to have an international network, or are smaller boutique firms better placed to serve clients?
Gary Horlick: It has been fascinating as an experience in the development of an area of law to participate in anti-dumping cases around the world, with countries in theory applying the same rules – the WTO Agreement – but each one applying its own legal customs, adminstrative law, and own view of the agreement. In practical terms, no one firm can have the necessary expertise in all markets, so the expertise can be brought in from other offices of the same firm or from formal networks or from the informal network of anti-dumping experts.
Anuradha R V: Trade law practice is still a very nascent area of practice in India. Like in many other jurisdictions, the trend seems to be for smaller boutique law firms to develop this as an area of practice. For servicing clients across jurisdictions, synergies in terms of working relationships with firms in other jurisdictions are worked out as and when required.
Ed Sim: Different clients have different needs. A client fighting a worldwide issue, such as a pharmaceutical company pushing on market access issues globally, or an Airbus fighting Boeing at the WTO, will need a large network from a single law firm. However, trade and customs issues increasingly are not being contested on such a large scale, but can be likened to smaller “brush fires” scattered around the world. Under such conditions, I think that putting together a network of boutiques is more useful for the client and the practitioner. The network can be expanded and adapted to deal with the changing environment, without the high overhead costs associated with using a single law firm.
John Sutham: I agree with Ed Sim that trade remedy issues are localised contests and it is difficult to adopt a global or standardised strategy or practice, whether you are a major law firm or a multinational corporation. Even though it may seem that most of the trade remedy user countries have by and large followed the WTO agreements, in practice, however, things are much more complicated than knowing which provisions of ADA to argue in your submission. For example, there is a vast difference in practice between India and Brazil as to how their respective casehandlers work as well as the procedures used, even though on paper the laws appear to be similar superficially. In this regard, having an international network of highly experienced and well-connected trade counsel in key jurisdictions is critical, and therefore, it appears that smaller boutique firms with excellent track records, practical experience and local connection and close ties to local trade firms represent a better model to serve clients’ needs.
Lawrence Friedman: I am in a traditional customs boutique practice. In fact, we are the oldest firm in the US focused exclusively on customs and trade matters. The great thing about that environment is that all the partners and associates understand what we do and there are no battles for resources or knowledgeable associates. Just like any practice, a successful customs and trade firm is going to be one staffed by smart lawyers who have specific experience in the issues the client needs addressed. We believe that our focused expertise and low overheads produce highly efficient and quality results for our clients.
For the most part, what we do is US administrative law. To the extent we encounter issues involving the application of foreign law or requiring a foreign local presence, we work through our network of international contacts. There is no question that we can provide practical trade solutions almost anywhere they arise.
Jasper Wauters: I would say, neither big nor small, but flexible and specialised; that is what characterises a top firm. It does not suffice to be a big name with a large international network to serve your clients in the best possible manner. Indeed, size can sometimes be a hurdle, but one that can be surmounted through proper management. One needs to be aware of the dangers of size, and has to ensure sufficient flexibility to quickly adapt to the changing needs of clients. Similarly, it would not be correct to conclude that because a firm is a small boutique firm that necessarily the quality of the service is higher. Being small has downsides as well in terms of the kind and number of assignments one can handle in the most effective manner. As lawyers we do not determine the timing of the needs of our clients. But of course, by being small there is a high likelihood of direct service to the client and a high degree of specialisation. So, what we at White & Case try to do is to combine the best of both worlds – have highly specialised lawyers providing personalised services globally, each using our firm’s considerable resources whenever it is advantageous to the client. In Geneva, we act as a boutique with a small team of highly specialised international trade lawyers who all have first-hand experience in WTO dispute settlement and international trade policymaking. However, our Geneva office is also part of the firm’s global resources, which enhances our practice, just as our expertise in Geneva-based WTO matters enhances the services that all of our lawyers can offer their clients. This combination of highly personalised, expert services delivered through an integrated, global group of trade specialists allows us to handle virtually any type of assignment.