Research Trends and Conclusions: Trade & Customs 2011

With the benefit of over 14 years of research and tens of thousands of votes from clients and private practitioners, Who’s Who Legal takes a closer look at developing trends in the trade and customs legal marketplace worldwide.

INTRODUCTION

Our research takes place in a year in which the Doha Development Trade talks may fail for the first time in its 10 year history. Political differences threaten to overshadow discussions and waylay the EU’s agenda of cutting tariffs, encouraging the formation of more free trade agreements between Europe and emerging economies, clarifying the WTO rules on subsidies and agreeing to a new set of rules governing transactions, remedies and defence instruments. Practitioners observe how the EU’s objectives are a reflection of the kind of work they are doing and what they want to see happen in the medium term future.

EMERGING TRENDS

The international legal landscape of trade and customs law has remained largely unchanged since our last publication in 2010. This year’s research lists 255 lawyers, a marginal increase from last year. The overall research finds that more practitioners are concentrated in the same, leading countries for this work: Brussels, DC and Canada account for over 50 per cent of all the inclusions in the total edition. Last year we reported on the WTO’s forecast of 13.5 per cent expansion in international trade, and how the finding underscored the belief that governments had rejected protectionism. In reality, expectations were exceeded as global exchanges surged by 14.5 per cent. However this year the increase in disputes, remedies and export control work suggest the opposite: world trade growth is expected at a more modest 5.8 per cent, a downgrade from 6.5 per cent in April. Numerous lawyers we spoke to are unsurprised; a slow economy often marks a shift from traditional, outward trade work, to litigation in anti-dumping and anti-subsidy conflicts – characteristics of a more defensive attitude to trade by governments.

Similarly, on the customs side, practitioners reported that the international war on terror, as well as the Middle Eastern and North African turmoil has created a tougher, aggressive stance on border enforcement. As one American lawyer explained, “enforcement is an alternative to raising taxes”. It is clearly a priority for a number of governments, notably the US, which stringently regulates the trading activity of domestic companies who do business with, or produce goods and services in, those volatile parts of the world, and are willing to impose very heavy penalties for infringements of the law. For North American lawyers, trade and customs cases are taking primacy within their practices: they are seeing more customs valuations, reviews, due diligence, compliance, and international arbitration. As a result, they reported a noticeable swell in federal litigation on export control and customs sanctions, and as the fines get heavier clients seek specialists to help them navigate the law. Although the market is still dominated by the US, UK and Canada, it has expanded into South America and Asia. Our 2010 to 2011 findings support this trend. As can be seen from chart 1, the number of lawyers included from China has increased by 20 per cent, India by 25 per cent, Brazil by 13 per cent, Japan by 14 per cent and South Korea by 40 per cent. According to one European lawyer, more countries are confident in bringing cases before the EU Trade Commission and the WTO. As the flow of traffic increases they require solid multi-jurisdictional knowledge and good working relationships with boutique firms.

Number of Lawyers listed from the BRICS economies 2009 - 2011

 

The big story is China. September this year marked the tenth anniversary of China’s accession into the WTO and during that time it has entered into bilateral agreements with Australia and New Zealand (ASEAN), Chile, Hong Kong, Peru, Macau, Singapore, Thailand, Costa Rica and many other countries and trading blocs. Last year China was the largest exporter and the second largest importer of merchandise in the world, and the third largest exporter and twelfth largest importer of services in the world. Despite the enormous increase in Chinese trade, sources revealed that their WTO compliance is still proving a problem. Those who work in the US and the EU have seen dozens of cases, often but not exclusively, naming the country as the respondent in export control, anti-dumping filings and ‘337’ conflicts (IP infringements) at the US International Trade Commission. The forecast was unanimous: as long as China continues to be one of the largest exporters in the world, and as long as it continues to accept some of the most arduous conditions of any WTO member ever to join, lawyers can expect to see much more dispute-based work coming from this country.

FORECASTS FOR THE FUTURE

Lawyers repeatedly mentioned the host of new agreements in the pipeline, which reflects the trend towards more work coming out of emerging provinces. Eastern Europe is predicted to generate more trade defence work. In the Ukraine, trade instruments are being used to implement protectionist policies, particularly relating to natural resources and energy. The same is expected from Russia when it joins the WTO later this year. Experts predict compliance problems as it tries to marry its fair trade requirements with the temptation to use its considerable political and economic leverage over neighbouring CIS countries. The creation of the customs union agreement between Russia, Belarus and Kazakhstan is going to further skew the balance of trade power but will generate more work for CIS lawyers who are experienced in advising companies operating in this part of the world. With these attempts to free trade, practitioners predict that the region’s trade bar will continue to grow in size and expertise.

Canada and the US, which have established active trade bars, are experiencing a busy period. Negotiations between Canada and the EC are well underway towards cementing a Comprehensive Economics and Trade Agreement (CETA). Further, a Canada-Japan FTA and Comprehensive Economics Partnership Agreement (CEPA) with India are also being explored. The agreement should produce more work and prompt improvements in merchant and tariff knowledge between the countries and the regions.

The US-South Korea FTA was signed in 2007, as was the US-Colombia FTA but neither are in force yet due to delays from Congress. DC based lawyers complained of a stagnant trade policy brought about by the political disharmony between the current government and the bi-partisan US Congress. They do not expect any direct, wholesale reform in this area for the foreseeable future; however, Canadian lawyers expressed concern that the American Jobs Bill is just another part of an increasingly protectionist agenda being imposed by the Obama Administration. The ‘Buy American’ clause is aimed at ensuring American-only products are used in metal and goods manufacture over and above other producers, even those with established bilateral agreements. The biggest casualty will be its largest trading partner, Canada. America received 75 per cent of its total exports in 2010, mainly in automotive, metal and energy products. According to Canada’s central statistics agency, this figure is down from 87 per cent in 2001 and is expected to fall further if the bill is passed through Congress in its current form. The consequence will be a call for compliance and internal trade advice as companies familiarise themselves with the new provision.

The research also revealed that more Asian states are entering into long term agreements and strengthening trade ties with local neighbours and international bodies. As reported, China has entered into many BTAs since it joined the WTO, and in that time was responsible for $203.2 billion worth of traffic in merchandise to the US and $44.5 billion in commodities to Canada, an increase of nearly 9 per cent and nearly 14 per cent respectively. Further, the EU-South Korea agreement took effect in July 2011. It abolishes 70 per cent of duties between the parties on automotive, pharmaceutical and consumer electronic goods which will rise to 98 per cent after five years. The EU is South Korea’s largest trading partner and largest source of foreign investment. Lawyers who work within the Asia region are busier with EU work, as reflected in the 40 per cent increase in listings in the research this year, and expect this trend to continue. The next 12 to 24 months will involve providing advice to companies on new compliance requirements, due diligence and general trade strategy. As far as some of our sources are concerned, Asia will definitely dictate the future of long term international trade.

FIRM ANALYSIS

A number of law firms have reacted to the increase in trade in recent times by bolstering their international teams or forming new practice groups. Compared to previous years, there has been a rise in inclusions from multinational, full service firms. For example, five years ago many law firms did not have a discernible trade and customs presence in our research but in response to high profile matters and key lateral hires, have developed internal and external expertise on import compliance, economic sanctions and FCPA actions. Further, as can be seen in chart 2, Baker & McKenzie LLP increased its representation from four to nine lawyers, spread out across South America and Asia-Pacific.

Leading Firms 2009 - 2011

 

As we reported last year, the establishment of new agreements and unions in Asia has made an impact on the quality and volume of trade experts. While the number of lawyers from South America is responsible for 12.8 per cent of the total listings this year, compared to last year’s figure of 11.4 per cent, the marked change is in the Asia-Pacific district. Of the total lawyers listed this year, 17.5 per cent practice in Asia, compared to 14.9 per cent last year. Our data confirms that the countries in which trade work is most contentious are also the regions where most of the pre-eminent lawyers practice. The United States, Belgium and Switzerland are the stand out jurisdictions, and Sidley Austin LLP has featured the most lawyers in this practice area since 2009.

This year the volume of international trade exceeded growth expectations, but lawyers expect the opposite for next year. WTO economists foresee growth of only 5.8 per cent, a downward revision from 6.5 per cent in April this year. The economic crisis has slowed international growth in general, and according to our sources, trade is becoming more protectionist as cross-border transactions, export control work, anti-dumping disputes and litigation become the mainstay of lawyers’ practices from Beijing to Geneva. There has been a clear demand for high quality and experienced multi-jurisdictional trade and customs knowledge: next year we expect to see full service law firms continuing to enhance their international trade practices beyond the usual jurisdictions, with a particular emphasis on the EU region, Asia and Latin America.

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Nominees have been selected based upon comprehensive, independent survey work with both general counsel and private practice lawyers worldwide. Only specialists who have met independent international research criteria are listed.

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