US Trade Actions ‘Policy, Not Politics’

By Gary Burrows

The raft of tariffs, economic sanctions, changes in export/import controls and scuttled and reworked trade agreements under the Trump administration, characterized as protectionism by some trading nations as well as opponents, are “not politics but policy,” a national security policy expert posits.

“The changes we’ve already seeing and will likely continue to see are secular trends; it’s not some episodic aberration that a new administration would change,” said Mario Mancuso, partner with Kirkland & Ellis LLP. “The drivers of the policy choices that the administration is making are structural, not political. Frankly they’ve been at work for about a decade.

Speaking at Breakbulk Americas, Mancuso invited attendees to read the Trump administration’s National Security Strategy, issued December 2017. “These strategies focus on how the U.S. envisions itself in international security order … for the past decade these strategies have been based on terrorism for obvious reasons. This one is different.”

 

China, Russia Policies

For the first time in history, according to Mancuso, the U.S. actually labels China, the second-largest world economy, as a strategic competitor. The document also effectively lists Russia as an adversary. Though neither should be seen as a big surprise, formal U.S. policy frames the argument that China and Russia “are trying to change the global order in ways that would be detrimental to U.S. security interests.”

The other key point the policy makes, Mancuso adds, is that it makes history by linking trade issues with national security issues. “And while the strategy doesn’t present a unified theory of how to approach the world, it says we really cannot think of these issues in isolation.

“It’s a fundamental assessment of what U.S. security interests are and how they’re being impacted by what the U.S. administration believes are unfair trade practices by some of our largest trading partners,” he added. “The reason that’s also important is because it feeds directly into the economic sanctions and export and import issues.”

While U.S. businesses clearly understand that economic sanctions prohibit doing business directly with North Korea, that country has trade relationships with Russia and China and are engaged in illicit shipping practices to fund its weapons program, Mancuso said. The Office of Foreign Assets Control in an advisory this year detailed how the North Korean regime actually altered shipping documents.

“You can’t get much more serious about nuclear weapons than the Korean peninsula,” added Mancuso, who has served as undersecretary of Commerce for industry and security and deputy assistant secretary of Defense for special operations and combating terrorism.

With the policy change towards Russia comes a longer game. “You have a country led by President Putin what would like to re-establish in some way Russia’s place in the world. It’s not a near-term issue,” Mancuso said. “It is complicated in the Russia case because of the obvious political overlay that exists.”

He noted new Russia sanctions, which could be issued as soon as Nov. 1, “will have very dramatic consequences – not for just U.S. persons – but for non-U.S. companies that a role in such U.S. control. You know that it’s serious when the U.S. places sanctions on a president’s wife.”

On tariffs, Mancuso said the U.S. is strategically approaching them with regards to Europe and its recently renegotiated trade deal with Mexico and Canada. The latter he called a deal that creates “a runway effective to deal with China.”

 

Export-Import IT Controls

As part of U.S. policy, the government is undergoing a dramatic review of “emerging and foundational technologies,” he said.

“Some of these technologies include things like AI (artificial intelligence), blockchain, quantum computing. These are larger, winner-take-all technologies that have or could have important impact on U.S. military capabilities,” he said.

However, most of these technologies are exported under U.S. Export Administration Regulations classification EAR99, which doesn’t require a license in most cases. “It’s a default classification; it’s like for pencils. You can send these anywhere in the world without a license with the exception of sanctioned geographies and sanctioned persons.”

Photo: Mario Mancuso, partner, Kirkland & Ellis LLP leads a panel that assessed the trade landscape at Breakbulk Americas.