A trade ‘Letter from America’

03 May 2018

This article was first published by AirCargo Magazine.

The renowned journalist Alistair Cooke famously wrote and broadcast ‘Letter from America’ from the US for a period of 58 years. It was a concise and learned spoken piece, around 15 minutes in length in which Mr Cooke delivered observations on developments in the US over the preceding week to a BBC audience in a manner intended to educate the listener and remove some of the confusion usually associated with the US. 

The ‘letters’ were subsequently broadcast to a much wider audience through the BBC World Service including into Australia and also formed the basis for television series.

Such was his fame that he was even included in a Monty Python sketch in which he was ‘attacked by a duck’ while delivering one of his letters. It was certainly silly but the mere fact of being the subject of a sketch reflected his status in society and the media

Having listened to many of the letters as a younger man, it occurred to me that this article could draw from the ‘Letter from America’ history as another form of ‘Letter from America’ but focussing on observations on trade matters from my current trip to New York City, Washington DC and Chicago, homes to much of American politics and industry. During the visit I was fortunate to spend some time with people very close to the centre of the issues we are facing and having to deal with the associated confusion.

  • The uncertainty is very real and shared by all. I spent time with lawyers who have moved to the equivalent of ‘DEFCON 3’ and haven’t rested much since early April as they log the threatened moves and counter-moves to try and navigate the agenda.
  • Many of those in the US were keen to get my ‘take’ on what was happening and what may happen on the basis that they little idea themselves on what was developing. It seems that much is being developed from one source only (the US President) through one medium (Twitter) so conventional mechanisms are not providing the usual information. Much action is being taken at the ‘Executive’ level without reference to a wider Cabinet, let alone Congress.
  • Although we may have focussed on dumping and countervailing measures along with the outcomes of the sections 232 and 301 ‘investigations’ and proposed retaliations there is as much developing in the area of sanctions. The imposition of new sanctions on certain parties and on trade with certain countries is creating significant impediments to trade and delaying investment decisions. Many are concerned that the relaxation on sanctions with Iran may be reversed from the US. The direct and indirect impact of US trade sanctions cannot be under estimated as even if Australian sanctions are cleared the US sanctions could still have an impact.
  • There is a concern that the experience of the US Trade Representative Robert Lightzier in largely confined to trade remedies against China which could limit his proposed responses to trade problems to merely imposing additional trade remedies rather than investigating other options.
  • The ongoing spiral of unilateral action by the US and retaliation by US trading partners merely contributes to the uncertainty. Measures are announced without certainty then adjusted even before being imposed (such as the additional tariffs on steel in aluminium in the US).
  • The ongoing ‘war’ on overcapacity on steel and aluminium in Asian and other markets will be a major battleground with Australia and the US actively sharing information on circumvention measures and measures to stop circumvention. We can expect additional actions shortly.
  • The Federal Maritime Commission investigation into detention and demurrage and related unfair practices (see here for an example) is a serious attempt to review these practices and is likely to flow into other jurisdictions. I was lucky to speak to lawyers closely involved in the investigation representing companies paying these charges and a lot of work has been undertaken to focus on what is seen as a massive and unreasonable cost to industry.
  • The debate on the impact of ‘modern slavery’ has taken on significant impact with studies showing that much of the supply chain producing seafood in South East Asia in operating in conditions which would be seen as modern slavery, along with the textiles and footwear industries. Even though the provisions only directly affect large companies, those companies will pass down the obligations and expectations on smaller parties who supply to them.
  • After a brief (3 day) dalliance with the idea of re-joining the CPTPP, the Trump administration seems still set on not joining that alliance and is pressing its NAFTA partners on re-negotiation of that deal. NAFTA seems the most pressing of issues, consistent with the promises made during the election campaign.

Ultimately the sense is that we should continue to press our own interests and complete as many other deals as possible as the US looks to have vacated its leadership role and continues to follow an increasingly insular agenda. So, even though we cannot ignore US actions and the responses we have little real ability to impact those actions and we should continue to progress our own agenda with trade partners from whom we can receive a higher level of certainty. US interests are looking with some envy on proposals to develop FTAs with the EU and the UK.

Oh – and if pain persists, consult your friendly neighbourhood trade lawyer as well as considering a ‘trade psychic hotline’.