U.S. President Joe Biden putting a smiling face on Trumpian trade tensions, says lawyer
There are three main global issues driving work in international trade and investment law, say two practitioners.
Despite the “America is back” rhetoric from the Biden White House, protectionism continues to erect trade barriers and fuel disputes – including between North American trade partners. Backlash against Chinese government trade practices is continuing. And supply chains are being disrupted, from COVID, as well as heightened scrutiny from governments to counter human rights abuses.
From former U.S. President, Donald Trump, to Mexico’s current President, Andrés Manuel López Obrador, as well as governments in Poland and Hungary, rising nationalism is resulting in protectionism, says Riyaz Dattu, who practises international trade and investment at Arent Fox LLP.
Head of the International Trade & Investment Law Group at McCarthy Tétrault LLP, John Boscariol, says that while the Trump administration emboldened others in the world to similarly take a protectionist view of trade relations, that tendency has been carried on by his successor.
“That administration created space for allies, for competitors, for even the current administration in the U.S. to be more protectionist,” he says. “And that creates more trade tensions. And, obviously, that that creates more issues that international trade lawyers need to deal with.”
Increasing trade barriers around the world are resulting in more cases dealing with anti-dumping, countervailing, safeguarding and trade remedies, as well as product duties and discriminatory measures imposed post-importation, says Boscariol.
“If you look at the what the Biden administration has done, although they have put on a friendly face and a smile to their Canadian counterparts, we still have significant trade issues with the United States – and not just softwood lumber.”
The U.S. is challenging how Canada is administering its dairy quotas under the Canada-United States-Mexico Agreement (CUSMA) and Canada is challenging safeguard tariffs the U.S. has placed on Canadian solar-energy, says Boscariol. The Biden administration also terminated the Keystone XL pipeline and there is a dispute underway over Enbridge’s Line 5 pipeline, which runs through Michigan, he says.
Also a partner under CUSMA, the Mexican administration under President Obrador is reversing much of the liberalization that has occurred in Mexico’s economy over the last few decades, says Dattu.
“Mexico, at one point in time, had more trade with the United States than Canada did,” he says. “… Since [Obrador’s] coming to power, that is not so anymore.”
“[Obrador’s] policies are hurting many foreign investors.”
When Mexico joined the North American Free Trade Agreement in 1994, the U.S. and Canada benefited from Mexico changing the trade and investment rules related to its oil and gas sector, says Boscariol. It was Mexico’s price of admission, he says.
“And now we've seen the new government in Mexico take steps that are threatening or discriminatory towards foreign investors in the Mexican oil and gas sector,” he says.
Dattu adds that the trend is reflected in the policies of many Latin American countries toward their natural resources, which is impacting Canadian companies in the mining, energy and infrastructure sectors.
On the other side of the world, tensions with China remain topical, say Dattu and Boscariol. The view of the U.S. and others that China is heavily subsidizing its production, favouring state-owned companies and engaging in other practices which distort trade to the benefit of Chinese producers is not new, says Boscariol. The response is reflected in great number of anti-dumping, countervail and safeguard cases against the country, which result in tariffs being applied to Chinese exports, he says.
But becoming increasingly obvious in recent years is that underlying the trade war with China is a technology war, says Boscariol. Aside from tariffs and protectionist measures, this is being fought with economic sanctions such as export controls, aimed at protecting dual-use and military and other sensitive technology, as well as AI, quantum computing and other high-tech. That is where international trade lawyers are seeing a lot of activity, he says.
Companies are more closely guarding their proprietary technology and governments are becoming more aggressive and taking broader measures in controlling the type of technology that can end up in China or Hong Kong. “We have seen this used with Turkey and Belarus recently, as well,” says Boscariol.
“The number of issues we see on the export-control side has really skyrocketed in the last three or four years.”
“A number of our clients are looking at their supply chains, looking at technology exchanges that they may have had where Chinese entities were involved,” says Dattu. “So that is a very significant trend. And we'll see that continue.”
On the supply chain front, Dattu predicts, in the next year or two, Canada will step up enforcement on CUSMA’s provision prohibiting importation of goods produced under forced labour.
“This is driving our practice in a very big way,” says Boscariol. “… In the last two or three years, we've seen an enhanced focus on human rights in the supply chain.”
“That's a hugely significant issue for companies, like apparel companies and others, who may source their products – directly or indirectly – from countries where there may be human rights violations.”
Recently, Canada has imposed export controls on Hong Kong, China, Turkey and Belarus, on the basis of alleged human rights violations, he says. Currently before the senate, the Modern Slavery Act will require companies to report on the use of slave labour, forced labour and child labour in their supply chains, and the measures they have taken to address it.