New Trade Developments and the U.S. — Careful Examination Needed.

A host of new trade developments recently have raised issues of U.S. national interests, national security, foreign investment, and issues of U.S. regulations. The represent a very dynamic and fluid situation that bears carefull  examination in this election season and during this global slowdown.
….. President Obama ordered a Chinese firm to divest ownership in four wind farm projects under the CFIUS legislation and national security provisions of the Defense Production Act. “Obama Orders Chinese Company to End Investment at Sites Near Drone Base.New York Times (Oct. 28, 2012). This raises fears concerning the U.S. approach to foreign business and investment liberalization even though Chinese acquisitions in the U.S. has reached already  a record high of almost $8 billion. “Blocked Project Raises Fears Over U.S. Approach to Foreign Business.” Financial Times (Oct. 2, 2012).
….. The Director-General of the WTO Lamy is not concerned  about the rise of U.S.-China trade cases in the WTO. He considers increased litigation as a function of greater trade volumes. Trade friction normally increases as trade volumes increase, and litigation increases with trade friction. This is a normal process and is dealt with effectively by the WTO’s dispute resolution system, so he contends. “Lamy Dismisses Rise in in  U.S. – China Disputes.Financial Times (Oct. 1, 2012).
….. The Supreme Court previously held that the presumption against extraterritoriality (or the presumption of territoriality) was not overcome in the reading of §10b(5) fraud cases in civil actions where you have “3-F” — a foreign issuer, foreign investors and foreign trading (even if the deceptive statements were made in the U.S.). Now the issue before the Supreme Court this term is if this precedent applies to criminal cases. This rule could of course be changed by Congress. “U.S. Justice in Collision with Foreign Fraud.New York Times (Oct. 4, 2012).
….. A new congressional report concludes that the expansion into the U.S. of Huawei Technologies and ZTE, Inc. (two Chinese telecom companies) would pose a national security threat. (But has found none so far.) This report is likely to add to tensions with China. But the report also comes from a Republican controlled committee during the presidential campaign. “China Tech Giant Under Fire.Wall Street Journal (Oct. 7, 2012). China has of course lashed back with cries of protectionism. “Huawei Fires Back at the U.S.” Wall Street Journal (Oct. 8, 2012). (Congressional Report of Oct. 8, 2012). CNBC Video — Huawei (Oct. 9, 2012).
….. A recent Wall Street Journal op-ed attacked President Obama’s trade war with China concerning solar panels and auto exports as being derived from his cronyism. “The Dumbest Trade War.Wall Street Journal (10.13.12).
….. This is a good pair of articles discussing China – U.S. trade and economic relations. The first argues that attacks by the U.S. presidential contenders are counter-productive and miss the real challenges. The second argues that we are in a new capitalist cold war with China and CEO’s need to overcome their taboo about speaking out against Two Articles on U.S. – China Trade and Economic Relations — Real Challenges or a New Cold War. Washington Post (10.14.12).
….. Mexico filed an action against China in the WTO concerning China’s subsidies of production and exports of clothing and textile products. Mexico argues these measures appear to involve both prohibited and actionable subsidies that are inconsistent with China’s obligations under the Subsidies and Countervailing Measures Agreement, GATT 1994, the Agreement on Agriculture, and China’s Accession Protocol. Recently Mexico  has greatly increased its exports to the U.S. and is a major market for U.S. exports. “Mexico Has Filed Dispute Against China.WTO News (Oct. 15, 2012). Mexico is supplanting China to an important degree in manufacturing exports to the U.S. because of cheaper wage costs. “Mexico: China’s Unlikely Challenger.Financial Times (9.20.12).
….. Regulation (for example, different standards for mobile networks), private corporate restraints (antitrust violations), and tariffs all hold back trade. Generally, only tariffs and certain non-tariff barriers violate WTO rules. “Pernicious Regulations and Trade.” Financial Times (Oct. 16, 2012).
….. China is a focal point in the Romney and Obama presidential campaigns. “China and Its Trade Practices.New York Times (10.16.12). “China Fumes Over Debate Bashing.” Wall Street Journal (10.18.12). “Better Ways to Deal with China.New York Times (Oct. 24, 2012).

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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