U.S. LAW & GLOBAL TRADE RELATIONS.

Antitrust immunity for OPEC and its members has been upheld under old case law for decades. This is very unfortunate.

There is no reason that such immunity ought to be extended to OPEC members in this century. Especially, when those actions imperil U.S. foreign policy, U.S national security interests, the U.S. domestic economy and the global economy.

The Foreign Sovereign Immunities Act (FSIA), enacted in 1976, and amended numerous times, allow actions against a foreign state on various grounds. Those include a state-supporter-of terrorism and more generally for international terrorism or tortious acts.  I would argue that the raising or oil prices by Saudi Arabia falls within these categories. In the sense that they support Russia’s unlawful and terroristic war crimes in Ukraine. (This State Dept. should consider declaring Saudi Arabia a state-supporter-of-terrorism).

It is also very clear to me that OPEC nations actions fall within the more traditional category of price-fixing. We have held foreign corporations in criminal and civil actions responsible and liable for such extraterritorial, predatory actions as long as they have an impact in the United States. Of course, we also hold foreign states liable under the Foreign Sovereign Immunities Act for participating in commercial transactions and their tortious actions. 

It is about time the Biden administration should consider submitting executive suggestions to federal courts when necessary, indicating that they should not find immunity to foreign states for their predatory actions.

Global commerce and geopolitics have come a long way from when the United States initially moved away from the notion of absolute sovereign immunity in the 1950s. When it adopted the restrictive approach to sovereign immunity in the Tate Letter of 1954, in the FSIA of 1976, and various amendments to the FSIA since then.

The newer and broader view of antitrust by the Biden administration, favored now by the FTC and the U.S. Dept. of  Justice under President Biden, should embrace a more updated and aggressive view of U.S. international antitrust law and greater restrictions on sovereign immunity generally in order to support the U.S. national interest, including the welfare of U.S. consumers and workers.  

There is no foreign policy reason why private actions or those by the Dept. of Justice should be barred by an atavistic view of governments participating in the global marketplace. A more robust implementation of or economic legislation can help implement our foreign policy. A more updated view would also help protect U.S. consumers and the U.S. economy in this tricky decade.

Good opinion piece by Thomas Friedman argues we are now taking on China and Russia and export controls is the critical instrument the U.S. is utilizing.  And this new American foreign policy and national security strategy is focusing on semiconductor chips. In particular, he discusses the new set of export regulations that clearly targets China. Biden’s new annual national security strategy report released last weel clearly targets both China and Russia.

So, the question I have is the following: Are export controls the new foreign policy?  Yes, in part. They are clearly coming into their own as central to implementing U.S. national interests and national security goals in a new era of global politics – where both China and Russia are the major concerns. Robust implementation of our trade laws generally is necessary to implement our foreign policy.  Indeed, changes to CFIUS focusing on China, the recent adoption of computer chip subsidies, and tax credits for e-cars clearly indicate that a broader security – related trade strategy has become a central focus of U.S. foreign policy. (My concern now is how consistent are some of these policies with our obligations under the WTO as well as do they risk political and trade retaliation?)

“Thomas Friedman — China and Russia. (Oct. 12, 2002).

National Security Strategy Report. (Oct. 2022).

“How U.S. is Choking off China from Technology.” (Oct. 14, 2022).

“Trade has Become a Weapon.” (Oct. 14, 2022).

“Biden’s Trade Assault on China.” (Oct. 20, 2022).

Trump’s toxic trade policies are well and alive.  They are being furthered by Biden’s policies today, especially those now pushing industrial promotion in the name of national security and “economic patriotism.” The role of the Department of Commerce and CFIUS have become much more important during the Biden administration.

The dynamics of globalization have changed over the last twenty years and the geopolitical landscape has dramatically evolved.  We do need a rebalancing of domestic / national security needs, especially those emerging since the global Covid pandemic, with the dynamic growth factors of global commerce. This includes assessing more carefully the inflationary impact of the U.S. dollar valuation on its exports.

However, many of the recent U.S. trade and investment policy responses have not been thought through sufficiently. Countries are already talking about protesting these protectionist policies by the Biden administration as being in violation of WTO trade rules and subject to WTO litigation. We’ll see.

Here are a few recent articles discussing the above.

“Investors are learning to Love Industry Again.” Financial Times (Oct. 3, 2022).

“U.S. Said to Plan New Limits on Tech Sent to Chinese.” Wall Street Journal (Oct. 4, 2022).

“Recent Legislation Expands Role of Government in Private Markets.” Wall Street Journal (August 13, 2022).

“GOP Needs to Leave Trump Behind on Trade.” Wall Street Journal (Oct. 3, 2022).

“Raimondo Drives Industrial Policy.” Wall Street Journal (Sept. 6, 2022).

“Post-Neoliberal Era Brings New Business Rules.” Financial Times (October 10, 2022).

The inaugural special report on foreign investment in the U.S. by the Financial Times has just been released. Ranks the top cities.  None are in Virginia. Six are in North Carolina. Seems to be a wakeup call for Virginia. The methodology focuses on workforce and talent, business environment, quality of life and openness. I am surprised about the absence of Virginia from this important ranking. 

“The Best Cities for Foreign Invesment.” Financial Times (October 5, 2022).

Trump’s toxic trade policies are well and alive.  They are being furthered by Biden’s policies today, especially those now pushing industrial promotion in the name of national security and “economic patriotism.” The role of the Department of Commerce and CFIUS have become much more important during the Biden administration.

Recent U.S legislation expands support for semiconductors, restricts U.S. sales of chips to China, and further tightens both outward U.S. investment and inward investment into the U.S.

Yes, the dynamics of globalization have changed over the last twenty years and the geopolitical landscape has dramatically evolved.  We do need a rebalancing of domestic / national security needs, especially those emerging since the global Covid pandemic, with the dynamic growth factors of global commerce. This includes assessing more carefully the inflationary impact of the U.S. dollar valuation on its exports.

However, many of the recent U.S. trade and investment policy responses have not been thought through sufficiently. 

Some U.S. policies today echo those of the 1930’s and are disturbing. There is a sentiment today in the United States that is somewhat similar to the fearful and protectionist ones held by many in the 1980’s toward ‘Japan Inc. ‘ This is clearly an unfortunate throwback.

Countries are already talking about protesting these protectionist policies by the Biden administration as being in violation of WTO trade rules and subject to WTO litigation. We’ll see.

Here are a few recent articles discussing the above.

“Investors are learning to Love Industry Again.” Financial Times (Oct. 3, 2022).

“U.S. Said to Plan New Limits on Tech Sent to Chinese.” Wall Street Journal (Oct. 4, 2022).

“Recent Legislation Expands Role of Government in Private Markets.” Wall Street Journal (August 13, 2022).

“GOP Needs to Leave Trump Behind on Trade.” Wall Street Journal (Oct. 3, 2022).

“Raimondo Drives Industrial Policy.” Wall Street Journal (Sept. 6, 2022).

“Post-Neoliberal Era Brings New Business Rules.” Financial Times (October 10, 2022).

The role of states in U.S. foreign policy has often been overlooked generally and especially in international trade relations. A new article in Foreign Affairs discusses the role of states within today’s political reality. I’ve always believed this is an over-looked topic. States have often been active in promoting international trade given the federal government’s inaction. This new article offers a number of interesting observations. While not agreeing with all of them I do think it’s useful to provide some excepts.

• According to the most common understanding of the federal system—the U.S. government is the country’s preeminent source of policy direction and bears sole responsibility for foreign affairs. Together with lawmakers in Congress, the president and senior executive branch officials are viewed as the key agenda-setters on U.S. leadership and how it is exercised in a tumultuous world.
• By outward appearance, the expansion of federal powers in the twentieth century has given Washington the advantage in the federal-state balance.
• And thanks to their sizable economies, the largest states can make decisions that have an impact beyond their own borders. All this has meant that the federal system is far more adaptable, and states far more powerful, than has generally been recognized.
• But states do more than test new policy; they also fill in existing policy gaps when the federal government stalls.
• Despite their growing role in domestic policy, states may appear to have little sway in foreign affairs, where nation-to-nation diplomacy and hard power reign supreme.
• As states assert their interests even more actively in the coming years, they will have a variety of tools to choose from. For one thing, they can count on broad public support.
• The growing power of states is already reshaping U.S. foreign policy. As states experiment with policies that the rest of the country isn’t ready to support, they can exert an immediate impact abroad: California’s zero emission vehicle policy, for example, was a blueprint for a similar scheme in China.
• The potential for state-led action is large. Already, states have pledged adherence to international climate change treaty provisions and are forming agreements with foreign governments to achieve sustainability goals.
• States seem likely to take the lead include supply chain resilience and industrial policy coordination; regional trading arrangements; long-term research and development partnerships; international standard setting, as, for example, in environmental regulations; and new forms of international diplomacy.
• Foreign governments can strengthen their long-term relationships with the United States, regardless of who is in power in Washington, by building ties with individual states and their dependent cities.
• Leaders in major states should also plan for the possibility of severe or prolonged federal dysfunction.
• At its best, the constant interplay between the states and the federal government can provide a powerful strategic advantage to the United States. States can contribute to continued U.S. leadership on the most vital international policy challenges of our time, as well as ensure the resilience of the U.S. system, helping to preserve and defend democratic institutions and practices.
• What no one should ignore is that U.S. states have the power as well as the motivation to both challenge Washington and shape the global policy agenda. State policymakers and leaders of countries large and small must consider the United States a vast entity with presumed national interests but also as an archipelago of powerful, competing jurisdictions, with certain shared ties, as well as an array of divergent interests and values.

      “Federalism and Foreign Policy.” FOREIGN AFFAIRS (Sept. – Oct. 2022).

China is Virginia’s third largest export market and is largest importer into Virginia. Virginia’s agricultural exports have increased year-over-year. (Major export commodities — soybean, pork, poultry, peanuts and tobacco.) So, what can be said? You need to be global to have a flourishing state economy. Trade with China is important, but Virginia transactions are broad and throughout the world. (Charts below are from the Virginia Economic Development Partnership and the Virginia Dept. of Agriculture.)

      Historical challenges have recently arisen attacking “globalization.” These challenges to traditional U.S. trade policy come from the liberal, conservative, protectionist and national security communities in the U.S. This development has been supercharged by the global pandemic and Russia’s invasion of the Ukraine, with China looming over this debate. A recent article in the Financial Times raises similar concerns worldwide. This is now a critical new development in U.S. politics, where trade has become a toxic topic and there has been, in fact, a convergence of views of the two major political parties. We’ll see how this develops. To me, this definitely represents a major change in the political ecosystem as to all issues of trade and investment in this decade. Clearly the era of post-War and post-Cold War globalization is changing. Here are some excerpts from the Financial Times article:

• Rising nationalism, is threatening the dense network of economic ties built up over the last three decades. The enemies of globalization can be found across the political spectrum, from the nationalist right to the anti-capitalist left. Over the past two years, the pandemic and the Ukraine war have demonstrated how vulnerable international trade is to unexpected shocks. 

• A decade ago, protectionism was still a dirty word in US politics. But the Trump administration started a trade war with China and the Biden administration has kept the tariffs in place. A bipartisan consensus in the US is now pushing for policies to reduce economic dependence on China and to repatriate key industries. 

• The invasion of Ukraine has not just made it seem imprudent to rely on political rivals for key economic inputs, it has also allowed the west’s national security establishment to seize the moral high ground from the free traders. 

• The US has long had rules that can restrict inward investment on national security grounds. The Chips Act creates new rules that will restrict outward investment, discouraging US firms from making semiconductors in China. 

• National security hawks believe that globalization meant that the western democracies naively sponsored the rise of hostile rivals such as Russia or China. Leftwing critics associate the “neoliberal” era of globalization with widening inequality and environmental degradation.

   “Enemies of Globalization.” Financial Times (August 31, 2022).