Arent Fox Trade Lawyers and Lobbyists Largely Pessimistic On Prospects for USMCA, China Deals

Former Rep. Phil English, R-Pa., now co-chairman of Arent Fox's lobbying team, says the incentives are in the wrong place for House Democrats to ratify the U.S.-Mexico-Canada Agreement. English was featured on an Arent Fox Sept. 16 webinar on "working through the chaos" along with Grant Aldonas, a former top trade lawyer on the Senate Finance Committee, former Sen. Byron Dorgan and two trade lawyers. English said if the economy worsens, it hurts Trump, not House Democrats, and that the NAFTA rewrite faces "a great deal of opposition" from elements of the Democratic coalition. He said it may never get ratified if it doesn't get done in the next two months.

Aldonas said he thinks "the prospects [for ratification] are pretty grim, to be honest, at least to get it done in this administration. You can feel the Speaker moving the goalposts." Aldonas said that U.S. Trade Representative Robert Lighthizer shaped the pact to gain "more support on the Democratic side than the usual 26 members." But, he said, "The Speaker is unlikely to want to give a win to the president." Speaker of the House Nancy Pelosi told a CNBC host Sept. 17 that she doesn't see an approval of USMCA as a "win for the president," and reiterated that her caucus is looking to get to yes.

English said, "As much as the USMCA also provides some relief in the agriculture sector, the biggest trade issue for ag right now is clearly China." Experts on the call disagreed on how the China trade war might shake out. Matt Nolan, a partner in Arent Fox's trade practice, said he thought China would make some ag purchases and "some nominal reforms, smaller things take place without really committing to anything again." Nolan said instead of trying to get promises of intellectual property protection, CBP ought to seize more counterfeits at the border.

Teresa Polino, a partner in Arent Fox's trade practice, says CBP does that, but it's hard to find all the counterfeits, especially with de minimis set at $800. Polino said a lot of companies are shifting manufacturing to Vietnam and that Vietnam is being more cooperative with U.S. customs authorities than ever before, to show it's not transshipment.

She said the pro-free-trade claim that consumers pay the cost of tariffs is oversimplified. "The reality is it hasn’t always been the importers who pay. Sometimes the supplier is willing to absorb the duty," she said, and other times, the importer pays, but it doesn't flow to the consumer because mass retailers deny requests to raise prices on the shelf.

Several participants said it would be nearly impossible for China to back down and still save face, and that what the administration is demanding is against China's leaders' political priorities. Aldonas said China is moving toward more state-owned enterprises and more protection for its homegrown firms, so tension with the U.S. will only grow.

Aldonas said the broad-based tariffs are not as effective as shutting down tech players like Huawei. He said the Justice Department could go after Huawei's SEC filings as misleading, and could put them out of business. "We’re imposing tariffs on textiles, which are not well-connected in the Forbidden City," Aldonas said.