Welcome to Weise Wednesday! Twice a month we share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. You have been involved in customs and global trade for many years. What is your perspective on what's happening in the global trade arena today?

A. These are indeed challenging times to be involved in global trade. In my 45+ years deeply involved in customs and global trade issues, there has rarely been a period of uncertainty like we are seeing today. This is particularly problematic for global traders because consistency of rules and predictability of costs and outcomes are so important for companies to be successful in the global marketplace.

In global transactions, companies must plan well in advance to ensure goods arrive in a timely and cost effective manner. But when the rules are changing and the cost of the transactions are so uncertain and unpredictable, effective planning is impossible, and business suffers.

 

A word on recent trade developments

In past Weise Wednesdays, I have discussed many of the issues which have contributed to the uncertainty facing global traders today – including the U.S. withdrawal from the Trans-Pacific Partnership (TPP), the renegotiation of NAFTA, the announced tariffs on certain steel and aluminum products imported from designated countries, and the proposed additional tariffs on designated products from China resulting from a section 301 action brought by the U.S. for alleged intellectual property violations by China.

Complicating all of these actions, and adding to the uncertainty, is the unpredictability of the response from our trading partners and the fear that retaliatory actions can spiral into a trade war that the world has not seen for a number of years.

In the case of the steel and aluminum tariffs, China has already announced its intention to retaliate by increasing tariffs on a number of U.S. products exported to China, and the fear is that other countries could follow suit. Several other countries have received a temporary reprieve from the additional tariffs while bilateral negotiations are underway to reach an alternative settlement with the U.S.

In some cases, like Korea’s reported agreement to modify its bilateral trade agreement with the U.S. (KORUS) to provide additional concessions, U.S. companies will benefit. But again, the uncertainty and unpredictability during the period of bilateral negotiations makes it extremely difficult for companies to plan global transactions in the short term.

On the U.S. 301 action against China, the U.S. has threatened an additional 25% tariff on up to $60 billion worth of Chinese exports to the U.S. Once again, China has announced its intention to retaliate with similar measures against key U.S. exports.

A process is currently underway in the U.S. to receive public comment on the proposed list of Chinese products that will ultimately be subject to the additional duties. It is hoped that bilateral negotiations with China during this review period can resolve the fundamental IPR dispute before any of the new tariffs go into effect. But again, nobody knows for sure what the final outcome will be, and this makes it very difficult for companies to plan for future shipments.

There is no question that all of these U.S. initiatives can, in the end, provide tangible benefits to U.S. companies by addressing trade imbalances that have existed for a long time. But it is not clear at this point how all of these issues will be resolved and how long it will take. Until the issues are finally resolved, it is understandable that there is a high level of anxiety among global traders.

 

Takeaway

In the near term, companies need to take steps to stay as nimble as they can in planning global transactions. It is critically important that the business community stay engaged in the process as it unfolds and closely monitor ongoing developments. Be sure your views are heard by the Administration and the Congress.