Roundtable: Trade & Customs 2011
The International Who’s Who of Trade & Customs Lawyers has brought together three of the leading practitioners in the world to discuss key issues facing lawyers today.
Participants
Samir Gandhi
Economic Laws Practice
India
Estudio Carena & Asociados Abogados
Argentina
King & Spalding LLP
Switzerland
THE EUROPEAN SITUATION
Who’s Who Legal: Many of the lawyers we spoke to noted a feeling of anxiety among clients about the negative effect the current European debt crisis could have on international trade. How are clients responding in your jurisdiction? Has there been a shift in the nature of the work trade lawyers are doing as a result of the past year’s financial turbulence?
Jasper Wauters: It is clear that the prolonged nature of the economic crisis including the renewed uncertainty in the markets that resulted from the European debt crisis has an effect on international trade. The information available to date suggests that governments generally resisted protectionist pressures in the first part of the crisis in 2008 - 2009. However, it seems that WTO members are finding it difficult to continue to do so and have in fact started to resort to an increasing number of both legal and illegal barriers to trade. In the context of the Greek debt problem, reference is often made to the way in which certain Latin American countries bounced back after the financial crisis of the turn of the century. What is often forgotten in that context is that this recovery was accompanied by a host of non-transparent and likely WTO inconsistent beggar-thy-neighbour policies, which undermine the very basis of the open trading system on which countries depend for selling their products globally. It will be interesting to see how the WTO members respond to the continuing crisis and whether they will remain willing and able to abide by their WTO obligations of open and transparent trade.
Samir Gandhi: In light of the grave financial situation in Europe and the US, our clients, particularly those with export interests in these economies, have shown greater inclination to explore business opportunities in other developing economies. This has resulted in the focus of our clients shifting to other parts of the world, particularly South Asia and South East Asia. In the past two years, India has concluded a number of strategic free trade agreements (FTAs) including the India-ASEAN FTA and the India-Korea CEPA. It is also in the process of negotiating new FTAs with countries such as New Zealand and Israel. Economic Laws Practice (ELP) has increasingly received client mandates from private companies to help them attain greater market access to the South Asian and South East Asian region, particularly by availing of the various concessions under such FTAs. We have also been appointed by sovereign governments such as the government of Israel to provide advice during their ongoing trade negotiations with India. Our clients have also increasingly requested our assistance to avail of the benefits provided to manufacturers and exporters under various export promotions schemes of the Indian government to sustain the slump in global demand.
In addition, another trend that we have noticed during the current financial crisis is the increased use of various trade remedial measures such as anti-dumping and safeguards. In 2010-11, India itself initiated more than 35 anti-dumping investigations. The trade team at ELP has acted either for the domestic industry or on behalf of exporters from several jurisdictions across the world, in several of these anti-dumping and safeguards investigations.
Adrián Míguez: The European crisis has most probably not taken its heaviest toll on Argentina and Brazil yet. We should recall that, since they are the two main members of the Mercosur –Argentina, Brazil, Paraguay and Uruguay –, an important share of their trade is funneled within the area. Furthermore, it is also noteworthy that Latin America has experienced sustained growth during the past years, which has boosted foreign trade within the entire region. At the same time, both countries have adopted certain mechanisms and employed certain tools to control the inflow of imports for the twofold purpose of hindering the outflow of currency due to foreign purchases and promoting the substitution of imports for domestic production.
CHINA/US
WWL: At the time of writing, the US Senate recently approved a bill to raise tariffs on Chinese goods in response to alleged currency manipulation, prompting China to appeal to the WTO. How might continued trading tensions between the world’s two largest economies affect global markets?
Jasper Wauters: The extent to which the US and China will be able to resolve their trade differences and the manner in which they do so, will be key to the future of the global trading system. China is willing to use all regulatory tools it has available to it to strengthen its position in world trade. Some of these tools are subject to disciplines under the WTO Agreements or are covered by commitments undertaken by China at the time of accession, such as export duties. Those commitments can be enforced through the dispute settlement mechanism of the WTO. Other measures are less obviously governed by international trade rules even though these government interventions clearly affect trade. It will be important for countries to find the most effective way of ensuring that such trade-related government interventions do not lead to unfair trade competition.
The fact that a number of WTO Members such as the US and the EU have started to use unilateral countervailing measures to offset the advantage created by Chinese government subsidies is also an important development. Such measures will likely become increasingly important upon the expiry of the transition period for China to move from non-market to market economy status.
The most positive news in respect of the relations with China is perhaps the fact that China has been willing to resolve trade disputes through the WTO dispute settlement system. It has been a very active user of this system over the last five years, participating both as a complainant and as a defendant. For the system as a whole, such development is itself very positive news.
Samir Gandhi: There is no doubt that a trade war between the US and China, which together account for almost 20 per cent of the world trade, will have a severe impact on the global economy, including India. However, for several Indian companies, trading tension between the world’s two largest economies and the proposed US bill to raise tariff on Chinese goods, is also viewed as an opportunity because some US based corporations may consider relocating their manufacturing businesses to other low wage economies. India is an important trading partner for the US, being second only to China, in terms of economic growth. There are several trade and investment opportunities for the US in India and while the growing rift between China and the US is certainly not good for world trade, it does present opportunities for India.
Adrián Míguez: With regard to the China - US trade in the case of Argentina, both markets influence exports as well as imports. Nonetheless, Argentina has adopted more stringent control mechanisms with respect to the valuation of imports of goods from both countries, as well as with respect to the observance of the rules of origin lest, especially in the case of China, there remains a surplus which may not be placed in the US and must be redirected towards other markets. Automatic, as well as non-automatic, import licensing systems have been implemented in many cases. At the same time, Argentina has concentrated its efforts on maintaining food exports to China “a market in which it competes with the US” and taken specific actions to control the value of commodities exports in operations between affiliates, cross-checking information on transfer prices between tax and customs offices.
EMERGING MARKETS
WWL: Away from the world’s leading economies, which jurisdictions are emerging as strong venues for trade work? What role are lawyers playing in the smaller countries’ trade and customs development?
Jasper Wauters: International trade work remains dominated by trade regulation in the big two, the EU and the US, as well as of course the emerging BRIC powers. Their importance will likely continue to increase in the months and years to come. The entry into the WTO club of Russia might be a major event that is likely to lead to an increase in trade related work. It is not by accident that our firm, which has such a strong trade and energy practice, recently opened an office in Moscow.
Samir Gandhi: India’s trade and commercial relations with developing economies including South Africa, Russia, Brazil and the south-east Asian countries have grown significantly over the past few years and have seen these jurisdictions emerge as strong venues for trade work. Additionally, the ASEAN countries as well as new trading partners with whom India is engaging in bilateral trade agreements such as Israel are also important sources of trade work. While the world’s leading economies such as Europe, China and the US continue to account for a significant amount of trade related instruction, trade with India’s other trading partners has generated a number of trade remedy and trade policy related mandates.
Adrián Miguez: Argentina and Brazil are two of the countries which contribute to develop South America’s foreign trade, together with Chile and, increasingly, Peru. In general terms, countries of this region have broadly pursued anti-cyclical and reserve-accumulation policies. Argentina has also applied genuine debt relief policies, which, according to pundits, will help place it in a lower-risk position against the crisis. Since as early as 2006, Argentina has been implementing automatic and non-automatic licensing systems, tightening customs controls over valuation of goods and the rules of origin, and launching several investigations on alleged dumping. All these measures have been aimed, as was mentioned above, at reducing the outflow of currency to foreign countries, raising the trade surplus, and fostering the substitution of imports for domestically-manufactured products, in order to maintain employment levels. Brazil and Argentina have further agreed, in this respect, that importers and exporters may pay their mutual operations in local currency, in lieu of US dollars, by means of a mechanism implemented by their respective central banks.
LAW FIRM RESPONSES
WWL: A number of lawyers we spoke to noted that, for many firms, trade work is no longer a high priority and does not create sufficiently strong returns. Many noted a strong shift towards favouring smaller, boutique trade practices among lawyers and clients alike, with others reporting a dearth of young lawyers entering the field. Is this the case where you are? How sustainable do you consider the practice of trade law to be in the current market?
Jasper Wauters: In my view, clients continue to demand high value from their lawyers. In this respect, the trade area is no different than any other highly competitive area of law. In order to deliver high value in the trade area, lawyers must have a high level of expertise and be able to translate such expertise into practical and commercially beneficial results. After 15 years of WTO practice and dispute settlement reports, international trade law has developed into a specialised area of law. It no longer suffices to know a little bit about everything. The days of the generalist are over. That is the strength of our Geneva office. We are able to provide highly specialised and commercially meaningful advice on a broad range of complex issues and deliver concrete results to our clients. All of us in Geneva have about 15 years of experience in international trade law, each bringing our own diverse expertise. We speak the WTO’s language and are able to translate that into business language for our clients. Based on the amount of work that has come our way last year, I can only conclude that clients appreciate our approach. The strength of King & Spalding is that it is both big enough to be able to accept any assignment and specialised enough to provide the kind of service that particular clients might need.
Samir Gandhi: In India, a trade law practice has always been a niche area, which has predominantly been occupied by smaller, specialised firms. These boutique firms have diversified over the years to provide a full range of trade and dispute resolution services including trade remedies, trade policy advice and advice on bilateral trade agreements to governments and private clients. During the current economic crisis, trade firms in India have probably been busier than their foreign counterparts. This has primarily been because India itself is the most frequent user of trade remedial measures such as anti-dumping and safeguard duties to counter imports. Simultaneously, there has been an increase in the number of trade remedy investigations initiated against Indian exports in several jurisdictions.
Further, at the bilateral level, India is currently negotiating a number of trade agreements with several of its trade partners and consequently companies as well as sovereign governments require advice from law firms on trade policy and regulatory matters. Economic Laws Practice has been perfectly placed to service both trade remedial work as well as international trade policy mandates with its team of lawyers, accountants and economists spread across India.
Adrián Míguez: In my opinion “from my experience as the Director of the Tax and Legal Department of Pwc for 10 years and partner of Carena & Asociados, a boutique law firm specialised in foreign trade, customs law, and exchange matters, since 2008”, with respect to this region, especially the Southern Cone of Latin America, foreign trade matters have long been exclusively handled by specialised law firms. As Jasper Wauters explained, we speak the language of the WTO, the WCO, and, in our case, LAIA and Mercosur bodies. We understand temporary imports mechanisms and the use of free trade zones. The largest firms have attempted to hire young lawyers to deal with these matters but the fact is that, in view of the amounts of the fines at stake in the matters generally addressed at customs offices within the region, multinationals still prefer the experience of boutique firms, which can guarantee a staff of professionals with the appropriate expertise. Furthermore, the focus given by tax authorities to transfer prices has enabled to develop specific niches for tax planning advice, not only with regard to income tax, but also with respect to customs valuation. The Big Four have been able to play a role in that regard with a more general view. However, but for these cases, even law firms themselves turn to boutique firms when it comes to solving serious customs matters.