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Biden’s Trade Plate Full, but Action Could Take Time

It’s likely to take six months for any significant trade actions or policies to come out of the White House, which would coincide with the need to renew Presidential Trade Promotion Authority (TPA), according to David Spooner, Washington Counsel for the United States Fashion Industry Association (USFIA) and a partner at Barnes & Thornburg.

Speaking on USFIA’s “Fashion Forward” virtual conference on Wednesday, Spooner said that time frame is when President Biden would look to gain Congressional approval for TPA in order to negotiate any trade deals, such as potential pacts with the U.K., European Union or African countries or blocs. TPA, which allows the president to strike trade deals without Congressional amendments, expires on July 1.

That’s not to say aren’t trade issues pending or that need to be dealt with more immediately. First up is likely what to do about the military coup in Myanmar, which had been seen as a place with strong potential and had seen some early growth for apparel manufacturing since sanctions were lifted after elections were held in 2010 and a sense of democracy had been restored after many years of military rule.

Spooner, a former official at the U.S. Trade Representative’s Office and Commerce Department in the George W. Bush administration, and Julia Hughes, president of USFIA, agreed that the Biden administration is likely to suspend Myanmar’s GSP (General System of Preferences) trade benefits–if and when GSP is renewed–and impose a variety of sanctions similar to what was in place prior to 2010 when the regime change occurred and actions such as a ban on imports from the country were lifted.

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“I did reach out to some folks in the administration to get a sense…and there didn’t seem to be an immediate appetite for trade sanctions,” Hughes said. “More likely is imposition of some sanctions…with the hope that there is a return to democracy and to the democratically elected leaders in Myanmar sooner rather than later. We haven’t heard anything yet if there’s an impact on manufacturing.”

As for GSP, the program expired on Dec. 31 and will need to be renewed. There appears to be bipartisan support to do so, although some in Congress have discussed changes to eligibility and products covered. The status of the Miscellaneous Tariff Bill is in a similar situation. Spooner said both bills, if passed, are likely to be retroactive.

Action is pending and should take place soon on the Uyghur Forced Labor Prevention Act that requires companies to prove with “clear and convincing evidence” that any products sourcing from China’s Xingjiang region are not made with forced labor, as has been found, and requires a list of products made by forced labor there and a list of businesses that sold the products in the U.S. The bill calls for whether reasonable grounds exist for issuing Withhold Release Orders (WRO) against companies and shipments from the region. WROs have been carried out by Customs & Border Protection under prior statutes.

Speaking in a webinar on the new administration’s trade policies Wednesday, Nicole Bivens Collinson, president, international trade and government relations at Sandler Travis & Rosenberg, P.A., said she did not think there will be any let-up in pressure regarding forced labor in Xinjiang. Rather, she expects there will be an increased focus on the issue under the new administration. Collinson added that the more universal-type approach being sought against China may also be taken against other countries alleged of ethnic-wide forced labor efforts.

“This is not going to go away,” Collinson said. “You need to prepare for it. You need to start looking at your policies, procedures and everything that you have in place, and making sure that you are covering yourself, not just to your tier one suppliers, but tier two, tier three, tier four, all the way back to when it comes out of the ground, if that’s where it comes from. But you need to be prepared and start looking at how you can deal with some of that.”

Turning to China Section 301 tariffs, Spooner said, “the short answer is that these tariffs will remain in place…for the time being while the administration consults with partners and allies in Europe and Asia to try to come up with a common strategy and evaluate what to do with the tariffs.”

One aspect that could be reconsidered as a first step is “allowing for more transparency in the tariff exclusion process,” which Spooner said can be “maddening” for importers.

“Frankly, it was a bit mean by the former administration to have all the product exclusions that had been included to be allowed to expire,” Hughes said.

She noted that it’s uncertain whether the new administration will look to revise the product exclusion process or the actual tariffs themselves, perhaps dropping consumer products like apparel entirely. Collinson said it is possible the Biden administration will restart the exclusion process, giving companies another chance to try to get their products exempt or taken off the list.

“While I would have liked the new administration to immediately come in and remove the 301 tariffs and a lot of the things that were done unilaterally under the Trump administration, it is a rational approach that they are taking and that they are really doing a whole-of-government review of different policies and particularly any that affect China,” Hughes said.

“What I’ve seen in the early days of the Biden administration is that they are working really hard to return to what seems to be a normal process–they announce what they are going to do for the day, they actually do that on the day, they publish fact sheets and information in advance of an announcement and that has been kind of comforting to see. It seems like we are going to know what’s going on and have a chance for input on those decisions,” she added.

Collinson noted that there is a “pending process” going on at the Commerce Department regarding exclusions. “They have had a lot of problems with respect to how that program has worked,” she said. “There has been an inspector general’s review that said the way they were doing it was really lending itself to appearances of favoritism, cronyism, inequities, inconsistencies etc. In my time, I’ve been doing this for 30 plus years, I have not seen—maybe once before—that the inspector general felt the issue was so bad they issued a management memo.”

Consequently, the Commerce Department team decided to revamp the process and rules. Right before they went out of office, she said, they issued an interim rule. With comments on the new rule due next Friday, she said she “highly suggests” anyone involved take a look at it. “It is sweeping in the way it is revising the process and how it’s done and what information is provided and who can who can submit and how they submit,” she said.

Collinson also expects “a comprehensive, agency-wide approach” to confronting climate change. She pointed to both Biden’s U.S. Trade Representative nominee Katherine Tai, who helped negotiate some of the environmental conditions of the USMCA, and the new Treasury Secretary, Janet Yellen.

“Secretary Yellen has said we can’t solve the climate crisis without effective carbon prices,” Collinson said. “So I think everyone right there, your antennae should be popping up right now saying, ‘What does that mean for me in the next four years?’”

Potentially, it could mean a cap-and-trade policy or some measure that “lets you know, if you have a big carbon footprint, you’re going to have to pay for it,” she suggested.  “She’s also talking about supporting bank regulations that account for the climate change risk. I don’t know exactly what those measures could be, but if you are highly leveraged you might have some issues that you have to deal with there.”

Vice President Kamala Harris, who said she did not vote for the USMCA agreement because she thought it did not do enough on climate change, could be another voice pushing for action on the environment, Collinson added. “She is going to be very hawkish on trying to address these issues throughout the government and this may be something that she really works closely with former Secretary Kerry on some of these issues,” she said.

Collinson also pointed to the possibility of some environmental bills in Congress. She highlighted a bill introduced during the last session of Congress that would have put similar restrictions to those the U.S. has on importing goods that are made with forced labor to those made on land that was illegally deforested.

Overall, Collinson said she sees Biden as being in a particularly good position to negotiate on trade. “If I was the Biden administration, I would be feeling like I’m sitting there with a royal flush in my hand, playing cards,” she said, pointing to all the 301s, 232s or executive orders left over from the Trump administration. “You’ve got all the cards in your hands, right, so if countries want to try to negotiate with you, you can use them as leverage,” she added.

Additional reporting by Chuck Dobrosielski.