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International Trade in the Trump Era — Issues to Watch

Donald Trump’s victory in the 2016 Presidential election put the Republican Party in charge of the White House and Congress for the first time in a decade. President-elect Trump ran as an anti-establishment candidate who departed from many traditional Republican positions and promised bold and in some respects controversial reforms. How his administration will govern and the extent to which its policies will be supported in Congress are key questions facing companies and investors.

This report comments on aspects of international trade, sanctions and export control policies that are currently at the forefront of discussion.

International Trade
TPP. Both Presidential candidates announced that they were opposed to the Trans-Pacific Partnership (TPP), which has already been signed by 12 nations, including the United States, but not yet submitted to Congress for approval. For some time, there appeared to be a possibility that President Obama would submit the TPP for approval by Congress after the election and before the new President takes office, but the current political climate has foreclosed this option as a possibility. The United States already has free trade agreements (FTAs) with most of the TPP member countries (including Australia, Canada, Mexico, Peru, Chile, Brunei and Singapore), and the TPP would add Japan, New Zealand, Malaysia and Vietnam to the free trade relationships of the United States, while updating prior FTA obligations and adding new ones. Whether or not the Trump Administration will abandon the TPP entirely or seek to “improve” it cannot be predicted at this time.

TTIP. The United States also has been engaged in negotiating an FTA with the European Union (known as TTIP), and it appears that those negotiations will be suspended for the time being.

NAFTA. President-elect Trump has stated he will seek to reopen and renegotiate existing trade agreements, especially NAFTA. However, he has not provided details of what would be changed, or how such amendments would differ from the changes already negotiated by the United States with the NAFTA countries and other current free trade partners as part of the TPP.

China and Trade Remedies. The President-elect has also stated he will pursue measures to protect U.S. industries from trade with countries such as China. It is unclear how this would differ from the current U.S. policies under which domestic industries have obtained many antidumping orders against Chinese imports and the U.S. government has been pursuing international trade disputes against China in the WTO.

Sanctions Policy
Another major area of uncertainty will be the Trump Administration’s approach to sanctions policy, particularly with Iran and Russia.

Iran. President-elect Trump criticized the Iran nuclear deal repeatedly during the campaign as being too weak. However, a number of other countries are party to the agreement, the UN Security Council implemented it under resolution 2231 and the United States cannot alter or cancel it unilaterally. Therefore, in a scenario where it becomes impossible to change the agreement itself, the Trump Administration (and Congress) may seek to impose new sanctions not based on Iran’s nuclear activities, or could use the dispute resolution process under the UN implementing resolution to pursue “snap-back” of prior sanctions where Iran violates its commitments. If the new sanctions interfere with the operation of the agreement and the United States acts alone, it may trigger a controversy with the EU, Russia and China, who currently support the agreement.

Russia. The United States, along with the EU and other countries, has maintained sanctions on Russia to express disagreement with Russia’s annexation of Crimea and involvement in the Ukraine. President-elect Trump has promised to seek a new engagement with Russian President Putin in an effort to find common ground and build a new working relationship. How this will be achieved remains an open question, as well as whether President Trump would be constrained by the diplomatic and security realities with which he will be confronted upon taking office.

Cuba. There are also unknowns in relation to the relaxation of the U.S. embargo of Cuba, as the loosening of sanctions has been accomplished through executive actions the Trump Administration could reverse.

Export Control Reform
Over the past several years, the U.S. government has engaged in a major effort to update U.S. export control rules. While final rules have issued for nearly all of the categories on the U.S. Munitions List and corresponding rules under the Export Administration Regulations (EAR), three categories remain—firearms, artillery and ammunition. Further, the State Department and Commerce Department have continued to issue guidance, correction rules and licenses to refine the implementation of existing rule changes. U.S. and non-U.S. companies alike have welcomed some aspects of export control reform, but also complained that it has not been as helpful as intended. The election likely will bring major changes to the leadership of the agencies overseeing export control reform and broader export control policy. It remains to be seen how this will impact export control reform efforts.

Although the announcement of the cabinet and other senior leaders in the Trump Administration may provide some indication of his likely direction on the foregoing issues, there will likely be continuing uncertainly at least until the President-elect takes office on January 20, 2017.