International political arrangements, such as trade deals and sanctions on particular countries, can seem like mazes full of sharp corners and stumbling blocks to the unobservant, but to the savvy in-house lawyer they’re full of opportunities.
That was the main message from members of a panel discussion at this year’s CCCA Conference in Toronto on making the most of trade agreements. International trade lawyer Heather Innes, the former counsel at General Motors, along with LexSage founder Cyndee Todgham Cherniak and Elliot J. Burger, the Director of Global Compliance with ATS Atomation Tooling Systems Inc., covered both the obstacles that international agreements create, and the doors they open.
“You’re not just lawyers, you’re strategic business partners,” Innes told the audience. In-house counsel are uniquely placed to understand laws, policies and international relationships, how they can change, and how those changes can benefit the organization.
“Every time you have cross-border flows, trade variables have to be considered,” said Innes. “People, products, components or finished goods, every time any of those things crosses an international border, you have trade variables that you need to understand.”
And every department in the company is likely to be affected by those trade variables. For example, said Todgham Cherniak, in one recent case the IT department didn’t understand the meaning of “country of origin” and what impact that rule might have if components or code came from elsewhere. “If you don’t talk about the concept, and talk to the IT department about why it’s so important what they’re programming, it’s garbage in, garbage out.”
That’s one kind of obstacle, but what about opportunity? Historically, Innes says, the more uncertainty there is, the more trade goes to the U.S. But there are a couple of international variables that could maybe turn that tide, some of which are being created by the current environment in the U.S.
For example, the U.S. has threatened to put duties on steel. Germany and Japan have made it clear they’re not willing to deal with the U.S., says Innes, so does that provide a unique opportunity for Canadian producers to step in to provide duty-free steel? The Americans are also threatening to impose duties on a list of Chinese goods because they claim China is violating trade agreements, she says. That could open a door for a Canadian organization selling those goods. China has threatened to retaliate in kind – another opportunity. “Canadian organizations should be looking to see if the U.S. is out of the picture because of exorbitant duties.”
“There are consequences to the level of posturing that’s happened,” added Burger. Trump tweeting that he’s going to impose duties on imported goods can have a real impact on your business. “You’re being asked as in-house counsel to interpret what the tweet means to your business. The response is to wait until the dust settles and the adults in the room start talking.”
Canada recently signed the CPTPP, an enhanced Trans-Pacific Partnership, and has signed CETA with the European Union – and the U.S. is not part of either of those agreements.
Todgham Cherniak offers up an example of where a Canadian company might profit from that absence: say a year ago goods were going from the EU to a warehouse in the U.S. and then being sold from there into other countries. Now we can talk about a warehouse in Canada that serves the U.S. market from here, she says.
Burger says sanctions can also be opportunities, because where Canada tends to focus its sanctions, the U.S. tends to go broader. It may sanction activities that Canada does not, and that creates space for Canadian companies to do business.
“Even with uncertainty, organizations can take steps to optimize their trading effectiveness and competitiveness,” says Innes. Her recommendations:
- Identify where your company operates
- Identify trade agreements that affect/could be applied to your corporate footprint, sourcing patters and markets
- Ask yourself – is your organization maximizing the benefits of those trade agreements? Why not?
In terms of preparing for anticipated change or driving desirable changes:
- The whole organization has to understand the issues
- Work with management, sourcing, marketing, finance and communications teams to maximize the use of existing agreements, to address trade remedies and operational changes, to plan for anticipated changes
- Participate in the process – have a seat at the table; work with government relations team, external associations to try to shape the results.
Kim Covert is Editor, Publications, with the CBA.