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April 29 2019

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30 The Journal of Commerce | April 29 2019 www.joc.com Government FORMER OBAMA-ERA US Trade Representative Michael Froman told a meeting of North American footwear executives this month that trade tensions between China and the US have pushed the US closer to the Chinese economic model than the other way around. "The idea of [China being ad- mitted to the World Trade Orga- nization (WTO) in 2001] was that China would become more like us," Froman said in a keynote at the Footwear Distributors and Retailers of America (FDRA) Footwear Exec- utive Summit in Washington, D.C. this month. "We're becoming more [like the] Chinese, thinking about our needs first and compromising as little as possible from a multilateral perspective. The question is, can the world tolerate two Chinas?" Froman did not downplay Chi- na's role in the escalation of trade tensions between the two nations, much of which occurred before President Trump took office and the current Sino-US tariff battle began. He said the US filed 16 cases against China with the WTO during the Obama administration, which also dangled a bilateral investment treaty as a way to induce China to address practices not aligned with broader WTO membership. "I think China is eager to reach agreement with the US," he said. "There's the shopping list issues [i.e., which US products China will import more of ] and the structural issues. Someone told me they under- stand how important it is for Trump to have 'tweetable deliverables.'" Executives attending the FDRA summit overwhelmingly decried the administration's attempts to use tariffs as leverage against China, as well as those on global steel and aluminum imports. Columbia Sportswear CEO Tim Boyle, a vocal critic of the Trump administration on issues from immigration to trade, said Columbia's products are com- monly affected by such mechanisms because of their wide geographic distribution footprint. "So, it's not uncommon we'd have a problem in some geography where a despot would raise tariffs or do some- thing crazy," he said. "You wouldn't expect it here, but we've learned you have to be prepared for anything." The remarks came in a fireside chat with FDRA President and CEO Matt Priest, who asked Boyle if being such a forceful advocate against the president has hurt his business. "We've probably ticked off half our consumers," Boyle said. "But whether you're running a business or are just a human being, there have to be certain principles. And some of those have to be inviolate. There are certain issues we're not willing to run from. If people are upset and don't buy your products because of that, that's their problem." Boyle said it wasn't clear whether the uncertainty caused by tariffs on Chinese imports was having an impact on the greater US economy, but he did say uncertainty is never good for any business trying to plan for the long term. But Froman, now vice chairman and president of strategic growth at MasterCard, said there may be a silver lining to the current administration's approach to trade. "I'm not terribly pessimistic," he said. "In trade, you have to be optimistic, and you have to have a long-term view of things." Froman was a key cog in the negotiation of the Trans-Pacific Part- nership (TPP), a free trade agreement among the US and 11 other Pacific Rim nations, and while he lamented the demise of that agreement in the early days of the Trump administra- tion, he said many of its provisions may end up in a revised North Ameri- can Free Trade Agreement (NAFTA). "At the end of the day, Trump may end up being the greatest globalist ever," he said. "That's my contrarian view." Froman's theory is that Trump's trade team is essentially augmenting NAFTA with TPP principles to create the deal's replacement, the United States-Mexico-Canada Agreement (USMCA), but that Trump's support- ers, who implicitly trust him, will allow the president to sell USMCA as a "win" for him and them, even if it's essentially a combination of the two trade agreements Trump has publicly decried as the "worst deals ever." Still, Froman called withdrawing from the TPP one of the country's worst strategic blunders in recent his- tory and outlined three ways Trump's tariff-heavy approach to trade will be costly to the US economy. First, there are the direct costs of tariffs, which affect the price of products for consumers and input costs for US-based manufacturers. Second, there is the cost of retalia- tion, reciprocal duties imposed by other nations that make US exports more expensive — and less competi- tive — in those markets. Lastly, Froman said there is what he calls the "risk of imitation." When the US goes against established trad- ing rules, "it gives other countries free reign to do likewise," he said. JOC email: eric.johnson@ihsmarkit.com twitter: @LogTechEric Shiing winds US trade policy is taking more of a Chinese tack, former USTR says By Eric Johnson "We're becoming more [like the] Chinese, thinking about our needs first and compromising as little as possible from a multilateral perspective." Shutterstock.com International | Washington | Customs | Security | Regulation

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