 Okay, we're thinking, we've got to think. This is Think Tech, and we're thinking about Asia, so it's Think Tech Asia, and my old buddy Russell is back from China. Hi, Russell. Good morning. Nihao. Nihao to you, baby. So it's nice to have you here, and we have a special guest, and that is Mark Lenhardt, and he's with a firm that begins with, what, Bunker Hofstetter, am I get that right, Mark? Bunker Hofstetter. Bunker Hofstetter in Washington, D.C., and guess what? They deal with trade. So that's what we're talking about, trade wars or tech wars. Will the real Donald Trump please stand up? The huge risks involved with Trump's trade policy. So you know, before the show began, Mark, we were talking about, you know, how the normal ebb and flow of trade works and where the high points and low points are and where there are the gratifications and the challenges lie. Can you give people who, you know, I think in large part we don't, we as a population as an electorate don't understand trade, the national trade. Can you give a thumbnail for us about how trade works in the normal course? You know, we have 100 plus 120 countries in the world that joined the World Trade Organization. It's a group that started at the end of World War II and wanted to clear the hurdles that sort of caused the countries to hurdle into World War II, and that was everybody was raising their tariffs. And so this group of countries agreed to lower their tariffs and to lower barriers to trade, and countries focused on trading with each other and creating jobs and creating wealth rather than fighting each other. And so, you know, the way trade works now under the WTO is that tariffs are significantly lower than they were, you know, 20 years ago, 50 years ago. And everybody is supposed to treat everybody else with respect. You know, there are a couple of core principles to the trade world now. We have, you know, the tariff binding. Everyone keeps their tariffs low. Everyone keeps their trade barriers in just tariffs, so there are no non-tariff barriers. And they treat others as they would treat their own nationals. This is called national treatment. And they treat everybody as if they're the most favored trading partner, the most favored nation status. And these are principles that have been around, you know, for quite a time since the GATT. And we trade with each other. Is it a perfect world, Mark? I mean, is this system you describe work perfectly or are there imperfections? And if so, what are the imperfections we deal with in the normal course? It's always going to be people who abuse trade or countries that abuse trade. And both the GATT and the WTO agreements provide for measures to counteract this abuse. We have something called anti-dumping duties, which are, you know, if countries are, you know, dumping or selling their goods at unreasonably low prices, you know, below their cost of production or whatever else, trying to get into a market by underselling the producers in that country. We have countervailing duties, which are intended to counteract subsidies provided by governments around the world. Safeguard duties, which are intended to allow a domestic industry to adjust to an increase in foreign imports. And then we have trade agreements that began taking the world by storm a few decades ago. And these allow us to have closer relationships with, you know, countries who are close allies or close trading partners. Excuse me, is it fair to say that the more trade we have globally, the better the global economy is. In other words, trade in general is a positive experience for humanity, for the species around the planet. I think so, you know, there are always going to be losers when people trade, right? I mean, if you make your sunglasses cheaper than I can, then people will buy your sunglasses rather than mine. You know, if you're in Washington state and you're in a rainy weather, you know, you're not going to be able to do as well with the sunglasses. But overall, everybody wins with trade. And, you know, Thomas Jefferson, one of the founding fathers of the U.S., he said, cultivate peace and commerce with all. Because it's the commerce side that makes everybody happy. Yeah. So, you know, going into it now, I mean, you're a trade lawyer. Your firm, I guess, has a section or maybe it's dedicated in a large part to trade. What does it mean to be a trade lawyer? Do you negotiate trading agreements between countries? No. Negotiating trade agreements is from government to government. What we do is we defend foreign companies in U.S. trade actions. So this is anti-dumping duty investigations or subsidy investigations, safeguard investigations that are all that are conducted by the U.S. government. Let me ask you a question, Mark. I think for our audience, one of the things that is impressive about its background is that, Mark, you've been a U.S. commerce lawyer. You've been on the U.S. side representing U.S. government. And now you're representing Chinese clients. So your viewpoints, tell us about your viewpoints. What have you seen by working on both sides of fences and in relation to what we see today, what President Trump is doing and his administration? Because I think you have a very balanced view working both on the government side of the U.S. as now you work on the Chinese side. That's right. Well, I was in the government. I defended the U.S. actions in court and at the WTO. And now I sue the U.S. government. The people in the government are great people, but they're driven by the policies of the government. And we've seen with President Obama, for example, the Democratic Party was known as the protectionist party for a long time until Donald Trump came along. And he, you know, President Obama enforced or ramped up enforcement of trade agreements and the WTO through anti-dumping countervailing duties. I would say, you know, there's a lot of discretion under the U.S. law. And I felt that foreign producers and U.S. importers weren't given a fair shake under the U.S. law. The Department of Commerce is supposed to be a neutral arbiter of the laws and their mantra for a long time was to level the playing field, but it's significantly tilted towards the U.S. industry. And I'm, you know, sort of principles of fairness are what drive me. And when I left the Department of Commerce, I didn't have much interest in representing the U.S. industry because they're so favored anyway. I sought to defend foreign companies and hopefully get fair results from them from the Department of Commerce, because if results are fair, if the rule of law is followed, then it's predictable. And anyone can adjust their behavior to, you know, come in line with what the responsibilities are under the WTO agreement. Well, in trade, in mercantile arrangements, you need predictability. How important is predictability on a global trade basis? I think it's absolutely predictable. And the U.S., what the U.S. has done with its trade law is make it as unpredictable as possible. You know, the U.S. is one of the few, if not the only country that conducts its trade investigations retrospectively. So they look at what has come into the U.S. and calculate the duties after the goods have already come into the U.S. With other countries, it's perspective. So at the border, you know what you're paying in anti-dumping duties or anti-subsidy duties. The U.S. just doesn't do that. They make it as unpredictable as possible, so that adds an extra advantage to the U.S. company. Let me ask this question, Mark. You know, I think you hit a point that's important that maybe the rule of law that we proposed to the world for many decades, we're changing the rules now. We hear about Section 301, Challenges 302. What's that about if you could tell the audience what the U.S. is doing with that? And how it affects the WTO, where are we going to WTO, which is supposed to be the body that kind of governs all this stuff so that everybody has a fair playing field? Sure. Well, let's start with what the WTO covers, and that is anti-dumping, countervailing duty, and safeguard investigations. I mentioned those earlier, but counteracting what they call predatory dumping or purposely underselling to get market share, government subsidies, and then just an overwhelming amount of imports. Section 232 is a reference to U.S. law that allows the president to take action to protect national defense requirements. It's a law that wasn't acted long before the WTO agreements came around, and it hadn't been used in the WTO era until recently. They sort of resurrected this old law. The national security duties are intended to protect the capacity of U.S. industries to meet national defense requirements. It looks not only at what is actually needed for national defense, but also U.S. capacity, the sectors that are related to national defense requirements. So they're looking at the employment of the skills that the U.S. has. And I think that, you know, my own opinion is that it's a legitimate law that any country should be able to protect sort of core industries to a level that makes them comfortable with their national security. There is a GATT exception for security actions. What's interesting about it, though, is there are three different types of exceptions under the security exception. And I'm going to go from the last to the first and then the second. The last one is any action that a member country has to take pursuant to obligations under the United Nations Charter. So if there's a coordinated boycott on services or trade from a certain country, that the U.N. has enacted or resolved, then nothing that a country does under that U.N. Charter action is going to create a problem with the WTO. Well, you know, one very important thing I think we're going to talk about, and I think this show is so important that we should not take a break, is exactly what has happened under the Trump administration. I think there are hundreds of millions of Americans who don't know what's going on. They don't know what the policy is or how the policy has changed or how that affects people except, you know, that we have a trade war. That's—we do have a trade war. I think—you correct me if I'm wrong—we're in the middle of a trade war. But aside from that, what is the policy of the White House of the national government under these various laws and treaties in which the national government can make choices? How has it changed in the past, what, 18 months? And that's the first order of business. What is behind the curtain here? We get little snippets of news on the six o'clock news, but do we know what the White House is really doing? So, can you tell us just, you know, in appraisee, how has the Trump administration changed the ordinary course of trade? What policies has it put into place? What policies has it changed, repealed, ignored to reach the current state of affairs? Well, you know, we'll start with Obama, and what Obama did was he ramped up enforcement, but it was all within the WTO parameters. He also sought pre-trade agreements and sought to establish those. Donald Trump has pulled out of pre-trade agreements, and he's sort of, you know, gone with the enforcement on steroids, resurrected old laws. And I'll read a tweet that he sent out yesterday, excuse me, two days ago on the 24th. He said, the United States is insisting that all countries that have placed artificial trade barriers and tariffs on goods going into their country remove those barriers and trades or be met with more than reciprocity by the USA. Trade must be fair and no longer a one-way street. So, what we see from Trump is he doesn't see the gains that the U.S. has made and is making with trade. He only sees the losses. He plays zero sum games where he wants to win everything. He wants the U.S. to export to everybody and not import or import a lot less. And that's just not how trade works and it's not how it works with, you know, when you're trying to deal with allies and et cetera. So, he's gone to a zero sum game when I think previous administrations have seen this as trying to get to a win-win situation. You know, I asked you before and I wonder if any part of his policies now in trade, the things he has done since January of 2017 work, are any of them useful or any of them defensible from a national interest or an American industry point of view? You know, you can say yes and no, to be fair. My own view is that it's what he's done is over the top. You know, if I were making trade policy for the U.S., I think I'd be more accommodating. But with the zero sum approach, what Donald Trump has done is take old laws and, in my view, abuse them to the greatest advantage that he sees, but I think it's a short-term advantage for the U.S. And I think we see that already with, you know, there was news yesterday about Harley-Davidson. They have seen, you know, with the U.S. pushing the tariffs to protect the U.S. industries, countries around the world have retaliated. So most people go to Harley-Davidson because they're from Wisconsin, where House Speaker Paul Ryan is from. And Harley-Davidson can't sell its motorbikes around the world when it's dealing with 25% tariffs around the world, just as the U.S. has put up a 25% tariff on a steel and aluminum coming into the U.S. So what you see is, you know, the short-term gain maybe was protection for the U.S. industry, but then when the retaliation comes in, the U.S. exporters can't export anymore. So Harley-Davidson moves production, that's intended for Europe, over to its New Thailand facility. So the U.S. loses jobs and loses that revenue. Marshall, it's just what Trump wanted to avoid, the loss of jobs to overseas. So the net effect of his tariff on Harley-Davidson, you know, now creates a situation where Harley is going to manufacture overseas, which is perfectly opposite of what he wanted. I'm sorry, Mark. You mentioned something that really hit the word capacity. You know, the president is doing things to build capacity, but I think one of the problems, you know, I'm an FDI lawyer, which is the bookend to trade. Trade means good relations of countries. American companies, for example, they need to build global supply chains. They need to go to foreign countries because labor is just too expensive in America. So do you think now, how does this affect now the trade relationship? Doesn't that affect now the ability of American companies to go elsewhere? We don't have friends to build that supply chain. We don't have it in the U.S. So what are your thoughts on that? Well, I think you're absolutely right. I mean, supply chains are different than they were 30 years ago. You look at this, you know, they did the national security investigation of steel and aluminum, and now they're doing automobile. That hurts American companies as much as it hurts foreign companies. You know, you've got, you know, BMW and Toyota and Honda are all making cars in the U.S., and GM and Ford are making cars overseas. So this is, it's a severe disruption. Even if you don't go to the standpoint of allies and good trade relationships, it's destroying the private businesses that are what make this country run. And then if you step back to the, you know, our allies and trading partners, well, number one, nobody can rely on what the U.S. says anymore. And number two, you know, my hope is that countries will have a little bit of patience with the U.S. until we get over this Trump phase, and then we'll let us back into their good graces once it's over. Well, here's a question. Oh, I'm sorry. Yeah, go ahead. You were talking, so I'm sorry to interrupt you, but it seems that China is a player that understands a longer-term viewpoint. Let me give you an example of what you hear in your thoughts. You know, we talk about the tariffs on steel and aluminum, so then Boeing is going to have problems selling their planes outside, for example, the China. And so it's interesting that last year, in fact, Boeing is already ahead of the game. They opened up the joint venture with a Chinese company to do finishing of the planes. And what are your thoughts? Because just recently, Xi Jinping, America played into the line, and Xi Jinping said, we're going to remove the foreign ownership restrictions. You don't have to do joint ventures. So in other words, in the aviation manufacturing industry, now Boeing is probably going to make the next step would actually move its facilities, create their own woofy in China, in their own subsidiary, and actually that intellectual property will go to China. And they're going to hire Chinese workers to probably make the planes for Boeing, for the Chinese market. So what do you think about that, the whole idea of capacity and trade, how they intertwine? There's really two parts to that, Mark. One is what Trump is doing, how is it affecting, how is it generating clever ideas in China and an American industry dealing with China, and whether those will work in the long term or work against us? And I guess the second part of the question inherently is, are we going to have the same process with other countries? Is this going to affect a kind of pushback, not just in a tariff war, but in an industrial war, a supply chain war, if you will, all over the world? Well, this goes into the Section 301 action, which is the U.S. brought to because they say that China requires these technology transfers. Frankly, I've always looked at it as a business decision. Boeing wants to be in China. There's a huge growth market in aviation in China, and they make some calculated risks. They know they're going to have to share some technology with China, but their risk assessment is that it's worth it. But then when Donald Trump tries to step in and force companies in the U.S. to deal one way or another with other countries, then it sparks some retaliation. China plays the long game, I think, better than everybody in the world. It has a much longer-term view. And you've seen China try to play nice with Donald Trump, but President Xi, just the other day, he said, you know, Western cultures are taught to, when they get hit on one cheek to turn the other cheek, he said, well, in China, we punch back. But that's only, I think, when necessary. There's a lot of restraint. And China has demonstrated a lot of restraint with all of this chaos that Donald Trump has created. But you have seen things like, when Donald Trump said, we're going to impose a $50 billion in tariffs for this section 301 intellectual property transfers. China said, well, we're going to retaliate with $50 billion. And then Donald Trump said, well, we'll retaliate with $200 billion. And China said, we'll retaliate in kind. And then you see some, I think, arrogance of some of the people at the top of the administration, where they say, well, China can't go somewhere else for, for example, soybeans, right? They buy, I think China buys about $15 billion worth of soybeans from the U.S. every year, and they just can't go somewhere else. Well, China can. And China just reduced tariffs on soybeans from a number of Southeast Asian countries. And I guess I would, I would ask you, Mark, where does that all go? Let's assume that the administration and some of the arrogant people in the White House, you know, keep on pushing from one number to the other. And Xi Jinping keeps on pushing. Where does that go? That would be a wall, you know, against all kinds of trade. And it would, in many ways, stop trade between the U.S. and China. Where does that take us? And the question that Mark was getting to the answer, and I think that you're going to ask Jay, is does China need the U.S.? Yeah. China can go elsewhere. In soybeans or otherwise, does China need the U.S.? A long-term game. Or does China need the U.S.? Or should China find other ways to satisfy its economic trade needs? Yeah. Well, you know, I mean, what we see to answer the first part is that, you know, pushing tariffs higher and higher. And it's not just China. I mean, you know, we look at what Trump is doing to Canada and Mexico, right? And especially Canadians, these are supposed to be our friends. And they're being horribly mistreated by this administration. You know, where does this end us? Well, if you look at a parallel in 1930, when the U.S. passed the Holly Smooth Tariff Act, it raised tariffs for countries around the world. And, you know, that led to the Great Depression and some extremist leaders around the world in World War II. I really hope we don't even get close to there. But we're looking at China and the U.S. who are, you know, the biggest trading partners, I think of each other. China certainly is of the U.S. And, you know, Canada and Mexico are two and three. So, you know, this path doesn't end well for anybody. And the second part of the question, what can China do? You know, I think China, to some extent, needs the U.S., but certainly not at the level that it's engaged right now. China has developed trade relations around Southeast Asia. It's currently redoubling efforts with the EU. There are markets around the world that I think are sufficient for Chinese demand, excuse me, Chinese products. And, you know, it can reduce what it buys from the U.S. It can buy from other places. What I see possible is that China might deal with countries, say in Europe, that were formerly our trading partner allies and who we have, who Trump has alienated. Same thing with Canada or Mexico. And so the result is, we get cut out. We get isolated. And that's got to have a huge effect on our economy, no? Absolutely. I mean, you see this happen over the world's history as, you know, these empires have lost their export markets, right? If you look at the British Empire, it lost its export markets and slowly dwindled down to where it is still a strong country, but nowhere near where it was. You know, the Austria-Hungarian Empire. And, you know, you see, every empire that's risen around the U.S., excuse me, around the world, later in its history, it loses its connections and its allies and trading partners. And that's when it begins to fade. And that's if U.S. policy doesn't change, you know, in the near future, then that's where the U.S. is heading as well. Even if China finds a way to deal without the U.S., would you still say that's going to affect the global economy? You know, I mean, absolutely. It's what the U.S. has done, because the U.S. has a huge market. I mean, we are about 350 million people and we have a lot of money and we buy a lot of things. It's a very consumer-oriented market. And everyone likes to sell in the U.S. because we pay good prices for things. As we shut off our market, then the industries in all those countries are going to have to sell somewhere. And if they don't have the big U.S. market, then their industries are going to shrink as well, unless they can find somewhere else to sell. The EU is the next logical place with about 450 million people and fairly wealthy nations. But outside of the U.S. and the EU, you have billions of people, but not as much wealth. So, you know, the U.S. closing its borders has a significant effect around the world. Well, I think I add something to that, Mark, and you can tell me what your thoughts on it. And what I see is that being in China, I just got back here two days ago, the moon is changing in China. You know, we have tons of Chinese students that go to the U.S. pursue graduate law degrees, business, and now they start to rethink that America is not friendly. We're going to Europe. You know, it changes the whole mindset. It changes the mindset that America is not our friends and, you know, we need to pay more attention to Europe and Africa. And, you know, that's where I see the danger is that America is falling out, period. We're seeing the influence. It's going to go to these other parts of the world. And in fact, the Chinese are going to woo in more European investments into China and more trade with Europe. And then China is going to pick up that slack. What do you think? Well, I think you're right. It's actually a more effective retaliation. If you raise tariffs, that means your own people are paying more for goods. So you're burdening your own people. Whenever Donald Trump raises tariffs here, he's making Americans pay more for the same goods. And the more that they're paying is just going to the U.S. coffers, to the government coffers. You know, when China moves its purchases to other countries, you know, it has a significant relationship with Australia for natural resources. And it buys a lot of coal and oil and gas from the U.S. But, you know, there are plenty of places around the world. Those relationships will strengthen. I think countries around the world will have a warmer relationship with China because of the trade relations. And the U.S. will begin to fade. And it'll really, it's going to really hurt the U.S. if it doesn't change its trade policies very quickly. Well, I worry about something you said a little while ago, and that is the rise of dictators in Europe was a result, at least in part of this Moot-Hawley tariff bill in 1930. And that same process could happen today. What I'm asking you really is whether there's a linkage between all of this, between, you know, the trade war, the isolation, the economic recession or depression, the emergence of leaders, that is, you know, tyrannical leaders, and also enmity between countries. It converts to diplomatic relations, doesn't it? It undermines the relationships of the country in general, such as what Trump was doing by insulting leaders at the G8 and insulting Canada and Mexico. That has a long-term effect on our relations in general beyond economic, doesn't it? Absolutely. You know, it's, I think it's an old saying that everybody's happy when everyone's making money, but when things start getting tight, then you find out who your true friends are. You know, we hope that the damage that Donald Trump is doing with our international standing can be overlooked and reversed, but you know, it's tough because countries look at the US and they see Donald Trump and they say this is the one who the citizens of the US elected. So he's a reflection of the United States. That's not a perception that changes easily. And you know, in terms of the connection between trade and eventual, you know, despotic leaders, I think there's a direct connection. You get protectionism, which looks good for a quarter or two. It's a short-term gain. And then things turn difficult for the domestic industry. It loses its export market, which means it lays off workers. And then there are fewer people and fewer or less wealth in the US to buy their products, so they lay off more workers. And then you have a large number of people who don't have work. And that's where the problem is. They want to blame somebody. And some, you know, dynamic leader will rise up and say it's their fault. And all of those people who are looking for someone to blame will cling to that. And I think it's something that you already see. You see with Donald Trump, he tapped into a nerve in the Midwest where people were out of work because manufacturing jobs had gone away and they were looking for someone to blame. And whether they said it or didn't say it, when Donald Trump did say it, somebody who they knew as a billionaire and a TV personality, they clung onto that. And, you know, you see in his supporters are as supporting of him now as they were a year and a half ago. You see similar rises happening in European countries where you have leaders that are, you know, described as far right and nationalists and et cetera, in a few European countries. I'd say things are happening like that in Latin America, although the Latin America has a long history of it. But, you know, you see what's happening in Venezuela and that's, you know, a country that is a beautiful country that I've been to and in the last 15 years, it's really lost the beauty that it had. And a lot of it is, you know, what happened in Venezuela is you can see, you know, a model for what's happening in the US. Venezuela and the US were close allies. And then you had Hugo Chavez come up into power and he began, you know, insulting the US, damaging the relationship with the US. He then reached out to countries that were not traditional allies of the United States, right, Russia, the Middle East and China. And then, you know, they began to suspend free speech and a free press and the political arena became less free and then there were price controls and everything spiraled out of control. This is not a happy story. And I think we have to follow it. And it's not as simple as just reversing what Trump did. We have damage to control and prevent against. We have fences to mend, fences to mend, which is why I want to suggest, Mark, that we do more with you. I hope we can call you back and explore these issues in even greater detail next time around. And better yet, Mark said he's going to get on a plane. He's going to come out here and we're going to do it live. Well, that'd be great, Mark. Absolutely. A little bit of serp, a little bit of talk. All right. Mark Lenhart in Washington, D.C., a trade lawyer. We greatly appreciate your participation on Think Tech. Look forward to more of it. Thank you, Mark. And see you in Beijing next time. Thank you, Russell. Thank you.