Even during his presidential campaign, the potential of a Trump presidency sent jitters across Asian markets. With his victory, the question is: what’s going to be the Trump effect? Asialaw spoke to lawyers in China and Singapore to take a closer look at what the Trump presidency could mean for Asia’s legal markets. Some of the practice areas that could be affected are international trade, competition and antitrust, intellectual property (IP) disputes, corporate structuring, national security and data protection. As Trump follows through with his stated intention to pull the US out of the Trans Pacific Partnership (TPP), it looks like China has a lot to gain and countries in Asia will want to befriend China. All this will be keeping Asia’s lawyers busy.
Death of TPP=Birth of RCEP?
In his first policy address as president-elect, Trump said he would withdraw the US from the TPP within his first hundred days in office, jeopardising the future of the 12–nation agreement aimed at lowering barriers to trade, enhancing labour, environmental and IP standards, reducing poverty, and promoting economic growth. An investor-state dispute settlement mechanism is also established through the TPP, giving investors the right to sue foreign governments for treaty violations.
Countries, including some of the TPP’s signatories, could shift gears to join China’s Regional Comprehensive Economic Partnership (RCEP) instead. Those involved in the negotiations include the 10 member states of the ASEAN comprising Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam, plus Australia, China, India, Japan, South Korea and New Zealand. Like the TPP, the RCEP aims to cut tariff and non-tariff barriers but gives more time for less developed members to comply.
Hotspots for legal sector
With or without any regional trade pact, lawyers are expecting a strong flow of work as a result of increased tariffs and scrutiny of competition issues from the US, and more bilateral trade agreements. “It’s field day for lawyers, with companies looking to concessions previously provided by the US as backup,” says Krishna Ramachandra, managing director at Duane Morris & Selvam. “If the TPP is dropped, it would still result in bilateral investment treaties being negotiated. The framing of corporate structures and how concessions can be relied upon will be important for business.”
“The Asian legal market will see more work in competition and antitrust, and helping companies to address structures such as special purpose vehicles when entering the US market,” says Emilia Shi, partner at Dacheng Law Offices. “Issues around national security and data protection will also be on the rise.”
“Trump will wage a soft war on businesses through the Foreign Corrupt Practice Act (FCPA) and other US legislation to punish foreign companies,” adds Ramachandra. “There will be ramping up of Securities and Exchange Commission (SEC) led investigations. China will be under the microscope a lot more by the US. But China will continue on with outbound M&A and there may be an increase of non-US acquisitions within the Asia Pacific.”
Eyes on China
As Asian countries ready themselves for increased tariffs on US imports, businesses will need to be on the look-out for how they may be affected as nations prepare for new, or re-negotiate, existing trade agreements and many will be turning to China to enhance relationships in this area.
“China can now dangle the carrots to try to get more countries on board and call the shots on it,” says Ramachandra. “Duterte [Philippines President Rodrigo Duterte] has embraced China and more countries will take this approach. This sends the signal to the US that if it is not willing to play ball, we’ll play in another ball park.”
“There’s no reason to regard China as an enemy,” says Dai. “With the US importing less from Asian countries, these countries will look to China, so China will benefit,” says Dai. “It will not just be up to Trump, but also Congress to decide on policies. The US will not just destroy its relationship with China.”
“In markets where the labour force is not as sophisticated, such as Myanmar, there is the psyche of doing business worldwide to get a good bargain,” says Ramachandra. “Trump has to do good on popular rhetoric, but he can’t ignore global trading partners. If you look at Trump’s rhetoric directed towards China and Mexico and remove the countries, it is ultimately pro-business. It would be fatal for Trump’s administration to destroy relationships built with Asia.”
“Singapore is the US’ third largest trading partner, so it has buffered free trade agreements with US that are independent of the TPP,” adds Ramachandra. “We’re not too concerned because this puts Singapore in a preferred position.”
“With the One Belt One Road (OBOR) policy, there will be more opportunities for ASEAN countries to work with China,” says Shi. “For regional trade agreements with China, tax and bilateral trading treaties will be important.”
It is unclear at this point what Trump’s foreign policy will look like but clarity should come within his first hundred days in office. Overseas businesses will need to prepare for more stringent US competition laws, new bilateral trade agreements between Asian countries and the US, and potentially a new regional trade pact for Asia that the US may not be a part of.