Regulatory intelligence for US exporters

Chief Lobbyist at Flexport Predicts Customs Modernization Will Pass by 2025

Of all the outstanding trade policy options -- new trade promotion authority, requiring Section 301 exclusions, revisions to antidumping law and a customs modernization law -- the head of government relations at Flexport said he thinks customs modernization is the most likely to pass. "I think we are coming on the cusp of something," Darien Flowers said, and said he thinks a bill will be enacted before 2025. Flowers once worked for Sen. Bill Cassidy, the Louisiana Republican who is leading the bill, though more recently he served on the minority staff of the Senate Commerce Committee.

Flowers and Michael Smart, managing director at Rock Creek Global Advisors and former Democratic trade counsel to the Senate Finance Committee, were analyzing, during a Nov. 15 webinar, the outlook for trade policy developments in the wake of 2022 midterm elections, which maintained the Democrats' control of the Senate majority but are projected to flip the House from Democratic to Republican control.

However, in both chambers, the number of Democrats and the number of Republicans are extremely close. In the Senate, it will either be another 50/50 Senate with Vice President Kamala Harris as a tie breaker, or, if Sen. Raphael Warnock wins re-election in Georgia, 51 Democrats and 49 Republicans.

All the races are not yet resolved in the House, but if Republicans win just the races where they are leading now, there will be 221 Republicans and 214 Democrats.

Moderator Phil Levy asked the men if the close margins mean the Congress will work across the aisle more often. Smart said that in the Senate, it does tend to have that effect -- in fact, in the most recent Congress, a coalition of Democrats and Republicans passed an infrastructure bill and major investments for domestic semiconductor manufacturing and scientific research.

"How it would affect the House is very much up for debate," Smart added. He said it will be very hard for the House speaker to bring forward legislation that satisfies both the significant contingent of conservative members while not making moderates uncomfortable. He said he thinks there will be a lot of pressure for moderates to go along with what conservatives want.

The panel talked about how the political support for expanding markets for U.S. exports through free trade agreements fell apart during the Trump era.

"The fact that many of the highest profile Trump-endorsed candidates did not win, I think, actually does create an opening for Republicans -- if they choose to do so -- to return to their more pro-trade roots," Smart said.

Levy asked if Congress is going to assert itself on Section 301 tariffs, and Smart said he put it at a 51% chance that the language from the Senate trade title, which asked the Office of the U.S. Trade Representative to reopen an exclusion process, will pass.

"There’s more and more analysis looking at the burden of those tariffs," he said, with many tariffs hurting U.S. manufacturers or consumers more than Chinese producers.

Audience members asked the panelists to offer thoughts about whether the Generalized System of Preferences benefits program and the Miscellaneous Tariff Bill could pass during the lame duck session.

Flowers, who once worked for Sen. Rob Portman, R-Ohio, said, "Senator Portman is traditionally a dealmaker," and Portman has said he wants to get a trade bill done before he retires from Congress at the end of 2022. Flowers said on trade policy the stars could align during the lame duck.

Smart was more skeptical. He said that while the House Ways and Means and Senate Finance committees' players are trying to pull together a package to renew GSP and MTB, he doesn't think it will happen if Democrats insist that a renewal of Trade Adjustment Assistance is in the bill. He said Republicans have always said they have to have trade promotion authority in order to agree to TAA, and he said TPA cannot be negotiated in the next month. "If I had to bet about whether this package comes together in the lame duck, I bet against. More likely some time next year," he said.

Smart and Flowers agreed that export controls and sanctions would continue to have bipartisan support on Capitol Hill. While both parties are also backing industrial policy, Smart said that the two parties "have different ideas about what that's supposed to look like." Still, he said, he doesn't think the Inflation Reduction Act will be rolled back in the next Congress.

He said that in terms of nearshoring and friendshoring, "what we’ve had so far is a lot more rhetoric than policy." He said he thinks there needs to be more traditional tariff reduction to drive supply chain relocation. "I’m a little less optimistic we’ll be able to move quickly in this area, but eventually we are going to be required to put some meat on those bones."