Lawyers from the US and UK lined up last week to back comments made by European Commissioner for Trade Peter Mandelson on the importance of free trade in the context of globalisation.
Speaking at the annual British-American Business (BAB) Winston Churchill Lecture last Monday (9 June), Mandelson turned the spotlight on the current US presidential campaign and, in particular, on comments made by both Democratic candidates suggesting that if they were to win the race they would clamp down on US free trade agreements.
“Who would have thought, 10 years ago, that you would hear serious US presidential candidates putting Nafta [the North American Free Trade Agreement] in question?” asked Mandelson. “Or calling into question the desirability of concluding a world trade round?” It was a line that found strong support among the audience of BAB members, which included partners from a number of US and UK firms. Linklaters’ corporate partner Larry Vranka, for one, concurs with the European trade commissioner.
“For many years [Linklaters has] placed the inevitability of globalisation at the heart of our business strategy by trying to anticipate and meet the needs of our clients as they become increasingly global,” says Vranka. “I’ve always been perplexed by people who suggest that globalisation should – or even can – somehow be rolled back, but I guess that’s politics. Let’s hope the major candidates show some leadership instead of, as Mr Mandelson put it, pandering to fears and misinformation on this issue.”
Earlier this year, Democratic candidate Barack Obama hinted strongly that, were he to be elected president, he would seek to renegotiate Nafta and oppose further free trade agreements.
In a speech to members of the American Federation of Labour and Congress of Industrial Organizations in February, the Illinois senator said: “What I oppose, and what I have always opposed, are trade deals that put the interests of multinational corporations ahead of the interests of American workers – like Nafta, and Cafta [Central American Free Trade Agreement] – and permanent normal trade relations with China.”
In the same month, Obama confirmed that if he became president he would “make sure that we renegotiate [Nafta]”.
Alston & Bird partner Mark McElreath, who, like Vranka, was in the audience listening to Mandelson last week, believes Obama’s protectionist railings were not a particular surprise at this stage of such a hardfought election campaign. But the reality, McElreath believes, is that the comments are little more than rhetoric.
He tells The Lawyer: “While the candidates are playing to the middle classes and middle America right now, in six months time, once in the Oval Office, big business will be bending their ear. What the average American has to understand is that they’ve benefited from globalisation because of cheaper imports. Bringing back their manufacturing jobs would not help them with this. But it’s a hard sell.”
It is not only the average American that has enjoyed the fruits of globalisation. McElreath’s firm, along with any other that advises on cross-border deals, has seen the benefits of welcoming international trade.
For law firms, while a return to some sort of protectionism or tariffs or a repeal of Nafta may provide a short-term boost in terms of helping their clients figure out the new lay of the land, it would hurt long-term in terms of revenue. This is an argument just as relevant to a firm like Alston & Bird, which has no offices outside the US, as it is to the likes of Linklaters.
“We’ve certainly benefited from globalisation in terms of the deals we work on flowing across borders,” says McElreath. “If the US starts making that more difficult, it would stem that flow of work. There’s also the probability that it would increase the flow to London, which is what we’re all afraid of.”
As McElreath points out, the US has already suffered several hits inthe past few years in terms of global trade, with developments such as the Sarbanes-Oxley Act of 2002, Homeland Security roadblocks, and the post-9/11 environment. “These all have an impact on the revenues of law firms,” says McElreath. “Even on the global giants – which have a significant portion of their revenue generated in the US.” Clearly, when it comes to restricting free trade, a little protectionism goes a long way.