Exclusive Q&A on International Trade with Guillermo Christensen
Posted: 4th March 2019 08:12
Can you outline the key global economic trends and structural changes in international trade?
The shift from goods to services and data flows is the most significant and long term trend. By moving the flow of value across borders away from the choke points of ports, airports etc, it weakens the power of governments to directly regulate trade. This leads to efforts by governments to find alternative ways to regulate the exchange of value, for example, through more stringent regulations on digital content and taxation at source or destination.
The other major trend is completing the shift from a US-centric trade environment to a tri-polar one with the EU and China. China, because of its very mercantilist approach, is driving the other trading blocs away from a free trade mindset toward more protectionism and zero-sum game approaches. That brings in a national security outlook on trade that also creates more challenges, especially for direct investment.
Which industries or jurisdictions do you believe currently offers the most interesting opportunities?
Digital economy services by far and away. We are still in the very early stages of moving many sectors and industries to a digital platform and particularly in the B2B area and supply chain, this will lead to much faster and potentially more reliable and secure trade.
What considerations must a company take before deciding whether to enter a new market?
Beside the typical new market entry issues, companies have to examine those markets with high regulatory risks from more of a cost overhead perspective. It is completely viable to enter a high risk market (from an FCPA view for example) like Angola, China, India but you must include at the outset a reserve for the costs for protecting the company – and those costs are not only measured in dollars or euros, but also in the “sand in the gears” issues; for example, local suppliers must be vetted by corporate compliance which takes ten times as long.
With reference to case study examples can you outline the various strategies that companies can utilise in order to penetrate new markets?
My focus in new market entry is primarily in high-risk areas – in those cases what we are doing with clients is building in at the front end more planning and scenarios, akin to what we would do in a military setting before sending in an expeditionary force. Reconnaissance in particular is a high priority – and establishing enough awareness and information that our clients more fully understand the risks. Too often, in the past, clients did this by hiring a so-called trusted third party on the ground, who promptly went and bribed someone or fleeced the client who was not aware of what something should cost.
What are the key compliance issues or pitfalls relating to international trade?
The main compliance risks still flow from US regulators and the relevant laws (FCPA/OFAC/export controls). Those are still the most energetically enforced and extra-territorially so. In the past five years, OFAC risks in particular have increased manifold as the number of countries embargoed has increased, but also as the programs have broadened in number – to include human rights violators – and in complexity, particularly the financial sanctions that are the heart of the Ukraine and Venezuela sanctions. These programs now can easily tie a company up in knots when it comes to understanding what is permissible and trying to understand who it is doing business with. Third party OFAC and FCPA risks are some of the most serious and hard to mitigate challenges.
What role does intellectual property play in international trade and how can companies effectively safeguard their IP in foreign markets?
I have a particular focus on cybersecurity – more precisely information security, and with my experience at the CIA and the State Department, in seeing how nation states engage in espionage. From that perspective, I find that too many companies are still very naïve or relaxed about protecting their IP, or they rely on legal protections that are nearly impossible to enforce in countries with weak rule of law. Therefore, I tend to view my client’s situation though the mindset that the best protection for their IP is to keep someone from being able to steal it in the first place, rather than the repercussions once it has been stolen. That requires more understanding of what is being shared, why, and alternatives – often more ingenious ones, that allow the objective to be met but with minimal risks.
What are the wider implications of the US-China trade war for international trade?
Companies must be constantly aware of their supply chains and where they may be subject to disruption due to a tariff or a blockade. While difficult, a company that has fuller awareness of its supply chain can also build in alternatives to hard-to-source components.
Companies must also be very aware that the Chinese government will tend to view a US or EU company the way they view their own – ie as partially an extension of the government of China. Therefore, you must be prepared for events that may have nothing to do with your company, but are directed at the country where you operate primarily from, or where your HQ is based. This requires planning and having emergency contingency planning for things like government raids, executives being detained, servers being seized. If those measures are not thought through in advance you will lose valuable hours in the crisis.
Guillermo Christensen is a partner in the Washington DC office of Ice Miller LLP and practices in the Data Security and Privacy and White Collar groups. He counsels clients on information security and enterprise-level cybersecurity risks and responding to breaches, in particular nation-state attacks. He regularly conducts internal investigations into insider threats and allegations of violations of international trade and national security laws. Drawing on his national security experience he assists clients (buyer and seller side) in national security reviews of foreign acquisitions through the CFIUS/Treasury Department process, in setting up international compliance programs to mitigate corruption and sanctions/embargo risks, and assists clients navigating entries into high risk international markets. He previously practiced in the international trade practice of another international law firm.
Mr. Christensen is a former CIA intelligence officer and a diplomat with the Department of State with multiple international tours and domestic assignments including with the FBI and the predecessor to the National Counterterrorism Center. Most recently, Mr. Christensen served as the Science and Technology Advisor to the U.S. Mission to the OECD in Paris, France, where he was responsible for cybersecurity, internet governance, cross-border data flows, and intellectual property rights. From 2001-2002, Mr. Christensen was the CIA Fellow at the Council on Foreign Relations in New York, and is a life member of CFR. He currently serves on the international advisory board of the Reeves Center at the College of William and Mary. Mr. Christensen holds a BA from The American University, a Masters of Science in Foreign Service and a law degree from Georgetown University. He is licensed to practice in New York, Virginia and Washington DC.
Guillermo can be contacted on + 202-572-1609 or by email at email@example.com