Episode Transcript
[00:00:03] Speaker A: Welcome to INA Insights, where prominent leaders and influencers shaping the industrial and industrial technology sector discuss topics that are critical for executives, boards and investors. INA Insights is brought to you by Ina AI, a firm focused on working with industrial companies to make them unrivaled segment of leaders. To learn more about Ina AI, please visit our website at ww Ina AI.
[00:00:40] Speaker B: Hi folks, this is Connor Bradley from Ina AI. Welcome to another episode of INA Insights. Today, our guest is Kellyanne Shaw, a partner at Hogan levels practicing international trade and government relations. She's also an adjunct professor at Columbia Law School and a senior advisor non resident at the center for Strategic and International Studies. Kellyanne spent a decade in government as A-U-S. Trade negotiator, including as a former deputy assistant to the president for International Economic affairs and deputy director of the National Economic Council. She has a deep knowledge of U. S. International trade, investment and economic law from her experience across several roles in the White House, U. S. Trade representatives, U. S. Congress and private practice. In her White House role, serving on both the National Security Council and National Economic Council, Kellyanne led the Office of International Economic affairs and played an instrumental role in a wide range of legislation, negotiations and agreements, including the US Mexico Canada Agreement and the China phase one agreement.
As a senior advisor to the President on matters of international economic policy, including trade, investment, development, global economics, energy and the environment, she was directly involved in almost every major economic decision made at the Trump White House.
Kellyanne also has served as lead us negotiator at the G seven, G 20 and APEC conferences, and led the US UK Economic Working Group, and has represented the United States in more than 40 World Trade Organization disputes and in negotiations. In her role as assistant general counsel for USTR, based in Geneva, Switzerland and Washington, DC, she's been named one of Washington, DC's 500 most influential people for the last two years in a row and has won numerous legal awards. And with that, I welcome Kellyanne to our podcast. Kellyanne, it's a pleasure to have you on. We are fortunate to interview a lot of titans from the private sector, but to have you on as a representative from the public sector is really a treat. So thank you for joining.
[00:02:52] Speaker C: Well, thank you so much. Pleasure to be here.
[00:02:55] Speaker B: Awesome.
So maybe we can start this conversation by kind of doing a here and now versus world trade policy when you came in versus where it is today. Could you start by taking us back to when you joined, when you started looking at world trade and economics and what the climate was like then and maybe how that compares to now?
[00:03:16] Speaker C: Sure. Happy to do so. And I've been an international trade lawyer since 2009. So I've seen the world transform pretty dramatically in the last 15 years. What I'll say in terms of trends that we're seeing, we're just seeing a difference in the type of commerce that's going across borders. So before, historically, the US trade has largely been focused on goods going back and forth with a small component of services. But with the proliferation of the Internet, advanced technologies, innovation, we're seeing a much more services led economy, not just in the United States, but around the world, and trade rules that are really struggling to keep up with it. I think the other trend that we're seeing is an emphasis on national security over economic outcome. Right? So we're seeing a lot of things happening in the export control space, investment restrictions both inbound and outbound, and the use of tariff policy for national security gains. And then I think really fundamentally the most important event of the last decade that's happened that's impacted trade has been the COVID pandemic and the realization that countries didn't have what they needed in a time of crisis. And at the time, 86 countries enacted various forms of export restraints. You had the EU actually erecting borders again across countries, which was pretty phenomenal. So we've seen a reevaluation of supply chains. A lot of work going in now to find out where are critical minerals and other things coming from. But I do think there is a massive rethink about trade policy, not just in the United States but around the.
[00:04:41] Speaker B: Yeah, absolutely. So I guess to recap, so it's a transition to more services focused economies and trade, concern for national security over net prosperity, potentially.
And then kind of an awareness of crises such as the COVID pandemic. That makes a lot of sense. And then how do you think the US in particular has responded to these evolving demographics in relation to international trade?
[00:05:06] Speaker C: Yeah, well, it's certainly been interesting to watch. And I think when I started out in trade, there was sort of an idiom that all Republicans are free trade and all Democrats are protectionists. Right. And if you look at the politics today, you'll find just as many Republicans on one side of that spectrum as Democrats. It's really been shaken up quite a bit. But I started off in the government in 2010. I had an interview with the US trade representative to go work as a career lawyer. And I met with the general counsel, and I've since joked with him about this. But at the time he asked me, what do you think of President Obama's trade policy. And at the time, to my credit, the view in Washington was there wasn't much happening. And so I think I said something to the effect of, like, it seems pretty boring. And he definitely had a bad reaction to that response. I walked out of there thinking, oh, gosh, I did not get this job. And then got a phone call the next days. And it turns out I did. I think he appreciated somebody being honest about my views with him. But at the end of the Obama administration, trade in the more traditional sense really picked up. And a lot of presidents do this in their second terms. They're interested in legacy building. And trade negotiations tend to be historically an important part of that. And so you saw Obama negotiating the TPP agreement, a TTIP agreement, which would have been an FTA between the US and Europe. And he was really active on a lot of initiatives happening at the WTO and around the world. But then fast forward to 2016. And I think a different political strand really caught on, both on the republican side as well as the democratic side, because you had both Clinton and Trump coming out against President Obama's major trade initiative. And I think things have continued to snowball from there. But really, there's still a recognition that the US needs access to export markets, but there is a renewed focus on manufacturing and the industrial base as well, in a way that there wasn't 1015 years ago. So I think right now, the politics on trade are very much up in the air, but there is a lot of interest in trying to rebalance what is viewed as an unfair trading relationship in the United States with a number of, not just our adversaries, but our allies as well.
[00:07:14] Speaker B: Yeah, no, that makes sense. And I think it goes back to what you mentioned originally, the national security and kind of crisis management preparedness. I think with recent kind of current events, that makes a lot of sense. And so for the people who aren't as well versed in international trade and might not have as deep of an understanding, what are some of the key metrics, or KPIs, that we can use to evaluate the performance of international trade and how the US is faring in?
[00:07:41] Speaker C: You know, I sort of put this into three separate buckets. So the first one is economic and commercial impact of our trade policies. Right. Like, how are us companies doing within the United States when faced with foreign competition? Are the terms of trade fair? Are the rules fair? Are us companies being outcompeted because of innovation or because of massive subsidies from the exporting countries? So I think those are some things to look at. And then sort of the reverse, right? Like, are us companies being discriminated against in foreign markets, or are we really facing a level playing field where companies can compete on an equal footing and see how we do?
So trade is a really important component of an overall and broader economic strategy of any administration or Congress.
So the other bucket is national security. And here I think the economics are less important. Right. So when you're evaluating how is our trade policy being used to address us national security needs, you're actually mostly talking about things that will limit trade. So, like the sale of sensitive technologies to China or to other countries can be limited through export controls or the new proposed outbound investment screening mechanism. And like in an inbound transaction, we've got CFIUs tools. So the Committee on Foreign Investment in the United States, there may be an economic reason why a us company or person wants to sell a strategic asset to a foreigner, but for national security reasons, that transaction is going to be blocked if it's deemed too sensitive to us national security interests. So again, it's like trade limiting. So you can look at policy based on either the economic spectrum or the national security spectrum. And then I think this third bucket of metrics is really value based. And people don't talk about values when it comes to trade that much. But if you really think particularly about the US political model, this freedom of choice, this democracy that we have, it's part and parcel with less government intervention, less picking winners and losers in our economy and allowing people to choose their own destiny, whether that's choosing what job they want to have when they grow up or what products they want to buy, services they want to sell. Our economic model, it just is not compatible with a communist or socialist model. Right. It's more compatible with a democratic model. And so you can look at some of the values in the economy, and that might lead you, if you're looking at the value spectrum, to think like industrial policy probably isn't a good thing because it's the government intervening in a way that it shouldn't be. So I think those are some of the types of metrics you can look at to see whether your policies have been successful.
[00:10:17] Speaker B: Got it. That makes sense. And then from that kind of economic bucket, do you think there are industries within the US that particularly need that protection against foreign competition or need to be bolstered to fare in foreign markets? Are there examples that come to mind?
[00:10:36] Speaker C: Yeah, and I think most recently there's been a lot of attention on the semiconductor industry, for example. And so you've got a couple of different trade tools and other tools being used to try to promote us semiconductor manufacturing and innovation. So the big thing was the Chips and Science act that Congress passed, which had pretty bipartisan support. Even traditional Republicans, who may not normally support that kind of intervention or large spending package, thought this industry is so important that we really do need to provide some money and incentives. And then you have things like export controls, which are restricting the sale not just of high tech chips, but some of the legacy chips as well, and other policies that the administration and Congress are both exploring in that.
Certainly, you know, there are definitely going to be sectors and industries where a heavier hand is necessary, but all of these things are balanced between national security interests, economic policy, and the values that we want in terms of managing the economy.
[00:11:36] Speaker B: Yeah, the semiconductor one is an interesting example because I think it hits on both of those buckets.
How can american firms compete specifically with this? And then coupled with the fact that the competition is in some way related to large national security risks? So very interesting kind of way to view the world there. Appreciate that. Kellyanne, as we kind of look forward in international trade policy, what do you foresee as being kind of the major challenges over the next decade or so?
[00:12:05] Speaker C: Well, that's not an easy question to answer, but I think there are a few different things that will really impact the way we're looking at trade moving forward. So the first thing is the increasing trend towards regionalization. So what we haven't talked about yet is the World Trade Organization. But this global multilateral set of rules that was negotiated throughout most of the last century governing trade among 164 countries is largely paralyzed, and it has been for some time. And so as those rules are stalled and the economy continues to evolve, what you're seeing are countries negotiating bilateral trade deals and pluralateral trade deals like the TPP or now the CPTPP, as opposed to putting their resources into a more global trading system. And so, like, I work in the private sector now, and take XYZ EV battery manufacturer, for example, who's looking at sourcing options? You're not just looking at things like where's the tax incentives? Or what does the labor force look like? But you're looking at how do I untangle all of these hundreds of ftas and figure out where I'm getting all of my parts and components and the rules required for each one. Right. It's a lot more complicated. And that regionalization and that fracturing is going to continue over the next ten years. And I don't call it deglobalization. I call it reglobalization. So we're seeing supply chains kind of like reform.
I think another big trend is the US China relationship. And whether you are us or China or some third country or a company just trying to navigate this, it's the two largest economies on earth who are facing a tremendous amount of tension. And it's not really clear where this relationship is heading over the next three to five years. And it could be stable or it could be pretty horrific, and nobody knows the answer to that. And there are a lot of factors influencing that. So I think watching that relationship will be really important over the next few years. And then the last thing I'll say is democratic legitimacy. And I think that's the strand I was pulling on at the beginning, which, know, it's not really clear in the United States where the politics are on trade, but the same is true in a lot of other countries around the world. And when your economy is doing well, there tends to be a longer leash to use trade tools to achieve either economic or national security interests and policy outcomes. And when the economy is struggling, that leash is shorter. But there is a sense in the United States and in a lot of countries that trade has not been fair to certain industries and workers. And so it's harder to advance certain trade policies when that's the democratic values that are within your constituents.
[00:14:43] Speaker B: Absolutely. Do you think, you talk about this reglobalization and kind of, maybe the fracturing is a hard word, but relocation of certain supply chains, do you think that has an impact on kind of, when you look at the growth of economic output in the world, is it a fair assessment to say that that reglobalization and shifting of manufacturing capacity, or whatever it is, does that lower that growth cadence that we have as a planet, or, I don't know, are there pockets for that kind of reglobalization to actually improve global growth?
[00:15:20] Speaker C: Yeah. The World bank, the World Trade Organization, and I think the UN and IMF recently did a study on what would happen if international trade rules became totally regional, if the WTO didn't exist anymore. And what it showed was trillions of dollars of loss to global GDP. So I think there certainly is a consequence for, you know, what I'll say is I think that some of these trends are just happening, right? Like they're not something that we should, companies or countries are going to be in a position to reverse. Because I do think there's a sentiment that what worked in the last century isn't working for commerce in this century, where a lot of what we produce is not just for commercial purposes, but also has dual use purposes sensitive to national security interests. And so a lot of countries are seeing the need sort of carve out a greater space for more trade limiting tools that will protect national security interests. So the supply chain debate, I do think, goes into that as well. Again, Covid was the big catalyst when we couldn't get our masks or vaccines or whatever else we needed. But I definitely do see this trend happening, regardless of what the consequences are for the global economy.
[00:16:32] Speaker B: Yeah, absolutely.
So, Kellyanne, I appreciate that kind of overview on international trade for our listeners. Maybe we can take a step back on kind of your journey to date and how you got here today. I think your story is a fascinating one. You completed your undergrad at the University of Washington. Go huskies. I know you guys are in the college football playoffs. Congratulations.
[00:16:51] Speaker C: Thank you.
[00:16:52] Speaker B: Earned a master's degree from the London School of Economics and then a law degree from Columbia school. How did you kind of discover your interest in international trade as you progressed?
[00:17:04] Speaker C: To be honest, I'm not totally sure, because my first two interactions with international trade, and the WTO in particular, were pretty negative. So I do find it ironic that I ended up here. So I grew up in Seattle, as you know, and in 1999, protesters took over my city. My brother was tear gas just trying to get to work during the battle of Seattle for that ministerial. And all I knew about the WTO then was what I had heard from my college roommate, which was that it was forcing everyone to eat hormone treated beef and killing turtles. So I thought, this thing is terrible. I'm never going to work in it. And then in law school, I ended up taking an international law course and reading a WTO case, one of the decisions from the panels, and I thought it was the most boring thing I had ever read and distinctly remember saying, I will never do this as a career. And so how I fell into it is pretty ironic. But as it turns out, I really enjoyed being a practicing trade lawyer, and we had a great trade practice at my then law firm, Gibson Dunn, and really enjoyed it. And then took a job with the US government in Geneva, which was just a ton of fun, defending us interests and working in the system. So I've been convinced since, and now I've stuck with it. But I think, like a lot of people, you can't really predict your path, and that was certainly me.
[00:18:14] Speaker B: Absolutely. Third time's the charm for your interaction with the World Trade Organization. It sounds like, awesome. So as we mentioned earlier, you've worked across several major government and international organizations on policy and the like. What's a piece of work that you think was the most fulfilling or most interesting in those engagements?
[00:18:33] Speaker C: Yeah. Well, what I always tell young lawyers is that there's nothing like defending your country in a litigation or a dispute. Right. It's like pen to pen combat as opposed to some other form. And so raising your placard and arguing and using the text to make your point and going in a sovereign to sovereign litigation, I think, is just so fun. So I really enjoyed the WTO litigation. I did. But I think sort of the most profound work that I did in government, and profound in terms of the way it impacted my view of the world, was being the lead negotiator for the United States at the G seven and the G 20 and APAC, and negotiating directly with world leaders, being in the room where it's just world leaders plus you plus one, and really understanding how decisions are made at the highest level in government and what these larger than life characters personalities are really like and how they do make decisions. I just had a lot of fun doing it. It was a huge challenge, but really enjoyed that opportunity.
[00:19:29] Speaker B: Yeah.
Not to make too small of it, but I can only imagine. I see an Internet celebrity on the street, and it's like they don't seem real. I can't imagine seeing a major world leader in the same room and kind of having that same interaction. Yeah.
[00:19:47] Speaker C: Or then having to negotiate with them in your first meeting where everyone's mad about something. So it was definitely surreal. And in the moment when you're going through something like that, you've got a job to do and you get it done, but you sort of think back and it's been a few years now and you're like, wow, that was a really cool experience.
[00:20:02] Speaker B: Yeah. Incredible. So, as we know, international trade policy goes hand in hand with major domestic programs like Build American, buy American, and made in America. How would you describe the impact of international trade policies on stimulating industrial output in the US specifically?
[00:20:19] Speaker C: Yeah. So there's sort of a perennial debate that has existed from the beginning of our republic about either protectionist policies or more free trade policies. And it used to be, for most of the US history, that it was the industrial north that wanted free trade policies because they wanted export markets, and it was the agrarian south that wanted more protectionist policies because they wanted to keep out foreign agricultural products. That trend is reversed, and you actually see the complete opposite now in terms of the, you know, buy America some of the other programs you listed are certainly important in achieving the right think, you know, of all the three buckets we talked about economic prosperity, national security, and maintaining our economic model. It's consistent with us democratic values. I think it requires a balanced position. And so those programs serve an important role, particularly now for the industrial space. And it's a trend that we're seeing in terms of some of the industrial policies like the Inflation Reduction act, the Chips act that we talked about, the bilateral infrastructure law addressing things like critical minerals, electric vehicles, renewable energy and semiconductors. So it's certainly on trend.
[00:21:30] Speaker B: Absolutely. And we talked about one of these earlier being the semiconductor industry. But obviously the US has moved strongly and swiftly to protect its intellectual property rights in industries like that. Do you think there are any other industries that are following similar paths in terms of protectionism or will be?
[00:21:49] Speaker C: Yeah. Well, anything in the renewable energy space has been a strong priority of the Biden administration. And then in the first two years of the Biden administration, Democrats controlled Congress. So they were able to work together to pass some of these big bills that had not only tax incentives but also funding, like direct subsidies. So that's certainly the trend right now.
It's sort of hard to predict where this goes if there is a change as a result of the next presidential election in terms of republican priorities, because Republicans have been less willing to embrace electric vehicles, for example. But I do think there will be other sectors where these, you know, just again, in terms of trends, if there's a republican controlled Congress controlling the House and the Senate as a result of the next election, I think you're less likely to see some of these big spending bills because it cuts against more traditional conservative values of not wanting to pick winners and losers. So you're more apt to see something like tariff policy or export controls or some of these other tools being used to achieve some of the same objectives.
[00:22:51] Speaker B: Got you. And I think this next question is part of the renewables piece you touched on. I think another big theme is availability of raw materials and rare earth minerals, which for certain industries, do we have the tech, do we have the IP, do we have the know how? But there are other kind of factors of production that are necessary, inputs like raw materials. And what is the kind of us doing to address any risks associated with specifically that raw material, rare earth mineral input that the US is facing?
[00:23:27] Speaker C: Yeah. Well, right now they're still trying to figure it out. So there are a lot of initiatives and there have been which have predated the Biden administration to make the United States less dependent on China, not just for the sourcing of critical minerals, but also the processing, because China has threatened historically to cut off certain critical minerals. And they just enacted this last summer export restraints on graphite, gallium, and germanium, partly in response to the US semiconductor export control rule. So it is a real threat, and it is a real challenge. I don't think that anyone has the silver bullet. So there are discussions happening with international partners. You see the mineral strategic partnership which Secretary Blinken and the State Department are running to try to work with allies to identify other source countries and help support the development of mining in Africa and other places.
There are rules within the Inflation Reduction act which say you can't mine or can't have any critical minerals in an EV battery that are mined or processed by a foreign entity of concern, which is effectively anyone in China. And so they're trying to incentivize the private sector to help come up with a strategy. And then there is funding from the Department of Energy to help assist with the mining of critical minerals. But it's a hot topic of discussion. I know there are discussions happening, too, about creating some sort of market with allies where you're either in the club or outside of the club, and if you're in the club, we're trading with each other. That kind of captive market thinking. But it's going to be a long process. I mean, China has been dominant in this for decades, and I think the western world is waking up to it only recently, and so trying to figure out what to do. But it's a real challenge.
[00:25:10] Speaker B: Yeah, absolutely. It's probably a longer putt, but I've seen kind of news headlines come across on rare earth mineral deposits to the moon and Mars. So hopefully that maybe more on the 5100 year timeline, but it could be another option to explore.
[00:25:25] Speaker C: Yeah, I don't know if you've seen that show for all mankind, but there's an episode in the recent season where they find an asteroid with certain critical minerals and are trying to actually capture the asteroid, which I thought was pretty amusing.
[00:25:38] Speaker B: I don't know if I've seen the show, but sounds like I've seen a bad Sci-Fi movie or two with a similar.
Thanks, Kellyanne. So, you know, I see we're coming up on time here. So just to kind of close us off, there's been a lot of geopolitical tensions across the globe in the last few years. How should american businesses expect us trade policy to change and evolve in light of balancing all the other us interests in the next few years give you a really easy question to finish this off here.
[00:26:09] Speaker C: Yeah, you're not letting me off easy. So my answer is, of course, it depends.
As we talked about some of the big factors, there's obviously a lot happening in terms of global supply chains as a result of the crisis in the Middle East, Russia and Ukraine, the blockade of different shipping routes and problems, logistical problems, just getting goods back and forth across borders, which are making it more challenging for businesses. I think sort of the US China question is something that a lot of my clients and companies around the world are spending time on, especially companies that have presence in both markets. If there is a force majeure, if there is a Taiwan invasion, if there is some conflict in the South China Sea, that would then require the US or China to really effectively decouple from one another at a fast clip. What would that mean in terms of where's my data, where's my banking, where are my manufacturing supply chains and raw inputs? So a lot of companies are spending time just putting together risk assessments on sort of worst case scenarios and hoping that that doesn't happen. But the other sort of thing to look out for is on the US election side. And I think that if Biden wins the presidency, we'll see a lot more of the same types of trends in terms of the US approach to trade, which is a more defensive posture. But the US is not currently negotiating any free trade agreements, not pursuing offensive trade policy. I think if there's a Trump administration, you're going to see both of those happen. Right. Trump also embraced those defensive trade measures, but you might see some more openness to some trade policy as well. So that would sort of be the difference. But a lot of this just depends.
[00:27:50] Speaker B: Yeah, absolutely. Now a lot of uncertainty and then, yeah, to be in an election year adds to that. So it'll be an interesting next couple of months and next couple of years, certainly for our listeners as leaders across businesses in America to keep an eye on. But awesome. Kellyanne, thank you so much for your time. That brings us to the end of our podcast here. It's been a pleasure having you on and look forward to getting this podcast out to our listeners.
[00:28:15] Speaker C: Great. Thank you so much. It was nice to chat with you.
[00:28:18] Speaker B: Awesome. Take care.
[00:28:24] Speaker A: Thanks for listening to Ina Insights. Please visit Ina AI for more podcasts, publications and events on developments shaping the industrial and industrial technology sector.
