← The Trade Guys
The Trade Guys
Alien Tort Statute, EU Auto Tariff Threats, Royal Whiskey Tariff Relaxation, and Trump-Xi Summit Preview
00:31:41
On this episode, the Trade Guys discuss a Cisco lawsuit, Trump tariffs, Scotch whiskey, and the Trump-Xi summit.
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- [00:01]
A
I'm Scott.
- [00:02]
B
I'm Bill. And we're the Trade Guys.
- [00:07]
C
You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm Alex Kisling and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys. Thanks for listening to the Trade Guys. On today's episode, Bill and Scott break down the Alien Tort act and the Trump administration's latest threat to raise tariffs on European autos. Then we examine the role that royal diplomacy played in lowering tariffs on Scotch whiskey and preview the upcoming summit between Presidents Trump and Xi in Beijing. All that and more on today's Trade Guys. All right, Trade Guys, we're going to once again begin today's episode with a couple of news flashes from Bill. So, Bill, what's hot off the presses this week?
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B
Two things. The refunds appear to be moving along with tactical glitches continuing on and off. Customs has indicated that they anticipate money going out the door around May 11th. So wait and see. Next week we can report on whether or not anybody actually got paid or not. The new thing that happened that was kind of interesting, which I had not thought about, is that those of you that are government wonks know there's an obscure thing called the Paperwork Reduction act, which requires federal agencies that are seeking to get information from the public to estimate the amount of dollars and man hours that are required to compile the data that the government is asking for. It's a reporting statute. And so CBP has cheerfully done that with respect to the refunds. And they estimate that it's going to cost importers 511,500 hours, man hours of work and $18.7 million to claim the refunds. So I just throw that out there. Since they're going to be getting back 166 billion, in theory, it's probably small price to pay. But I did meet this morning with a group of Europeans from one particular country that shall remain nameless. And they were very interested in what was happening with refunds because they've got a lot of people that are getting them, apparently. And what they said was that a lot of the smaller companies in Europe are not applying because they think it's too much work and they think it's too much paperwork. And I try to explain that it really wasn't. It's relatively simple, but we'll see what happens. But that led me and them both to believe that if the idea here on the part of the government by not making it automatic and making you apply to get your money back was to save money in the hopes that a lot of people won't apply. That may be working. So eventually we'll have a report on that. The other piece of news from yesterday the last two days is the WTO general counsel met, and this goes back to when we talked about the WTO ministerial, which was at the end of March, I think, where they basically punted on both their work plan for reform and on the E Commerce moratorium taxation issue and decided that they would kick it to the general counsel's meeting in May. Well, that was this week. And not to take credit, but to
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C
say take credit, go ahead.
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B
Once again, the trade guys were right. They accomplished nothing. They failed to agree on a reform program and they failed to extend the moratorium. So there is no progress, which is exactly what we and I think probably everybody else expected. So more on that another time. Back to you, Alex.
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C
All right. All right. Thank you as always for those top line items at the start here. But let's dive into our first topic for today, which is a look at the Alien Tort Statute, a law dating back to 1789 that has recently found itself back in the news following a closely watched Supreme Court hearing on a case between the Falun Gong religious movement and Cisco. The case could reshape whether US Companies can be held liable in American courts for allegedly aiding human rights abuses overseas. So, Bill, let's start with the basics here. What is the Alien Tort statute and what is the nature of the case before the Supreme Court?
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B
Well, it's one sentence. That's the most interesting thing about it.
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C
Brief segment yes.
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B
What it says is one sentence. The district courts shall have original jurisdiction of any civil action by by an alien for a tort only committed in violation of the law of nations or a treaty of the United States. And that's it. What does that mean originally? There's very little legislative history about it. It was in the first Judiciary act of 1789. We believe it was intended to deal with pirates and attacks on ambassadors inside the United States as foreign parties. It was an effort to create a judicial pathway for resolving those kinds of disputes. The United States wanted to make clear that it was the central government that was going to be the focus of that activity and not the states. And so they inserted this sentence into the first Judiciary Act. It lay dormant for almost 200 years with very little use. And then in 1980, there was a case called the Filartica case, in which all the relevant Parties were living in New York, but they were all foreign nationals. Two Paraguayan citizens sued a third Paraguayan citizen, all of them in New York, alleging that the third one, the defendant, had kidnapped, tortured, and killed one of their relatives in Paraguay. And for the first time, the court said that the Alien Tort statute, the ats, can be used to seek relief in that case. It's a civil statute, so we're not talking about criminal liability here, but we're talking about basically money. So they were allowed to go ahead and sue. That one did not reach the Supreme Court. It reached the Court of Appeals in the Second Circuit, New York Circuit, which produced the ruling. I just said. But what that stimulated then was, I wouldn't say a flood, but an ever growing trickle of more cases on these issues. And basically there have been a series of Supreme Court decisions over a long period of time that have successively narrowed the scope of what you can use this statute for. But there are several large questions that remain outstanding. A lot of these cases have been what one person has called the foreign cubed situation, which you have a foreign plaintiff suing a foreign defendant for something that he allegedly did in a foreign country. So everything took place overseas, and everything involves non US Parties. And the court has generally precluded those kinds of lawsuits. And they've established that there has to be a US Nexus. And that has then raised a bunch of thorny questions. There was one case involving Nestle and Cargill, which alleged that they were complicit in slave labor and child labor in the cocoa fields of Cote d'. Ivoire. And the court determined that even though the defendants were technically US Corporations, it was Nestle USA and Cargill US that while they were US Corporations, there was not enough of a nexus between what they did with respect to the coca farmers to establish any kind of liability. And so that case was tossed. There was a subsequent case where, as I said, that involved two foreign corporations being sued. And the court ruled that you couldn't sue foreign corporations. But the court did not directly opine on the question of whether you could sue a domestic corporation. Most of these cases involve individuals, you know, doing bad things of various sorts. The Cisco case, which is the current one, will allow the court to tackle the two big remaining questions. This case involves the Falun Gong, which is a Chinese group of both. I don't know quite how to describe it. It's a group that does a lot of physical activity, exercise. But it's also, I think the Chinese government believes it's a religion as well. And they believe it's a threat to their government. Most people don't believe that, but that's what they say. In any event, the allegation is that Cisco sold the Chinese government surveillance software and probably hardware, I guess too, that enabled them to monitor and ultimately suppress Falun gone activities in China. And rather than suing the Chinese government, which wouldn't get them very far, they're suing the American company. This presents two issues. One is Cisco's an American company, so the court has to decide, can you sue an American corporation under this statute? And they've not dealt with that directly before, so it'd be interesting to see what they say. The second thing has been behind all these cases is what does aiding and abetting meaning? Because nobody is alleging that Cisco actually did anything directly to anybody in the Falun Gong. Nobody ever alleged that Nestle or Cargill actually engaged in slave labor. These are all enabling cases that the American party did something to assist in this crime or this bad behavior. And the Supreme Court so far has held to a fairly high standard by ruling out simply the physical presence, saying that just because the company is in the United States, that doesn't create enough of a nexus to make them liable for what happened. You have to have more than that. You need to prove, I think, complicity really that they were actively engaged in whatever it is bad that has happened. And of course the plaintiffs always allege that that's what's going on. The court has yet to really find that to be the case in most of these circumstances. Philartica was a different situation because this clearly was the act. They were suing an individual over his specific actions. They had a strong case. When you're dealing with corporate behavior, it's much more attenuated. I have no idea how this will turn out. But these things continue to work their way through the judicial system. And it's sort of a testimony in a way of globalization. We're all connected. And when you develop foreign supply chains and when you engage in supply chains abroad, this is the kind of thing you run into. When I used to lecture on supply chains, you do the obvious ones. You do automobiles. I've got a picture of a Boeing airplane that shows their supply chain. I also have a chart of a Nutella supply chain. And there is a Nutella supply chain that you don't always think about that consists of hazelnuts, sugar, palm oil and cocoa, because it's a chocolate product, among other things. And Cote d' Ivoire is part of the supply chain. And that's just the world we live in right now. You know, everybody, everything is made everywhere, and the court has to sort this out. I have no idea what they'll do, but it's one that bears watching. If the court decides that Cisco passed the aiding and abetting test and was liable, then you're probably going to see a flood of additional litigation. And in the past, several justices have commented on that and, and suggested that one of the reasons why they were unwilling to have that happen was precisely to avoid a flood of litigation like that, to try to deal with things that basically happened to other people somewhere else.
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C
Yeah. Yeah. Scott, do you agree with all of that?
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A
Basically, yes. Look, hard cases make bad laws. That's what we always hear from lawyers, and they're right about that. And one of the things that makes these cases hard is this is a very simple statute written in basically very cryptic language and then became dormant for 200 years. So no one's left around to say what they actually meant. I think they were looking for a way to make sure the central government of the United States was the place to settle foreign policy matters. That was an important element of the structure of the government. That's why you needed a central government more than anything else, as the framers would describe. But this is. There's a four part test here. Obviously, civil action. Well, we know what that is by an alien. We know what that is for a tort that is, you know, as a general matter, a civil wrong that is usually settled in terms of damages. And then comes the hard part, a violation of the law of nations or a treaty of the United states. And in 1789, the law of nations was pretty darn simple. It had treaties of foreign, of commerce and friendship, were quite common and basically mostly protecting ambassadors abroad. It was one of the key principles that you made treaties based on. And that was part of the common, what will be understood as the law of nations. But that idea of customary international law has really expanded quite dramatically into people's minds. Now, whether international law is or isn't particularly helpful in this case, it does give rise to questions that just couldn't have been part of the conversation 250 years ago. So one of these things, you know, simple language, simple four part test, and when you get to the test, it isn't simple at all.
- [13:38]
C
All right, we'll keep an eye on it. But I want to turn next to President Trump's plan to raise tariffs on European auto imports from 15% to 25% after the administration accused the EU of failing to follow through on last year's trade agreement with Washington. So, Bill, I'm going to go back to you here. You know, Trump is saying that Europe is not complying with the deal, but European officials are insisting the agreement is still working its way through their legislative process. So what exactly is the dispute here?
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B
Well, it's another example of why I think we're in a state of perpetual negotiation with Trump. It's just he had another rant over the weekend and said basically his complaint is they're not moving fast enough. And he has a point. They're not moving very fast. And the same Europeans that I talked to about refunds this morning agreed they think their process is really slow. So, you know, I think that's going on. I don't detect an effort to slow roll this, particularly right now. I think back in January and February because of some things that Trump said at that time and because of Greenland, I think there was some slow rolling going on. Right now it's in the end game of the European process, and it's a complicated process. The commission has to propose something. The parliament then does what it thinks is the right thing. And the member states, the Council of Ministers, also develop their position on the subject. So there's three parties producing independently three different proposals. And when all is said and done, when they've all three have done that, then they have what's called a trilog process, where the three of them sit down and try to work out the differences. That's what's ongoing. They had a meeting yesterday to do that, which allegedly made some progress. The EU Trade Commissioner Sefkovitch, said they made progress, but they're not finished yet. What the uncertain element, I think. And Trump didn't say this. Trump basically said they're just going too slow. You know, hurry up. The question that's going to come up is whether the amendments that the European Parliament added to the agreement are going to be acceptable to the United States. And that's where it gets a little bit more complicated because the amendments were and Scott, you have correct me if I own there's a sunset amendment that says the deal's off as of March 31, 2028, unless the EU and the US have negotiated a final permanent agreement. There's a sunrise amendment that says we won't reduce our tariffs until the United States reduces its tariffs on steel and aluminum and downstream products thereof from 25 to 15%. So it's a question of sort of who goes first there. And then there's a, I guess you'd call it a snapback amendment.
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A
Yes.
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B
Which said if the United States imposes additional tariffs higher than 15%, the EU reserves the right to snap back its concessions. So those were all additions, which I think, from a neutral point of view, are all kind of sensible additions, whether they are going to be acceptable to the United States or not. Nobody's really said yes yet. They've just focused on the time it takes. Sefkovich said he hopes that this will be done by the summer, and I think he's probably got that right. Whether Trump will wait or not, I don't know. But the result is every time he makes these new threats, that really just slows the process down, because the Europeans have got to be thinking, well, if he's going to do that, why should we move if we're going to get punished anyway?
- [17:22]
A
Yes, that's all true. But look, at the same time, I understand the President's frustration. He had a deal in July 2025. People came and shook his hand. There were photos of it. It was all put down on paper the next month. So July, August, there's an agreement and a framework. And I understand it's very hard to make things stick with the Europeans because of the complexity of their own internal processes. But as of April 2026, the European Union has not implemented any part of the agreement that they made six months before. I would be frustrated with that as a negotiator, and I'm sure the President is livid about it because it looks like they're slow walking things. Whether they are or not doesn't really matter. They've got a process that is now adding additional elements. The sunrise, the sunset, the snapback, none of which the United States has agreed to. And so very frustrating to deal with. And you get the suspicion that the whole thing is kind of an anti American project that just takes different manifestations. Now, in fairness to everyone involved, the hard part of any negotiation is getting the deal to stick. All right? And if not enough work was done on either side, then we got to deal with that. But this one, I mean, just stepping outside and erasing the names of the players, if you wrote down, you know, party B did this to party A, you'd think that they were slow walking a deal that they didn't really like, and they're looking for a way out of it and they're trying to screw partier. And that's what it looks like to me.
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C
Let's assume the tariffs on the autos did go forward. I mean, from 15 to 25%. How painful is that for Europe?
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A
Well, it's a major area of export competitiveness for particularly Germany in terms of finished products. But autos are a key component in their US Goods trade surplus. So it's one of the things that, you know, a lot of vehicles come from, come from Germany and sell in the United States.
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C
Of course.
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A
Yeah, it's part of the premium market, an important, well established part. The German marks are well known and well respected. They do build vehicles in the United States, but not their top line autos. For instance, they build the SUVs and other products here.
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C
Right.
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A
So I think it's important and I think it remains an important industry in Europe.
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C
Yeah.
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B
Bill, please, two things on that. Next week we're going to have Jennifer Savavian on. She's the head of Autos Drive America, which is a trade association that represents foreign automobile manufacturers. So we can ask her that question and see what she says about it. I think the view in Europe was that, I mean, they didn't say this publicly, but the view in Europe was that they could handle 15%. And this is not just auto specific. They could handle 15%, they couldn't handle 25%. And so taking the tariff on anything, in this case cars up to 25, I think is going to be a real problem.
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C
Yeah. Yeah. Okay, great discussion on that. I want to turn to the topic we've all really been looking forward to today. Scott in particular as eager to jump into this, mixing his two favorite things, whiskey and the royals. So as many of our listeners know, the king and Queen were in the United States last week for what was a very well received royal visit. And amid the royal diplomacy, President Trump announced he is lifting tariffs on Scottish whiskey in honor of the King and Queen. So Scott, this is kind of quite a win for the king. How big of a deal is this really? And then, Scott, how the hell do you spell whiskey?
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A
Well, fair enough. Let me see what I can do with that. Look, first of all, when you have the tariff man in the White House, it's really nice to see that one of the gifts he gives to a foreign sovereign is a lower tariff. You know, there's all sorts of gifts being exchanged throughout these processes of royal visits of any sort. But to have one of the gifts being lower tariffs on Scots whiskey I think is particularly noteworthy. Now, is it spelled with an e or not? And the answer is there's a lot of branding that goes into this and there's a lot of sort of specific elements that are mandatory if you want to claim the use of the name Scots whiskey. So, for instance, American whiskey bourbon has to be aged in new oak barrels. Scots whiskey, by their regulation, internal regulation, has to be aged in used oak barrels. So that each defines its product and the elements that make its product distinctive in their own ways. That's a good thing to do. The E or not in whiskey is tends to be. Scotch whiskey doesn't use the E in almost all other whiskeys, Even Japanese whiskey, which is basically Scott's whiskey's formula, made by Japanese whiskey makers. And it has the great precision and perfection that the Japanese bring to almost anything, but they also use the E. So once a little bit of branding, it all is derived from word that's basically the water of life, which is a key, which is a very interesting concept. So it turns out that the Scotch whiskey industry is large and international in its nature. The Scots Whiskey association traces to thousands of jobs. 40,000 people in Scotland.
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C
I couldn't believe this. I couldn't believe this.
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A
It's astonishing. But if you think about it, some of the most prominent international brands are Johnnie Walker and Dewar's. And these Scots whiskies, which literally are sold in every dining establishment and every bar in the world. And they're given as gifts. And the products have very high elements of branding and uniqueness. And so the fact that there are distributors all over the world for this unique product that is all made in Scotland is very impressive. But then again, there are a lot of small distilleries. One of the things about Scots whiskey that many of us are engaged by is how unique the products are. Because it's local water, it's local filtration systems, it's using local peat to heat the barley so it doesn't turn into barley plants, it just molts, and you stop that process, and then that's used in the fermentation. There's techniques and practices that are very distinctive to individual distilleries that make for unique tastes. So it is a product of great depth and fascination for a lot of people. It's a wonderful product. From that standpoint. I think the Scots have done a fantastic job of turning it into an international brand. And I think the Kentucky Whiskey association and many American whiskies are seeking to do something very similar to that with their most prominent and sort of brandable whiskies. But great product, and it's great to see a gift like this that benefits us Scotch drinkers because the price will go down substantially. And that's. That's a good Thing to give you access to the more exclusive parts of what they send us.
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C
Yeah. And that's all that Bill drinks is the exclusive stuff. In addition to the 40,000 employed in Scotland by this industry, I mean, it accounts for. I think the number was 23% of. Of their export. I mean, it's just a huge, huge
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A
market with very important industry. And in good old Scotland.
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C
I had no idea.
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A
But I love. I love some of the elements of it. You know, it's like everyone says, the stereotype of Scottish people is a little bit. A little bit stingy. And the requirement of using used barrels is a perfect manifestation of that sort of thing. So we don't need those new ones.
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C
Bill, Bill, your thoughts?
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B
Well, for the record, I don't drink it.
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C
I'm with you. I'm with you. I'm not a whiskey guy myself.
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B
I'm. I don't like Scotch, but I think the thing about the used barrels is they're used because they stored bourbon.
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A
Yes. Or wine. There are a lot of wine barrels that got used whiskey barrels.
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B
We export barrels. The Scotch export Scotch.
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A
Yes.
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B
To me, it's one more example of why, vis a vis Trump, it's good to have a king.
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C
Yes.
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B
Trump loves kings. And when I think I said this before I met with a Swiss, I told them one of their big disadvantages on the tariff fight was they didn't have a king, and they didn't have any golfers either. I mean, that's the other thing the Scots have is they have good golfers.
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A
Yeah, they're better golf. Yes.
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B
So, you know, he did the king a favor. And I think that's. The British have used that card. They played that card very effectively, and they'll probably continue to play it. It's interesting that he did it because we usually say, you know, when there's a trade war, the first victim is usually the farmer because it's the easiest stuff to cut off. But the second victim is almost always the liquor industry, both distilled spirits and wine and beer as well. First of all, it's easy to tax. There's already a tax structure for domestic revenue purposes, and it's easy to just hike the tariffs on whatever everybody's favorite brand is, foreign brand, in order to make a point. And this kept coming out, actually, in the various retaliation cycles that the EU has gone through in the past. The EU has a list of items US exports to target if they ever decide to retaliate. And every once in a while, they make this list public. They don't Generally, but every once in a while it pops out from somebody and it changes over time. And one of the things that changes it is it, it's calibrated to focus on stuff that is made in the districts or states of key congressional leaders. And for a long time, one of the prime European targets for retaliation every time we did something they didn't like. This is all pre Trump. This isn't a Trump thing. Right. One of the prime targets was bourbon, because bourbon is made in Kentucky.
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A
Correct.
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B
Which is until last year was the home of Senate Majority Leader. And that explained everything. And now that he's not the majority leader anymore, and now that he's retired from the. Senator McConnell's retiring from the Senate, bourbon may actually slip off their screen because it was a political thing, but it's an easy thing to target and it's one of the first victims. And you'll find that industry, and it is an industry, it's huge in both in Europe and in the United States. They're usually first or second in line complaining anytime there's a trade problem.
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C
Yeah, okay. There is real meaning behind the royal diplomacy. I mean, it is a card that they're playing effectively, no question. And it's as light hearted as this segment is, there's real meaning to it. I'm going to call an audible here. This is not on our agenda today, but I realize now that this is our last episode before the Trump XI Summit. So maybe I could ask both of you quickly if there's anything in particular you're looking at for that meeting, which happens just a few days after this episode is released.
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A
I think the most important thing is they're going to try to sort of keep things from getting a lot worse. And there's obviously a lot of things on the agenda. What's happening in the Middle east is a very important piece of that, given the amount of crude that China imports from Iran and elsewhere in the Middle East. But there are dimensions of geopolitics far beyond sort of the trade disputes between the US and China. And I think it's in both leaders and both countries interest to not make things a lot worse with this. And they'll probably try to resolve some things and not succeed. But as long as there's not a catastrophic failure, I think that's probably what can be achieved.
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B
Both sides are busy lowering expectations and I think what will likely happen is this is not everybody else is predicting the same thing, that they'll continue their ceasefire from last year for a longer period, maybe even as long as Another year or so, we'll see. I mean, with Trump, nothing is ever permanent because if he gets mad, he'll just ignore it and announce some new set of tariffs. But I think they'll probably formalize and continue their tariff ceasefire for some lengthy period of time. And they're going to set up this Board of Trade thing that Ambassador Greer has been talking about. And I think we discussed this a couple weeks ago. It sort of old. What? Old Scotch and new barrels? Maybe wineskins?
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A
Yes, very definitely.
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B
Every administration has had a structure for monitoring trade relations with China and dealing with problems. It actually, they work.
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A
Yes.
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B
You can do good things with them. It's a good idea and it's nice that they're going to set one up. And I hope it's more successful. I mean, the other ones have been. Some have been more successful than others. I hope this will be successful. It's a good forum for taking specific problems that each side has with the other one and trying to get them resolved. So I think that will be a good thing, but I'm not looking for any major breakthroughs on policy at all.
- [30:19]
C
That's great. Well, sorry to put you guys on the spot, but I thought it was good. Good topic to wrap up on and shameless plug for all of our listeners, please go to the CSIS website. We have just a ton of great content from our experts across the center looking at the summit both ahead of the summit. And we'll have a lot coming out after the summit concludes based on the takeaways, but we'll leave it there. Bill and Scott and I are off to the distillery. Otherwise we'll see everybody next week. Thanks for joining us as always.
- [30:45]
A
Thank you.
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B
Thank you.