GE Trade Policy Director Sees Trump Trade Policy as Counterproductive; Drawback Helping to Mitigate Tariffs

General Electric, a major U.S. exporter, remains supportive of "the notion of trying to open markets," said Drew Quinn, director of trade policy at GE. But, the tariffs the U.S. is using to try to bludgeon China into a more open stance are worse than the status quo, he said. Quinn, who was speaking at a March 5 Washington International Trade Association program on Asia, said that tariffs are generally pretty low on the aircraft engines, MRI machines and turbines it sells. There aren't a lot of investment barriers, either. "The biggest issue for us is the host country's industrial policies, and how they favor their national champions," he said. But even there, Quinn said, GE has found a way to work with foreign countries where it has facilities, and has been able to participate in subsidies. "We may have a different and less absolutist position than some people."

Quinn, too, contradicted the conventional wisdom that it's too hard to quickly shift supply chains to escape the Section 301 tariffs on Chinese goods. "Supply chains are actually kind of flexible," he said, even when you're talking about parts that must be certified by the Federal Aviation Administration. But he agreed with many businesses' assertion that many other countries cannot match skills or scope found in China.

The unpredictable and aggressive tariff policy now actually makes it less likely that GE will move some of its manufacturing back to the U.S. to avoid tariffs. He said that GE employees in Canada and Mexico are arguing that GE should shift production to their countries. "You will be able to insulate yourself from the effects of unpredictable U.S. tariffs," he said they say. "You can still use your U.S. supply chain, and you'll have an insurance policy."

GE is spending a huge amount of time on a tariff mitigation strategy, and is finding duty drawback is allowing the company to recoup a lot of what it's paying for inputs on Lists 1 and 2. It has not heard about any of its exclusion requests -- it has 25 across the power, aviation and healthcare divisions -- and Quinn said he's a bit concerned that only List 3 will be lifted in a China trade deal. "We hope that List 1's 25 percent tariffs does not become the new normal."

Quinn, who was once deputy assistant U.S. trade representative, said he's surprised by how often GE chooses not to take advantage of free trade agreements. "Utilization is much lower than I would've expected," he said, because demonstrating origination and the rules of origin can be "so complex it sometimes overrules the benefits." He said if that's true for a company with as advanced a trade infrastructure as GE has, imagine how small companies navigate these rules.