Trump is quietly waging a nontariff trade war
Trade policy emanating from the Trump administration over the past month has been dizzying. From the fairly standard, if regrettable, enforcement actions taken by the United States Commerce Department against Canadian softwood lumber imports to the catastrophic possibility raised last week that President Trump might withdraw from the North American Free Trade Agreement, free traders’ heads are spinning.
Lost amid the shuffle is litigation over an obscure fishing regulation that may pave the way for even more regulatory barriers to free trade, mirroring a sad chapter in American trade relations.
Back during the 2002 farm bill debate, Congress mandated American retailers provide country-of-origin labeling (COOL) for certain fresh meats imported into the U.S., a list that was expanded six years later to include fruits and vegetables. Canada challenged U.S. COOL requirements at the World Trade Organization, arguing that they discriminated against Canadian products and violated our international trade commitments. After a lengthy fight, our northern neighbor prevailed and the United States ultimately overturned COOL in late 2015.
It was a costly and unnecessary fight that should have chastened U.S. policymakers about peddling nontariff barriers to trade. Yet we appear now to be slouching toward more soft protectionism akin to the COOL debacle.
In the waning days of the Obama administration, the Commerce Department’s National Marine Fisheries Service division — at the behest of the State Department and environmental activists — issued a proposed rule creating the Seafood Traceability Program. Set to go into effect next year, the program’s stated rationale is to combat illegal fishing practices and seafood fraud, issues that have reared their heads in Southeast Asia and South America, particularly. The program requires commercial fisheries and seafood companies to collect and report extremely complex data for 15 different species of wild-caught and farm-raised seafood before they can be imported into the U.S.
A general rule of thumb in trade policy is that, whatever barriers a country imposes on imports, it can expect in retaliation for its exports. It’s not difficult to envision other countries responding to the Traceability Program with their own similar programs that burden U.S. seafood exporters. Likewise, because it applies to U.S.-harvested seafood that leaves the country for processing and then returns, it saddles domestic seafood companies with higher compliance costs. Not only will the Traceability Program weigh down domestic companies with higher costs and the threat of foreign retaliation, it will raise prices for U.S. consumers.
For those concerned about global poverty, it also is worth noting that the program applies not just to large corporate seafood companies, but to subsistence fishermen in developing countries, as well. Lacking the technological means to comply with the program’s onerous data-collection requirements, these fishermen could effectively be locked out of the U.S. market.
The Traceability Program was challenged in early January — about a month after it was announced and before Trump took office — by the National Fisheries Institute and a small group of other industry players, who claimed the Commerce Department and the National Marine Fisheries Service violated the Administrative Procedures Act and the Regulatory Flexibility Act when they proposed the rules. Environmentalists initially were concerned the Trump administration would not defend the case and eventually would just let the Traceability Program die. Those fears led Oceana, the Natural Resources Defense Council and the Center for Biological Diversity to intervene in the case in March, essentially agreeing to become co-defendants in order to defend the program.
But despite the seafood industry’s pleas for Commerce to withdraw the program and the Trump administration’s emphasis on deregulation, Commerce Secretary Wilbur Ross and the administration decided to defend the Traceability Program in court. In a leaked recording of a pre-Inauguration telephone call between Ross and then-President-elect Trump, the pair discussed using these sorts of regulatory barriers to stem the tide of imports, with those efforts cloaked in language about safety or cracking down on supposedly illegal foreign practices. In other words, while the Obama administration introduced the Traceability Program as an environmental policy, the Trump administration may wield it as a trade weapon.
There are essentially two paths for the Trump administration to follow through on its protectionist promises. One would be an all-out trade war by withdrawing the United States from the WTO, as Trump floated on the campaign trail. This would be catastrophic for the U.S. and the global economy. The likelier option is to pursue “soft” protectionism with a stepped-up trade enforcement posture both domestically and at the WTO, coupled with nontariff barriers like the Seafood Traceability Program.
While free-traders hope the administration pursues neither path, that’s unlikely. We need to be prepared to make the case against both direct tariffs and nontariff regulatory barriers that also serve to impede free trade and hurt the economy.
Image by FabrikaSimf
