The following op-ed was co-authored by R Street Justice Policy Manager Christina Delgado.
President Donald Trump’s campaign-trail rhetoric calling for an “America first” stance on trade helped propel him to victory, and the White House unsurprisingly has started to translate that talk into policy. Since taking office, Trump has opened the North American Free Trade Act to renegotiation, signed an executive order creating a new Office of Trade and Manufacturing Policy, launched national security investigations into steel and aluminum imports and ramped up calls for “free, but fair” trade.
This rhetoric has weighed heavily on the public discourse, leading to a sharp dip in popular support for free trade, particularly among Republicans. But prioritizing American interests doesn’t have to mean ending free trade or instituting protectionist policies that harm us more than they help us. To put America first, we should start by reforming how we handle enforcement of our trade laws at the border.
Presently, the investigation and adjudication of unfair imports is the job of the International Trade Commission (ITC), a quasi-judicial independent executive branch agency whose decisions can be vetoed only by the president. The ITC’s governing statute is the Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, passed in the early days of the Great Depression. Today, the ITC provides the executive branch and Congress information and analysis on trade matters, administers trade remedy laws and maintains the tariff schedule.
Unlike other trade-related government entities, the ITC has the power to exclude products from entering the United States, as it is granted authority to block the import of any articles it deems were made under “unfair methods of competition and unfair acts … that injure a US industry.” The statute is designed explicitly to favor U.S. industry, or companies that do substantial business in America, a fact that has created some compliance concerns with the World Trade Organization’s General Agreement on Tariffs and Trade.
The ITC’s enforcement powers are directed by administrative law judges who exist outside the judicial branch. ITC investigations are thus able to run simultaneous to and independent from district court proceedings, although the law grants defendants the right to stay litigation in the federal courts pending an ITC investigation.
Though the commission doesn’t have the power to award monetary damages, ITC actions move faster than traditional litigation, making the ITC an especially attractive venue to resolve intellectual property disputes in the technology sector. As a Cato Institute study by former ITC Chairman Daniel Pearson observed, Section 337 of the Tariff Act, which provides the statutory framework for ITC actions on patents, “remains a reasonable and effective means to protect U.S. intellectual property rights from infringing imports.”
Trade enforcement is a component of our rules-based trading system. America’s biggest companies rely on a global supply chain in which components often are manufactured abroad and then imported into the United States for final assembly or sale. In this landscape, enforcement actions are meant to be quick and decisive. An “America first” trade policy should recognize this reality and make it easier for American companies to dispute any frivolous claims in the most efficient forum where the technical aspects of intellectual property are best handled without impeding the market’s overall flow.
The ITC is far from perfect and there a variety of proposals to reform and improve it. We should seek to limit the potential for abuse, while streamlining the process and better coordinating it with district courts. For instance, new legislation introduced in the U.S. House would narrow the “domestic industry requirement” to focus on genuine domestic industries by requiring articles be adopted and developed in the United States.
Reform also could include deferring to the federal courts in cases where monetary damages provide the most reasonable resolution. As it stands, federal courts are the best forum to develop and shape intellectual property law and deter unnecessary litigation through binding rulings. In fact, many have proposed abolishing section 337 of the Tariff Act in favor of moving all such disputes to the district courts. Were this were to happen, it would require substantial updates to the federal court system, including specialized courts and a speedier process. While there may be a principled case for such a proposal, as Cato observed, it’s not clear whether it would be “worth the time, effort, and political costs.”
In a sense, President Trump is right. American businesses need “free” trade that allows the free flow of goods across borders. But they also need “fair” trade where the rules of the road are enforced in the best forum. Both of these are necessary components of the American intellectual property system that drives much of the national economy. We need to be able to access the latest technological innovations and gadgets cheaply, but we also need consistent and reliable incentives for research and development.
An ideal trade environment would eliminate all barriers to trade and provide equitable and decisive enforcement, but that is not our current reality. Until and unless we ever get there, reforming the system to promote innovation through clearly defined and enforced rules is our responsibility as the global leader in technology, with the most power to make positive contributions to the world.
Image by Bill Perry