With Steve Bannon out, Trump’s White House still isn’t pro-free trade
President Donald Trump’s recent decision to part ways with chief strategist Steve Bannon — until now, the White House’s leading voice of so-called “economic nationalism” — has been interpreted by some as a victory for the administration’s so-called “globalists.” Alas, this paradigm is too simple and the threats to free trade posed by this administration remain very real, if less apparent to casual observers.
During the 2016 presidential campaign, then-candidate Trump promised a bold new protectionist trade agenda for the United States. If elected, he said, he would withdraw the U.S. from the Trans-Pacific Partnership, back out of the North American Free Trade Agreement, and potentially withdraw from the World Trade Organization.
In the administration’s earliest days, it appeared the president was ready to make good on those promises. His inaugural address was littered with over-the-top protectionist rhetoric and one of his first official acts as president was to withdraw the U.S. from TPP. In April, at Bannon’s urging, the president came close to withdrawing the United States from NAFTA as well, only to be convinced to renegotiate the agreement.
But looking at the set of objectives for NAFTA renegotiation released last month by the Office of the U.S. Trade Representative, one sees a document that appears quite reasonable, aside from a misplaced focus on reducing the trade deficit. The objectives appear to mirror the jettisoned TPP fairly closely. And while Bannon was able to claim TPP’s scalp, we’ve thus far avoided a full-scale assault on other trade agreements.
Instead, the real prospects for rising protectionism come in the form of trade enforcement actions. On these, the administration is relying on rarely used but powerful trade statutes — not standard anti-dumping or countervailing duty laws. While these cases and investigations won’t grab the same headlines as withdrawing from TPP, they nonetheless increase the specter of harmful protectionism.
First, with the support of Bannon, the Trump administration began investigations into whether steel and aluminum imports posed national security threats to the United States. The case is thin, but under domestic law and our commitments at the WTO, the president has broad authority to restrict imports in the name of national security. Thankfully, other members of the cabinet, including Defense Secretary Jim Mattis, are rumored to be pushing back against the steel and aluminum investigations. With Bannon gone, hopefully these investigations can quietly be put to rest.
On the same day Bannon’s exit from the White House was announced, the trade representative announced it would begin investigating whether China is treating American businesses unfairly with its policies and practices “related to technology transfer, intellectual property, and innovation.” American businesses long have complained about China’s intellectual property abuses. This is a worthwhile investigation for USTR to undertake, but the United States must pursue it the right way.
Rather than impose steep tariffs or other import restrictions unilaterally and in violation of international law, which would surely trigger retaliation against American exports, the Trump administration should seek the help of the European Union and others to bring the case against China to the WTO. If done properly, this could further the cause of a rules-based trading system where abuses are curtailed through international cooperation.
Regrettably, the Trump administration — including the president, Trade Representative Robert Lighthizer and trade adviser Peter Navarro — has professed hostility to the WTO. Thumbing our nose at the WTO in this and other contexts could have dire consequences and upend an international economic order that has served America well.
The final major trade enforcement action pending is a case filed at the International Trade Commission by two bankrupt solar companies that could double the cost of solar products in the U.S. Unlike standard anti-dumping or countervailing duty cases, where the remedy sought applies to imports from one country or one company, the petitioners in this case, Suniva and SolarWorld, want to apply tariffs and price floors against solar products imported from all countries. This type of trade remedy is known as a “safeguard” and is rarely used, given how extreme and far-reaching its effects would be.
The last time the U.S. imposed tariffs under its safeguard powers was in 2002, when the Bush administration imposed stiff tariffs on imported steel. The tariffs sparked retaliation by the European Union, caused up to 200,000 domestic job losses, particularly in industries using steel imports, and were eventually withdrawn after a successful challenge at the WTO.
Similar to steel in 2001, solar tariffs today would amount to nothing more than a crony capitalist giveaway to failing companies, while rewarding the administration’s friends in the coal industry. This would all paid for by crippling an otherwise growing domestic solar industry (though one with admittedly too much domestic support in the form of subsidies) and higher prices for energy consumers.
While some rejoice Bannon’s departure as a symbolic demise of the administration’s “economic nationalism,” there’s still plenty of opportunities for the Trump administration to make good on its promises to change the trajectory of American trade policy in bold and sometimes counter-productive ways.
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