In this post-election period of sharp partisan division, perhaps no issue unites both the Republican and Democratic bases like opposition to recent U.S. trade policy.
President Trump campaigned hard on the notion that “free trade” has not been “fair trade,” and that the United States should strike better trade deals and be tougher on its trading partners. While many political observers dismissed these statements as idle campaign rhetoric, one of President Trump’s first moves in office was to sign an Executive Order withdrawing the U.S. from the Trans Pacific Partnership (TPP), a multinational trade deal that was a lynchpin of President Obama’s strategy to solidify America’s standing in the Pacific region. However, even Trump’s Democratic opponent, former Secretary of State Hillary Clinton, opposed TPP on the campaign trail due to a rising backlash against globalism. Trump’s action on TPP does not appear to be an isolated case as the White House has signaled its intention to honor other campaign commitments on trade, including renegotiating the North American Free Trade Agreement (NAFTA) in order to secure new, more favorable terms from Canada and Mexico. Trump is also backing a plan to impose a “substantial border tax” on companies that move their manufacturing abroad and export their products back into the U.S.
So what does the U.S. trade agenda look like going forward? Are we entering a protectionist era? Are fears of potential trade wars overblown? And what can be deduced from the White House and Cabinet team the President has assembled?
One of the first substantive conversations about Trump’s trade policies took place at the Senate Commerce Committee’s hearing on the nomination of Wilbur Ross to be Secretary of Commerce. In past administrations, the Commerce Department has played a supportive role in trade policy, promoting U.S. businesses and collecting important economic data. However, it appears Trump is “consolidating intellectual resources” around Ross, a staunch critic of China who helped rescue the domestic steel industry earlier in his career. Ross will work closely with Peter Navarro, author of Death by China, now the head of Trump’s new National Trade Council. Ross and Navarro published an opinion piece last year identifying four planks in Trump’s economic plan: Regulatory Reform to reduce red tape; a more balanced energy policy; increasing exports to reduce trade deficits; and a large new investment in infrastructure. Some highlights from Ross at the hearing:
- The U.S. gives up too much in multilateral negotiations, where multiple parties can coordinate to extract more concessions than the U.S. would otherwise make in a series of bilaterals.
- The U.S. tends to give our trading partners immediate benefits in return for concessions realized later in time. Simultaneity of concessions will be sought in future trade deals.
- Ross criticized the practice of foreign companies setting up shell corporations to import goods then walking away before paying countervailing duties.
- The Commerce Department will pursue self-initiated anti-dumping/countervailing duty cases, sending a more aggressive enforcement signal to trading partners.
- The U.S. will be less willing to agree to extensions in trade cases.
- Reciprocity is major feature of trade deals which is often honored in the breach by trading partners.
It is worth noting that three of the earliest visitors to the Trump White House were the United Kingdom, Japan, and Canada; all of whom are also among the U.S.’s largest trading partners. A fourth prominent partner, Mexico, cancelled its planned visit. In each of these conversations, the future of our trade relationship featured prominently.
Beyond Ross and Navarro, President Trump has nominated Robert Lighthizer as U.S. Trade Representative, again suggesting Trump intends to follow through on his campaign commitment to overhaul our trade relationships. Each is an economic nationalist whose nomination gives credence to President Trump’s Inauguration Day mandate: America First.
On Wednesday, February 15, Director Navarro hosted congressional leaders at the White House to discuss how President Trump intends to implement his trade agenda. While the discussions were preliminary, it signaled the new Administration’s intention to be proactive.
Looking ahead, the President’s most recent engagement with Japan may give some clues of how he intends to proceed with our current and prospective trading partners – rather than engage in large, sweeping multilateral arrangements like TPP, the President intends to start negotiations anew with our bilateral partners, resetting the terms of our trade dialogue. With Japan specifically, President Trump and Japanese Prime Minister Shinzo Abe committed to working together to ensure free and fair trade between the two nations, pledging to start a “special dialogue.” In the President’s words, the U.S. and Japan will pursue a trading relationship that is “free, fair and reciprocal, benefiting both of our countries.”