Trump Trade Team Signals Aggressive Posture Towards WTO

International Trade Daily™ provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy, as well as the policies of major U.S....

By Bryce Baschuk

President Donald Trump sent the strongest signal yet that his administration would pursue a trade agenda that prioritizes U.S. trade laws over the mandates of the World Trade Organization.

The Office of the U.S. Trade Representative issued a report March 1 that reflected Washington’s frustration with the way the WTO treats U.S. trade laws and pledged to “aggressively defend American sovereignty over matters of trade policy.”

The nearly 400-page report didn’t propose any new legislation, but identified four major trade priorities for the Trump administration:

  •  Defend U.S. national sovereignty over trade policy.
  •  Strictly enforce U.S. trade laws.
  •  Encourage other countries to open their markets to U.S. exports.
  •  Negotiate “new and better” trade deals with countries in key markets around the world.

The document also outlined the existing legal avenues that the administration would pursue in order to protect U.S. interests — which included some departures from the trade enforcement approach taken by previous U.S. administrations.

“Clearly, this administration does not intend to play the same old game in Geneva, or to tolerate trade agreements that end up failing to open markets or eliminate barriers,” said Tim Brightbill, a partner at Wiley Rein LLP in Washington, D.C.

U.S. Sovereignty

The Trump administration said any adverse WTO dispute rulings do not automatically obligate the U.S. to change its domestic laws, and the WTO’s dispute settlement system cannot “add to or diminish” U.S. obligations and rights.

This issue has been a bone of contention for U.S. trade officials, who in recent years complained that WTO dispute panels had increasingly sought to rewrite or write new rules that were inconsistent with WTO members’ international trade obligations.

“Even if a WTO dispute settlement panel — or the WTO appellate body — rules against the United States, such a ruling does not automatically lead to a change in U.S. law or practice,” the document said.

WTO spokesman Keith Rockwell declined to comment on the report.

Focus on Enforcement

The Trump administration will pursue enforcement actions against U.S. trade partners who engage in “unfair” trade practices such as “injuriously dumped or subsidized imports” or “harmful surges of imports,” the document said.

Specifically, the president may initiate anti-dumping and countervailing duty cases against other countries under Sections 301 and 201 of the Trade Act of 1974, it said.

Section 301 authorizes the USTR to impose new import tariffs, restrictions and other trade sanctions if a foreign country restricts U.S. commerce by imposing “unjustifiable or unreasonable” tariffs, import restrictions, discriminatory policies, excessive subsidies, or market access restrictions.

Section 201 permits the president to impose temporary import restrictions -- also known as “safeguard” actions — to prevent serious injury to domestic producers during a surge of increased imports.

Enforcement of U.S. trade laws will be a key priority for Trump’s nominee for U.S. Trade Representative, Robert Lighthizer, who previously urged the Obama administration to make greater use of its section 301 authority.

Claus-Dieter Ehlermann, former WTO dispute settlement panelist, said the “unilateral use by the U.S. of Section 301 of the Trade Act of 1974 had been one of, if not the decisive, motives for the adoption of the Dispute Settlement Understanding.”

Free Market Forces

In a veiled attack on China, USTR said it would aggressively target those countries that are not pursuing “free-market principles” or maintaining “functional legal and regulatory systems that are transparent.”

Going forward, the U.S. will use “use all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets,” the document said. “The purpose of this effort is to ensure that more markets are truly open to American goods and services and to enhance, rather than restrict, global trade and competition.”

The document scaled back the language in an earlier version of the text, which called for applying the principle of reciprocity to those foreign trade practices the administration deemed unfair.

A punitive reciprocity approach--which responds to foreign trade tariffs or restrictions with like measures--is legally dubious and could leave the U.S. vulnerable to retaliation from its trade partners.

Better Trade Accords

USTR said it would pursue new bilateral — rather than multilateral -- trade negotiations and seek to update its existing trade accords to “reflect changing times and market conditions.”

The document said the North American Free Trade Agreement and a variety of other U.S. trade accords were partially responsible for America’s increased trade deficit, stagnant incomes and lost manufacturing jobs.

The USTR called for a “major review of how we approach our trade agreements,” pledged to hold U.S. trading partners “to higher standards of fairness,” and would “use all possible legal measures” to prevent them from engaging in “unfair activities.”

It’s encouraging that the paper doesn’t include U.S. National Trade Council Chief Peter Navarro’s “craziest ideas on bilateral imbalance triggers in trade agreements,” said Richard Baldwin, a Professor of International Economics at the Graduate Institute in Geneva.

Brady, Wyden Respond

House Ways and Means Chairman Kevin Brady (R-Texas) said in a statement that current trade agreements, including the WTO, had worked for Americans because the pacts “establish a firm rule of law to hold our competitors in check” while opening markets for U.S. goods, services and farm products. Trade agreements have also made a wide variety of products available to American families at affordable prices, he said. When other countries don’t follow the rules, trade agreements give the U.S. powerful tools to retaliate through a dispute settlement process, Brady said.

But Brady said he agreed with Trump that the U.S. should improve trade agreements to make them better for American workers. NAFTA, he said, is decades old, and new disciplines are needed on digital trade, state-owned enterprises and labor, he said. Brady said he looked forward to working “intensively” with Trump on strengthening existing agreements and delivering strong new pacts.

Sen. Ron Wyden (D-Ore.), ranking member of the Finance Committee, said it was “troubling” that the agenda “still leaves the American people in the dark about the actions the president intends to take on trade.” Some of the priorities cited by the administration such as stricter enforcement are “laudable,” but the report “includes no indication of how they would be achieved,” he said.

For example, despite the president’s statement that he plans to renegotiate NAFTA, “nowhere does the report indicate that the Administration proposes or anticipates a renegotiation of NAFTA,” he said. Also, the report fails to indicate the actions the administration plans to take to with respect to bilateral discussions with TPP countries, Wyden said.

“Despite a law that requires Trump to spell out the actions he intends to take to achieve his objectives on trade, the American people still know as little about his trade agenda as his plans to replace the Affordable Care Act, reform the tax code, rebuild America’s infrastructure, or defeat ISIS,” Wyden stated.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.