“Well, I’m mostly there on most items,” President Donald Trump said of his 100-day plan.
As far as trade policy is concerned, his self-assessment would indeed be true—if tweets and executive orders ratcheting up tensions in a growing number of trade disputes constituted progress.
However, although Trump has withdrawn America from the Trans-Pacific Partnership, a 12-country trade deal, he has neither labeled China a currency manipulator nor made progress in renegotiating the North American Free-Trade Agreement. On April 26 his administration denied reports that it was poised to trigger America’s withdrawal from the agreement. No new “America first” trade deals have emerged, and his trade-related executive orders have requested reports or investigations. Trump has created more work for pencil-pushers than for exporters.
The slow pace might reflect the obvious ideological infighting within his team, a desire for evidence before acting or the realization that Congress, which sees trade policy as within its mandate, must be kept on board. Congress officially delegates responsibility for trade to the United States trade representative, but it has yet to confirm Robert Lighthizer, Trump’s pick for the job.
Another reason for delay is that other priorities have intervened. Seeking China’s help with North Korea’s nuclear program, for example, Trump has explicitly used American trade concessions as an inducement.
Trump has done enough, however, to prod America’s trading partners into action. Both the Canadian and Mexican governments have been busily strengthening trade ties elsewhere. Mexican officials have stepped up efforts to finish a trade deal with the European Union by the end of the year. They also report that Trump’s threats have swayed private-sector opinion: Business now understands that Mexican negotiators will have a stronger hand in talks with America if they can credibly threaten to import wheat and corn from Argentina or Brazil.
The EU has seen its proposed trade deal with America plunged into the deep freeze. Instead its trade commissioner, Cecilia Malmström, has trumpeted trade talks with Japan and the Asean countries of southeast Asia, as well as with Australia, Chile and New Zealand.
With Trump seemingly hostile to America’s traditional role as promoter of that rules-based system, the Japanese are also keen to fill the gap. Prime Minister Shinzo Abe had called the TPP “meaningless” without America, but now his government is trying to salvage it.
The travails of the TPP had been expected to invigorate the other big trade deal in Asia and the Pacific, the Regional Comprehensive Economic Partnership. That does not involve America, and is seen as a chance for the Chinese government to show regional leadership.
Even were he interested in new multilateral trade deals, Trump would find his authority constrained. On Nafta, a drastic action such as triggering withdrawal would be his prerogative. In any renegotiation, however, he would be partly beholden to Congress. On trade disputes, however, more is at stake, and there is more cause for alarm at the damage Trump’s trigger-happy approach might wreak.
Since 1995 the World Trade Organization has been the main arbiter of international trade disputes. On April 19, however, Trump’s administration seemed to take matters into its own hands, starting an investigation into whether steel imports are a threat to national security. A similar probe into aluminum imports was announced this week. America also has imposed duties averaging 20% on imports of Canadian lumber.
Chad Bown, a trade expert at the Peterson Institute for International Economics, a think tank, described the Trade Expansion Act, the law from 1962 that the Trump administration has invoked, as the “nuclear option,” adding that “it calls the whole rules-based system into question.”
The act, sparse on details, gives the president huge discretion. WTO rules bar countries from slapping tariffs on randomly, but make an exception for national security.
James Bacchus, a former chief judge for the WTO and also a former congressman, worries that, if America looks for excuses to violate trade rules, other countries will too.
“WTO law only succeeds if those who are bound by it engage in mutual self-restraint,” he said. “We Americans should be the first to show self-restraint.”
© 2017 Economist Newspaper Ltd., London (April 29). All rights reserved. Reprinted with permission.
Image credits: Doug Mills/The New York Times