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It isn’t every day that Washington’s offshoring-happy economic policy establishment reveals one of its dirtiest secrets in public (unwittingly, of course!). So anyone – and especially U.S. political leaders – with any interest at all in trade, globalization, manufacturing, employment, and related issues (e.g., the economy, getting re-elected) urgently needs to read the final paragraphs of Tuesday’s New York Times article reporting that President Trump will soon greatly ramp up trade pressure on China.

But it’s vital to read the passage intelligently, because the point is made in in the kind of Washington-speak intended to conceal its real meaning.

As Times reporter Keith Bradsher wrote, a key feature of Mr. Trump’s alleged new China strategy will be the use of a provision of America’s national trade law system called “Section 301.” It’s a provision that grants a president broad authority to respond with punitive tariffs to foreign trade practices considered to be damaging the U.S. economy in “unfair” ways, and to respond pretty quickly. (It’s still not nearly quick enough for me, but that’s a separate issue.) And as he made clear, it’s a trade law provision with a noteworthy history. In Bradsher’s words:

The United States used Section 301 energetically against other countries during the Reagan administration and the administration of President George Bush. Mr. Lighthizer [the current chief U.S. Trade negotiator] was a deputy United States trade representative in the Reagan administration and has been an advocate of shielding the American industrial base from government-assisted foreign competitors.

But the cases then thoroughly antagonized America’s trading partners.

‘It was really the aggressive uses of this in the late 1980s and early 1990s that prompted the rest of the world to set up the dispute resolution system’ of the World Trade Organization [WTO], said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics here.”

Bown – whose Peterson Institute home is heavily funded by the offshoring lobby – no doubt meant his statement to reinforce the standard establishment description of and rationale for the WTO-centered world trade system that’s been in existence for the last quarter century. That is, the international economy had too long operated on a law of the jungle basis that bred continual and dangerous conflict, and that in an act of enlightened self-interest, the world’s economies recognized these perils and created a global trade court that would mete out justice according to objective legal standards and thereby serve every countries’ long-term interests.

In fact, Bown wound up confirming a very different description of the WTO and the motives behind its creation that I have advanced since it was first proposed: It’s an arrangement supported by America’s trade partners in order to prevent the United States from using its matchless market power to promote and defend its legitimate international economic interests. P.S. – because U.S.-based multinational companies supply the American market from so many overseas factories, undercutting Washington’s unilateral power to restrict imports mattered crucially to them, too.

For the Reagan-era uses of Section 301 cases that Bown (and Bradsher) mention were noteworthy not mainly because they were “energetic” or “aggressive”. (Unless you view most of America’s trade partners as snowflakes or strong champions of the rule of law.) These 301 uses were noteworthy because they worked. All the evidence is contained in this article I published in Foreign Affairs in 1994. And as Bown made clear, this success was completely unacceptable to “the rest of the world” – most of which, like China, relies heavily on selling to America in order to grow and develop satisfactorily. As a result, these economies, along with the multinationals, became convinced that handcuffing the United States was essential. And official Washington dutifully went along.

Although Section 301 is still on the books, it’s been U.S. policy under Democratic and Republican presidents alike to avoid it in favor of WTO procedures (just as most foreign governments, including allies, and the multinational companies want). And legally speaking (a term I use advisedly when it comes to the WTO and international law generally), that approach seems to dovetail with WTO rules.

But the Trump administration appears to be considering the contention that the United States retains the unfettered authority to use 301 at least in certain instances. The administration further seems confident that, whether it’s right or wrong on the law, the WTO membership collectively will shrink from a frontal challenge for fear of completely destroying a dispute-resolution system that still might serve its interests well going forward – at least much of the time. 

Nevertheless, the reports of a Trump course change on China trade – which could eventually be broadened – are still just reports. All that’s certain now is that, if they’re accurate, the president will wind up showing the his own compatriots and the rest of the world what a real America-First trade policy would look like.

 

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