US Policy Changes Vol.12 (Trade Vol.1)

Here are articles on trade. Excerpts are on our own.

WTO
Trump is right to ditch TPP. Here’s why WTO should go next. (11/22/2016) | @AlanTonelson @CNBCopinion
…the Buy America regulations governing federal civilian and military purchasing already require imports to contain certain levels of American-made parts and components. …
An enormous and pervasive trade distortion could be corrected through a border adjustment tax on imports from countries that use Value Added Taxes – i.e., nearly all countries. These levies in effect penalize U.S. goods seeking overseas customers and subsidize foreign goods destined for America. Some estimates judge that this policy discrepancy generates about half of the U.S. trade deficit.
To carry out much of this program legally, the U.S withdrawal from the World Trade Organization is necessary. …
A new America First trade policy along these lines will foster not only more but better quality U.S. growth – based mainly on investing and producing rather than on the borrowing and spending that inflated the previous decade’s bubbles. …

China will defend WTO rights if Trump moves on tariffs: official (11/23/2016) | @davelawder @Reuters
… Trump has said China is “killing us” on trade and that he would take steps to reduce the large U.S. goods trade deficit with China, including labeling Beijing as a currency manipulator soon after he takes office on Jan. 20, 2017, and levying duties of up to 45 percent on Chinese goods to level the playing field for U.S. manufacturers. …
“China will take a tit-for-tat approach then. A batch of Boeing (BA.N) orders will be replaced by Airbus (AIR.PA). U.S. auto and (Apple (AAPL.O)) iPhone sales in China will suffer a setback, and U.S. soybean and maize (corn) imports will be halted,”…

Trump’s leadership is vital for world trading system: WTO chief (11/9/2016) | @tgemiles @Reuters
…and he would support the administration of Donald Trump in ensuring trade was a positive force for job creation.
… Trump has described the Geneva-based trading club as a “disaster” and suggested he could pull the United States out of the WTO if the rules proved an obstacle to his plans to protect U.S. manufacturing.

China scores WTO victories against some U.S. anti-dumping methods (10/19/2016) | @tgemiles,@davelawder @Reuters
… Specifically, the panel found fault with the U.S. practices of determining dumping margins in certain cases of “targeted dumping,” in which foreign firms cut prices on goods aimed at specific U.S. regions, customer groups or time periods.
Dumping is normally found when a foreign producer’s U.S. prices are lower than its home market prices for the same or similar goods, or when the imports are sold at prices below production costs. …

U.S. Files WTO Case Against Chinese Agriculture Subsidies (9/13/2016) | @jwilson29 @business
… China is offering excessive support for the production of corn, rice and wheat, in the process denying American farmers the ability to compete fairly for exports.
The value of China’s price support for the commodities last year was an estimated $100 billion more than what it had committed to when the nation joined the WTO…
“The most likely impact in the next six months might be to motivate China to impose anti-dumping tariffs on U.S. products, including agricultural products,” William Tierney, chief economist for @AgResource… “It will have little or no impact on Chinese ag policies.”

Donald Trump Says It Might Be Time for the U.S. To Quit the WTO (w Video; 7/25/2016) | @ianmount @Fortune
… “Europe got together so they could beat the United States when it comes to making money. In other words, on trade.”
…Trump highlighted the fact that the U.S. economy has lost almost one-third of its manufacturing jobs since 1997. He drew links between this drop and the North American Free Trade Agreement (NAFTA) that President Bill Clinton signed four years before, as well as Bill and Hillary Clinton’s support of China’s entrance into the WTO four years later. …

WTO helping China Loot Caterpillar (10/4/2010) | Howard Richman & Raymond Richman @AmericanThinker
Why can’t Caterpillar make a profit exporting mini-excavators to China? The answer is simple: China has a 30% tariff on all excavators. …
…Larry Summers… oversaw China’s entry to the WTO (World Trade Organization), and he let China declare all these vehicles as a “strategic sector” entitled to high protective tariffs. …
China… simply manipulates currency exchange rates to make its exports attractive and to keep imports expensive, thus perpetuating and increasing its trade surplus.
… First it forces vehicle-making companies to locate their factories in China if they want to sell to the growing Chinese market. Then it forces them to “share” their proprietary technologies with Chinese competitors. Caterpillar already has 11 factories in China. It also has two Chinese competitors – Liugong and Sany – that are producing what one expert describes as “knockoffs” of Caterpillar models, and they are exporting them to the world.
… At first SAIC just shared production and profits with GM on GM brands produced in China. Now SAIC competes directly with GM by selling its own models in China using GM’s technology. …
China’s self-created trade imbalances have given it a 10% growth rate while its victims’ economies stagnate (exports stimulate growth). China is now using its rapid growth as a lever for demanding that high tech and pharmaceutical companies move their R&D laboratories and patents to China…
WTO rules permit China to place 30% tariffs on vehicles. WTO rules let China manipulate currency exchange rates in order to keep its trade out of balance. WTO rules let China loot western companies of their technologies.
…one special WTO rule… allows a country experiencing trade deficits to impose duties or other limitations on imports in order to bring trade into balance. It’s time…

WTO Entry Boosts China’s Economy (2002/11/18) | @chinaprgcn

Manufacturing
American Manufacturing Groups Push Donald Trump to Rethink His Trade Threats (11/16/2016) | @Reuters @Fortune
… His suggestions that his administration could impose 45% across-the-board tariffs on goods from China have drawn threats of retaliation by Chinese state media against U.S. soybeans and companies such as Boeing (+0.15%) and Apple (-0.51%).
… “I’m of the belief that there is a lot of space between our current policy and an all-out trade war,” @ScottPaulAAM (@KeepitMadeinUSA) said, adding that he would like to see Trump be more proactive on enforcing existing trade rules.
“There are 2 million manufacturing jobs in this country that are dependent on our trade relationship with Canada and Mexico,” said @LDempseyNAM (@ShopFloorNAM). “…we certainly don’t want to put those jobs in jeopardy.”
… “Obviously Congress and the president could always look at everything, but they have to keep in mind both the production and the supply chains are deeply integrated into the three countries and that integration also supports a lot of American jobs,” Mark Fields (@Ford) said. …

Donald Trump Poised to Pressure Mexico on Trade: While an abrupt withdrawal from Nafta trade deal is unlikely, the president-elect and his advisers are gunning for big changes (w Videos; 11/21/2016) | @willmauldin,@davidluhnow @WSJ
… If Mr. Trump wins concessions from Mexico, Canada likely would seek comparable advantages with Mexico. Any talks with Canada, which had a trade agreement with the U.S. that predates Nafta, would likely bring up thorny issues that have long dogged relations, including softwood lumber imports from British Columbia, Canada’s support for its dairy farmers and the labeling of beef in the U.S. produced from cattle born or raised in Canada. …
… Export quotas… would be “the beginning of pure protectionism, and it would be shooting both of our countries in the foot. …
Rep. @BradSherman (D., Calif.) suggested negotiating within the framework of Nafta the option for Washington to impose special tariffs of up to 4% on Mexican goods to reduce the bilateral trade deficit to $25 billion, excluding oil and agricultural goods. “Good neighbors have balanced trade relationships,”…
The “destination-based cash-flow tax” could be challenged at the WTO, but Mr. Trump’s advisers say they will use Washington’s leverage at the Geneva-based trade body to change the treatment of VAT and other border-adjusted taxes. …

The Trump policy that will ‘shrink the economy and make the US poorer’ (11/17/2016) | Benjamin Powell @CNBCopinion
… According to exit polls, 50 percent of voters in Wisconsin and Michigan agreed with the notion that international trade kills American jobs. Similarly, 53 percent of Pennsylvanian voters and 48 percent of Ohio voters bought into this fallacy. Among the voters in the four states who expressed agreement with the trade fallacy, Trump’s support ranged from 59 percent in Michigan to 67 percent in Ohio. …
More than half of all imports are intermediate components or raw materials that go into the production of other goods and services. When international trade makes these materials and parts cheaper and more widely available, the domestic industries that use these items become more competitive, enabling them to sell more products, which results in expansion and increases in jobs.
Similarly, when foreigners receive dollars by exporting to the United States they’re able to buy more, which increases the market for U.S. exports. …
Exit polls showed that only a small minority (fewer than 13 percent) of voters in the Rust Belt battleground states understood that international trade has no net effect on the number of jobs. Candidate Trump benefited from their ignorance. …

In China-U.S. Trade War, Trump Would Have Weapons (11/10/2016) | @KeithBradsher @nytimes
…@DanRDimicco…
… Since President Ronald Reagan, Republican and Democratic administrations have been reluctant to confront countries that may be subsidizing or dumping exports, either because the evidence is unclear or because of a risk of damaging diplomatic or strategic relations.
… The Obama Administration has been preparing to file a World Trade Organization case against China over claims that it subsidized aluminium exports. And the United States, Japan and the European Union already complain that Chinese government subsidies have produced a bloated domestic steel industry that they say dumps millions of tons of excess goods on world markets each year.
… General Motors and Ford Motor… But much of the design and engineering work is still done in the United States. …
American farmers… but it is unclear how badly they could be hurt by any trade action. …
China’s biggest potential weapon is to disrupt the supply chains of multinationals by halting exports of crucial materials or components. …

FTA
Scoring the Trump Trade Plan: Magical Thinking – Who knew Donald Trump was a fan of Latin American fiction? (w PDFs; 9/28/2016) | Marcus Noland @PIIE
… If you want to lower the nation’s trade deficit, increasing the saving rate, not launching a trade war would be the right place to start. But there is not a word of this in “Scoring the Trump Economic Plan: Trade, Regulatory, and Energy Policy Impacts.” It’s all perfidious foreigners and incompetent trade negotiators instead. …

Trump Trade Proposals Could Sink Economy: Marcus Noland discusses a newly released PIIE Briefing analyzing the economic pain to the US economy that would occur if Donald Trump were to implement his trade proposals as president. Also discussed are the lost opportunities from Hillary Clinton’s trade stance. (w Video/Voice/Transcript; 9/19/2016) | Marcus Noland @PIIE
Marcus Noland: …both China and Mexico, especially China, in their dealings with the United States in the past have shown no reluctance to retaliate when the United States does something. So in that scenario, the United States economy goes into a mild recession. Private sector job losses relative to baseline are 4.8 million. Those are concentrated in the capital good sector and some mining sectors…
When we examine the geographical incidents of it, Washington State is the worst affected state losing 5 percent of its jobs relative to baseline. But then there’s a broad swath of states that lose 4 to 5 percent of their jobs. And these include a number of so-called battleground states. We have North Carolina in that group, Pennsylvania, Ohio, Wisconsin, and so on.
… The worst affected counties happen to be two counties in California in Northern California which lose 7 percent of their jobs.
A second scenario we examined is we call asymmetric trade war. And in that scenario, China and Mexico do not put the across the board tariff on the United States, but they respond in other ways. …three illustrative possibilities. First one is China halts purchases of US aircraft. The aircraft sector is a very contentious sector because a lot of purchases are effectively state purchases. …Airbus is a clear alternative to Boeing. …
Another one we examined is a kind of buy no American policy where the government of China tells its state-owned enterprises stop buying American business services. So that really affects software, financial services, and so on.
A third possibility is an embargo on soybeans. US-China bilateral trade in soybeans is a quarter of the world market. And so, China just puts on an embargo.
In that first one in the aircraft scenario, …the Seattle area, Seattle-Tacoma, Everett, Washington, very hard hit, Wichita, Kansas, hard hit, parts of Connecticut and Texas where Pratt & Whitney produces engines, hard hit.
In the case of the business service scenario… Silicon Valley, Seattle again, poor Seattle, New York City, Boston. …
Marcus Noland: …an embargo against soybeans, that’s the one that would probably be the least persistent because soybeans is a commodity. …
…some of these rural counties in Arkansas, Mississippi, and Missouri are absolutely devastated for a year. …
…what we call the abort of trade war. …
…the Chinese have a secret weapon…. the iPhone. …
Chinese value added on iPhone is only about 4 percent. … But it would cost the United States a lot. iPhone prices would go skyrocketing. …
… Shutting down trade with Mexico and China would have ripple effects in ways that people don’t think about.
Marcus Noland: …that leadership in trade policy would extend to other areas of diplomacy as well. …
…the perception that the United States might not be steadfast or the perception that the US alliances with South Korea and Japan might be weakening could set off unpredictable sorts of developments in Northeast Asia including promoting nuclear proliferation. …

Assessing Trade Agendas in the US Presidential Campaign (PDF; Sep 2016) | Marcus Noland, Gary Clyde Hufbauer, Sherman Robinson, and Tyler Moran @PIIE
“Could a President Trump Shackle Imports?” | Gary Clyde Hufbauer
Table 1.1
LIMITED STATUTES
Section 232(b). … Under the 1962 Act, upon the request of another federal department or agency, or a private party, or his own initiative, the director of the Office of Emergency Planning shall investigate the impact on national security of the importation of a specified article, and if he finds an adverse impact the president shall impose the necessary import restrictions. …
… Conceivably a President Trump could instruct his officials to investigate the national security implications for the US industrial heartland resulting from thousands of Chinese and Mexican imports. Without exception, the courts defer to executive branch determinations of national security. …
…Section 232(b) tariffs seem immune from challenge either in the US courts or the WTO. However, trading partners might bring a case under GATT Article XXIII Nullification or Im-
pairment, claiming compensation because their legitimate expectations of trade benefits had been defeated by the Article XXI action.17 Or they might simply retaliate without waiting 18 months or more for the WTO Appellate Body to adjudicate their claim.
Section 122. … Under Section 122, the president can impose a
tariff of upto 15 percent or quantitative restrictions, or a combination of the two, for up to 150 days, as a remedy, either on a nondiscriminatory basis or against one or more countries selected because of their large balance of payments surpluses. …highly doubtful that the courts… then invoke it against the same target country or countries for another 150 days.
…unlike Section 232(b) of the 1962 Act, Section 122 tariffs can be imposed across the board without the need for a prior national security investigation.
… Given the historical origins of Section 122 it seems likely that the courts would equate “balance of payments deficits” —the common description of trade deficits in the 1970s and earlier— with the modern concept of “current account deficits.”
… At best, the target countries could bring a GATT Article XXIII Nullification or Impairment case or resort to self-help.
Section 301. …the USTR first determines that a foreign country is denying the United States its rights under a trade agreement or is carrying out practices that are unjustifiable, unreasonable, or discriminatory and burden or restrict US commerce. …
…the Uruguay Round Agreements Act of 1994 does not forbid the USTR from invoking Section 301; it merely gives the USTR discretion not to invoke the statute in the wake of an adverse determination by the WTO. …
ALMOST UNLIMITED STATUTES
Trading with the Enemy Act of 1917. … As originally written, Section 5(b) of TWEA delegated to the president broad war-
time powers to regulate all forms of international commerce and to freeze and seize foreign assets. …
…the US Court of Customs and Patent Appeals (526 F 2d 560) held that the 10 percent surcharge, imposed for three months as part of the “Nixon shock” in 1971, fell within the presidential power to “regulate” imports. …it should be recalled that the constitutional use of the word “regulate” in Article I, Section 8, clearly encompasses the imposition of tariffs. …
Despite the limitation “During the time of war,” which appears in the opening language of Section 5(b)… no congressional declaration (pursuant to Article 1, Section 8 of the US Constitution) is required for the United States to engage in war.
…Trump’s lawyers could easily invoke GATT Article XXI Security Exceptions to defend against a WTO challenge. Again, however, US trade partners might bring a GATT Article XXIII Nullification or Impairment case in the WTO against the United States or might simply resort to self-help by restricting US exports…
International Emergency Economic Powers Act of 1977. … only during an “unusual and extraordinary threat.” But the courts have never questioned presidential declarations of…
…the history of liberal interpretation of “national emergencies” under TWEA argues strongly against a narrow interpretation of “national emergencies” under IEEPA. …
As with Section 232(b) and TWEA tariffs, Trump’s lawyers could defend IEEPA tariffs against a WTO…
PRELIMINARY INJUNCTIONS?
…“A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.”
“Irreparable harm” might be the easiest requirement for the corporate plaintiffs to meet. …
CONCLUSION
…trading partners and US firms would quickly fall into line. But if he… imposes the trade restrictions of the magnitudes threatened, foreign countries will soon retaliate. They will not patiently wait for US court proceedings or WTO litigation to vindicate their rights under national or international law.28 Enormous economic damage will ensue long before the legal battlefield is cleared.
Only congressional revocation of powers delegated by TWEA, IEEPA, and other statutes could ensure against the isolationist trade policies…