We still don’t know exactly what the next US president, Donald Trump, will do on trade policy. Mr Trump has campaigned on a highly protectionist and trade-sceptic platform. He has vowed to raise substantial tariffs on imports from Mexico and from China. He even suggested he might want to pull the United States out of the WTO. Of course a lot of what has been said by the campaigner and president-elect will be met by a reckoning with reality, and most of the campaign promises not honoured.
“We shouldn’t read too much into what has been said on the campaign trail”, said a former senior USTR official and former appellate body chairman to an audience of trade policy aficionados in a closed-door event in London today. “Because of the difficulties in keeping other campaign promises in other areas [such as getting rid of Obamacare], there could be an inclination to emphasize trade even more.”
“The reason is that under US law, the president of the United States has under a number of different laws extensive unilateral authority to exercise discretion and taking unilateral trade actions without seeking first the approval of Congress”, the source said, citing in particular Section 301 under the 1974 Trade Act (more here).
In practice, one can expect the following types of actions
— Not ratify the TPP. This was already announced by Donald Trump as being one if his first ‘steps’ (this means taking no step) once he takes over the helm of the country in January 2017. “What remains to be seen is whether Trump’s opposition to the TPP could lead to renegotiation at a later date. The TPP would not be the first agreement to be declared dead when a new administration assumes office, only to be resurrected with some improvements”, writes Jean Heilman Grier, a trade consultant and former USTR official on her blog.
— Renegotiate NAFTA, the 1994 free trade agreement with Mexico and Canada. “The precise changes he will seek are not clear”, Heilman Grier writes. “The new President may also seek to reinstate tariffs on Canada and Mexico in select sectors, such as autos, in an attempt to bring manufacturing facilities back to the U.S.”, she adds.
— Strong recourse to trade defence instruments. Expect a lot of action on steel, said the former Appellate Body member. “Steel is increasingly a hot-button issue… We could have a lot of tit-for-tat in steel”.
— “A shift away from negotiation towards enforcement”. These are the words of the senior US figure who talked in London today. It is not very likely that the US will pull out of the WTO, “but I think there will be a further retreat from multilateralism into unilateralism”.
This could translate, for example, into less willingness to comply with adverse dispute settlement rulings. That is “already a trend”, the above source said. It is also not clear whether the US would seek more enforcement via the WTO dispute settlement mechanism, or via unilateral action.
One of the unilateral actions is likely to be to nominate China a currency manipulator, Jean Heilman Grier reckons. “According to [Trump’s] transition team, he will propose new currency manipulation legislation and by his 100th day in office consider whether to name China as a currency manipulator. It is unclear what U.S. actions might follow such a designation. But, unilateral trade action could well prompt retaliation by China.”
On issues that interest the EU in particular, the former US official believes that the president’s plans for new infrastructure investment will most likely entail many ‘Buy America’ provisions. On TTIP itself, Donald Trump has made no formal statement so far. “That can be good or bad”, said the above source.
“Early signs are that we are going to see a very hard line” on trade. “I base that on the personnel in the transition team”, said the former top US and WTO official. On the transition team one finds indeed strong China and trade critics: David Malpass, Dan DiMiricco, and Peter Navarro. President-elect Trump has just nominated millionaire Wilbur Ross for commerce secretary. Ross has been a vocal critic of trade agreements.
Ross has stated in the media that he was ready to negotiation “bilateral” trade agreements, and a shift away from regional agreements.
A first version of this article was made available to PRO subscribers on 29 November 2016.
