Overview: The Trump Trade Policy Promises, Pitfalls, and Future Prospects?

Transcription

1 Overview: The Trump Trade Policy Promises, Pitfalls, and Future Prospects? Warren H. Maruyama November 2, 2017

2 President Trump s Campaign Promises Trade Our Trade Deals Have Been a Disaster We Have to Renegotiate our Trade Deals NAFTA Has Been a Disaster. TPP is a horrible deal. We Don t Beat China in Trade. We Can t Beat Mexico. When Have You Seen a GM Car in Tokyo?

3 USTR Robert Lighthizer Partner, Skadden Arps and Former Deputy USTR Negotiated Reagan Administration s Steel VRAs Formerly US Steel s Lead AD/CVD Lawyer Commerce Secretary Wilbur Ross Billionaire Investor - Specialist in Restructuring Bankrupt Companies - Steel, Coal, Textiles White House Staff The Trump Trade Team Prof. Peter Navarro Director of White House Office of Trade and Manufacturing Policy Gary Cohn NEC Chair / Former Goldman-Sachs COO / Leader of WH s Wall Street Faction Jared Kushner White House Adviser (Son-in-Law)

4 Congress Has Delegated Broad Authority to the President Congress Has Plenary Authority Over Trade - Article I, Section 8 of the Constitution But Congress Has Delegated Broad Authority to the President Termination and Withdrawal Authority for Trade Agreements Section 125 of Trade Act of 1974 Designation of Currency Manipulators 1988 Trade Act and 2015 Customs Enforcement Act Authority to Raise U.S. Duties Section 301(b) Unfair Trade Practices Section 232 National Security Balance-of-Payments Section 122 International Emergency Economic Powers Act (IEEPA) Import Relief Section 201, AD/CVD, Section 421 (China) Congress Has Retained Authority to Approve Major Trade Deals TPA Authority for Bilateral Trade Negotiations Bipartisan Congressional Trade Priorities and Accountability Act of

5 High-Stakes NAFTA Renegotiation Ahead Key Campaign Promise But Termination Would Have Economic and Political Costs U.S. Companies Many Have Highly Integrated N. American Supply Chains Mexico and Canada Are Big U.S. Export Markets Big Changes to NAFTA Require Congressional Approval President Trump Can Terminate NAFTA Under Section 125 But U.S. Farmers, Manufacturers, and Supply Chains Take a Big Hit U.S. Business and Agriculture Have Coalesced Around Do No Harm Position Administration Proceeding Under TPA Procedures Administration s Focus Has Shifted to Updating NAFTA At Least for Now Incorporate Key TPP Chapters But Also Includes Trump Objectives on Currency, Deficits, Rules of Origin 5

6 NAFTA RENEGOTIATION NEXT STEPS 90-Day Congressional Consultation Period First Round of Negotiations (August 16-18) Administration s NAFTA Wish List 1. Rules of Origin 2. Trade Deficit Reduction 3. Eliminate Chapter Dumping, Diversionary Dumping, and Evasion of AD/CVD Duties 5. Currency Manipulation 6. Disciplines on State-owned Enterprises. 7. Labor and Environment 8. Various TPP Chapters, e.g. Cross-Border Data Flows Won t Be Easy to Come Up with Deal that: Can Be Negotiated with Canada and Mexico Satisfies Trump s Anti-Trade Blue-Collar Base Satisfies U.S. Agriculture and Business Communities Can Pass the Congress... 6

7 US-China Trade China Is Largest U.S. Goods Trading Partner $598 Billion in Two-Way Trade (2015) Large U.S. Trade Deficit U.S. Exports - $116 Billion and Big Export Market for U.S. Agriculture No Shortage of Bilateral Issues: Currency Manipulation Indigenous Innovation Restrictions on Foreign Internet Providers Steel and Aluminum Over-Capacity IPR and Cyber-Theft AD/CVD Duties China s Non-Market Economy Status Mar a Lago Summit Presidents Trump and Xi Relationship Dominated by Need for Chinese Cooperation on North Korea 100-Day Plan on Trade U.S.-China Comprehensive Economic Dialogue CED Section 232 and Section 301 7

8 Trump Administration s Trade Policy Agenda Defend U.S. National Sovereignty Against WTO WTO Panels and AB Can t Add to or Diminish WTO Rights and Obligations Strictly Enforce U.S. Trade Laws, e.g. AD/CVD, 201, and 301 Use All Possible Sources of Leverage to Open Markets to U.S. Goods and Services and Protect U.S. IPR WTO Rules Don t Work for Non-Market Economies Prepared to Go Outside WTO Rules, e.g. Section 301 Focus on Reciprocity and Eliminating Trade Deficits Will Negotiate New and Better Bilateral Trade Deals Hogan Lovells 8

9 [B] ilaterals can occur much more quickly, because basically, it's just a few people in a room talking about what needs to be done. - WH Advisor Peter Navarro Potential Bilateral Trade Deals for President Trump? UK? Japan? Others?? But Big Unknowns The Upside: Bilateral Trade Deals?? Intense Pressure from U.S. Agriculture for Japan FTA? Can UK Even Negotiate Until Exits EU in 2019 (or Later)? Will Potential Bilateral Trade Partners Agree to New Trump Demands, e.g. Currency Manipulation, Deficits, Rules of Origin? Can President Trump Mobilize Bipartisan Congressional Votes to Approve Bilateral Deals? Hogan Lovells 9

10 Presidential Actions Int l Trade Executive Orders Circumvention of AD/CVD Orders (March 31, 2017) Trade Deficit (March 31, 2017) Buy American / H-1B Visas (April 18, 2017) Presidential Memorandums TPP Withdrawal (Jan. 23, 2017) American Pipelines / Buy America (Jan. 24, 2017) Section 232 Steel and Aluminum (April 2017) Section 301 (August 14, 2017) Barrage of AD/CVD and Section 201 Actions Filed Softwood Lumber 20-25% U.S. Preliminary CVDs (April 24, 2017) Hogan Lovells 10

11 President Trump s Trade Agenda Preliminary Report Card Biggest Move Was Withdrawing from TPP Protectionist Actions Have Been Limited Extreme Campaign Promises (e.g. NAFTA Withdrawal, 45% Tariffs on China, 35% Tariffs for Mexico) Shelved At Least for Now Steady Stream of Trade Actions But Mostly Symbolic Reviews So Far Section 232s and 301 Could Lead to Concrete Trade Actions Increasing Pressure from Democrats and Unions to Show More than Rhetoric Despite Limited Policy Changes, Marketplace Has Reacted to Trump Trade Initiatives Trump Trade Initiatives Are Likely to Continue WH Clearly Sees Political Advantage in Positioning President Trump as Trade Skeptic But Implementation Won t Get Any Easier Need to Close NAFTA Deal Needs to Walk Fine Line on Section 232 and 301 China Is Formidable Adversary Doesn t Want Trade Wars to Send Economy Over a Cliff Hogan Lovells 11

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