Administration's Action on Section 232 Seen Weakening Trade Law Around World
Whichever way the World Trade Organization decides on the validity of U.S. tariffs and quotas on metals and other countries' retaliatory tariffs, it hurts the rules-based system, said Jennifer Hillman, a Georgetown University law professor and former member of the WTO appellate body. Hillman spoke on a panel at a Global Business Dialogue trade policy association event. If the WTO says that a claim that an action was taken to protect national security -- when there's no war between the parties, and the item is not clearly war materiel, such as ammunition -- then almost any protectionist measure could be justified, she believes.
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She said that the Trump administration's read on Section 232 of the Trade Expansion Act means that "anything we deem to be in our economic security interest is national security and vice versa." The ways in which the 232 actions happened were contrary to promises made within the WTO, such as making sure trade laws are administered in a fair and transparent way, Hillman said. How is slapping a tariff on items already on the water fair and transparent, she asked. And, in the case of quotas on South Korea, "we imposed it in the most draconian way." She said there are 54 types of steel products identified, each with its own quarterly quota, with no flexibility to borrow from future quota periods or roll over unused quota amounts. Even voluntary export restrictions negotiated by Robert Lighthizer, when he was a deputy trade representative, in the 1980s had more flexibility, she said.
Because of the rigidity of the quotas, she said South Korea will not be reducing its steel exports to the U.S. by 30 percent, "it's probably closer to a 50 percent cut in their trade." How voluntary can such an agreement be, she asked. But, she said, retaliatory tariffs from the European Union, Mexico, China, India and Canada bring their own threats to the legitimacy of the WTO. All those countries say the U.S. tariffs are not based on national security at all, but, rather, are safeguards.
Other panelists avoided the question of how the WTO will view the dispute but instead addressed the larger issue of how free trade has affected U.S. workers. Scott Paul, whose organization Alliance for American Manufacturing supports tougher trade enforcement, said if the WTO could have solved Chinese overcapacity in steel and aluminum, "believe me, we would've done it by now." He described the global steel dialogue through the Organisation for Economic Co-operation and Development (OECD) as "plodding along at an exceedingly slow pace." He said trying to use the antidumping laws to target Chinese steel has been ineffective because China reworks the products subject to duties into items that aren't or transships through Vietnam, Malaysia, Indonesia and South Korea. A representative from Malaysia's Embassy at the event challenged this claim, noting that Malaysia's share of U.S. steel imports is minuscule.
Paul said that Canada and Mexico are not dumping steel, but that punishing allies had to be done to force them to find a solution to China. In response to a question from International Trade Today on how protecting aluminum smelters makes sense when there is no bauxite mining in the U.S., Paul said it was wrong to include Canada in the aluminum tariff. "I think that's an overstep," he said.
He did not take a position on the wisdom of tariffs on imported autos and auto parts, but he said say the U.S. auto industry is highly integrated with NAFTA partner countries. Nick Giordano, vice president of the National Pork Producers Council, said retaliation by Mexico and China on U.S. pork exports is very painful for his members, since those are two of the top three markets. He said the organization is very eager for NAFTA countries to be excluded from metals tariffs.
However, he said, "I think our producers are showing tremendous fortitude and patience," and he said they recognize that the president is trying to get more reciprocal trade. He said beyond the narrow question of whether the WTO will accept the Section 232 tariffs' justification is a question about the free trade approach of more than 50 years. "The broader question being asked by a lot in the United States [is]: Does the post-war global trading system that the U.S. was the primary architect of still serve the national interest?"