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U.S. Trade Policy Agenda Focuses on Enforcement and National Security

The Trump administration’s second annual trade policy agenda again takes a tough line, emphasising “aggressive” enforcement of U.S. trade laws, the role of trade in supporting national security and limiting the role of the WTO. The document is critical of previous administrations for continuing to “passively adhere to outdated and underperforming trade deals and allow[ing] international bureaucracies to undermine U.S. interests,” leaving U.S. workers and businesses “at a disadvantage in global markets as unfair trading practices flourish[ed].” By contrast, the document asserts, Trump has “launched a new era in American trade policy,” one in which the United States unabashedly uses its economic power to open foreign markets and obtain “fairer treatment for American workers.” This policy rests on the following principles.

Supporting National Security
The report warns against trade policies that weaken the economy and jeopardise national sovereignty, a reference to WTO dispute settlement rulings that the administration believes have created “new obligations to which the United States and its elected officials never agreed.” The United States will protect national interests against “hostile policies from China, Russia, or any other countries,” the report states, and will “respond to unfair economic competitors by using all available tools to discourage any country from undermining true fair market competition.” On the other hand, the United States will be a “true friend and ally” to countries that are “committed to market-based outcomes and willing to provide the United States with reciprocal opportunities in their home markets.”

The report complains that mainland China has failed to adopt the market economy system expected of all WTO members more than 16 years after joining the multi-lateral body. If anything, the report notes, mainland China has appeared to be moving further away from market principles in recent years. The administration believes Beijing’s policies “are contributing to a dramatic misallocation of global resources and leave everyone – including the Chinese people – poorer than they would be in a world of more efficient markets.” The report warns that while mainland China is “free to pursue whatever trade policy if prefers” the United States “is free to respond” with all available tools at its disposal.

Strengthening the Economy
This section focuses on the tax reform bill Trump signed into law in December 2017, which reduced the top statutory corporate tax rate from 35 percent to 21 percent and switched the United States from a worldwide tax system to a territorial tax system. These changes align the United States with its major trading partners, the report states, and allow U.S. businesses and workers to compete on a level playing field.

Trade Agreements
The report emphasises on-going efforts to renegotiate NAFTA to “get a better deal for American workers and to improve the U.S. trade balance” and to make improvements to the U.S.-South Korea free trade agreement that will “improve U.S. export opportunities and facilitate more balanced, two-way trade,” particularly for motor vehicles and parts.

The report mentions plans to negotiate new trade agreements but provides few details, referencing only on-going efforts to pursue a possible post-Brexit deal with the United Kingdom and to prepare for potential bi-lateral negotiations in the Indo-Pacific and African regions. The report also blames the Senate’s delay in confirming several deputy U.S. trade representatives at least in part for the lack of any new negotiations to date. In preparation for future negotiations Trump plans to seek an extension of trade promotion authority through 2021, which would allow any trade agreements negotiated between now and then to receive expedited consideration by Congress.

Enforcement
The report highlights the administration’s use of a variety of trade enforcement tools, including a Section 301 investigation of mainland Chinese policies related to technology transfer, intellectual property and innovation (in which Trump is reportedly considering higher tariffs on a number of mainland Chinese goods), the Section 201 safeguards recently imposed on solar panels and washing machines, and the Section 232 national security investigations of steel and aluminium imports (in which Trump has announced plans to levy additional tariffs of 25 percent and 10 percent, respectively, on imports from all suppliers except Canada and Mexico). The report also touts a 59 percent increase in the number of new AD and CV duty investigations, including the first such probe self-initiated by the DOC in more than 25 years.

WTO Reform
The report asserts that the WTO is “an important institution” but is critical of its dispute settlement function, which “has appropriated to itself powers that the WTO members never intended to give it” and is thus “undermining our country’s ability to act in its national interest.” Instead of containing market distorting economies like mainland China, the report states, the WTO “has in some cases given them an unfair advantage over the United States and other market based economies.” Although the report asserts that the United States is willing to work with other WTO members to address these concerns, press reports indicate that the administration has done little to detail its objections or propose potential solutions.

The report states that the WTO’s “highest value should be as a forum for trade negotiations” but criticises the organisation’s “inability to reach agreements needed in a modern global economy,” an apparent reference to the failure of the Doha Round. The report suggest that rather than pursuing broad initiatives such as that one the administration will focus on “building coalitions of like-minded members to use the WTO committee system as vital tool to achieve market-oriented results.”

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