Against the Trump Trade Bill

National Review Online

Tuesday, July 03, 2018

As of now, the U.S. Fair and Reciprocal Trade Act is purely imaginary. But we know from a leaked draft that the bill — commissioned by the president and drawn up by his administration — would do several things. It would allow the president to impose tariffs on foreign goods as he sees fit, effectively withdrawing the U.S. from the World Trade Organization. It would mark a breathtaking transfer of power from the legislative branch to the executive branch. It would surely cause turmoil in the global economy.

It is hard to imagine Congress, despite its habitual acquiescence to executive-branch abuses of power, passing a bill that completely cedes the authority to impose tariffs to the president — let alone this president. The steel tariffs President Trump has levied against Canada, the European Union, and others rely on an abuse of section 232 of the 1962 Trade Expansion Act, which gives the executive the authority to impose tariffs for national-security reasons. But congressional Republicans still believe in the value of free trade, and understand that there are better ways to punish abusive trade practices than a retreat into autarky.

Both this bill and the Trump administration’s broad approach to trade issues are predicated on the misconception that remaining party to the WTO is no longer worth it. But there is no better tool to discipline bad actors on the world stage than the WTO. Lodging a formal complaint to accuse, say, China of producing excess steel would stand a better chance of changing its behavior than the wanton imposition of tariffs on Canada and Germany. Most WTO complaints against China alleging bad trade practices have resulted in its taking steps to comply; indeed, the president’s own economic report from February noted that the U.S. “gets better outcomes via formal WTO adjudication than negotiation.” In all, the U.S. has prevailed 91 percent of the time when it brings complaints through WTO channels.

The WTO is not without its faults. Plenty about global trade has changed since the Uruguay round of negotiations concluded in 1994. WTO countries have not managed to adapt to China’s misbehavior since its 2001 entry into the organization. But that indicates a need for a unified, multilateral approach to taking on China through existing channels. Withdrawing from the group entirely or passing a bill that practically does so would damage our ability to punish bad actors at all.

The international-trade system may need improvement, particularly in regard to China’s brazen mercantilism, but this poorly conceived bill is not the way to go about it. We are lucky it won’t pass and hope it soon finds a home in the nearest wastebasket.