Trump Calls for Free, "Fair Trade," Highlights Job Losses in Addressing US Congress

2 March 2017

US President Donald Trump called for a bipartisan approach in efforts to increase American economic competitiveness during his first address to both chambers of the country’s Congress on Tuesday 28 February, in a speech that called for free, “fair trade” but otherwise offered few trade-related policy details.

Taking place just over a month since Trump’s inauguration, the speech marked the first such address to lawmakers and was being watched closely for references to upcoming policy priorities, indications of his legislative agenda, and its political tone. Traditionally, US presidents in their first year of office do not give a formal “State of the Union” address, but do address Congress in this type of forum.

While trade was among the more contentious topics on the campaign trail before Trump was elected last November – with multi-country agreements like the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) drawing particular fire – the topic was referred to only briefly in the speech, largely to illustrate a mercantilist perspective that emphasise trade deficits as cause of job losses and competitiveness.

“We’ve lost more than one-fourth of our manufacturing jobs since NAFTA was approved, and we’ve lost 60,000 factories since China joined the World Trade Organization in 2001. Our trade deficit in goods with the world last year was nearly US$800 billion dollars,” the US leader claimed on Tuesday evening.

Trump also referred to some of the steps his administration has taken to date on trade, such as formally instructing the Office of the US Trade Representative (USTR) last month to withdraw the US from the Trans-Pacific Partnership (TPP) Agreement, of which it was the largest economy. The remaining signatories to the accord have spent the last several weeks discussing in different forums how to proceed, with a full summit planned for mid-March in Viña del Mar, Chile.

While referring to the TPP deal as “job-killing,” Trump otherwise gave no further detail on the accord. He did, however, repeat past rhetoric over American workers not benefitting sufficiently from past trade policy.

“I believe strongly in free trade but it also has to be fair trade. It’s been a long time since we had fair trade. The first Republican President, Abraham Lincoln, warned that the ‘abandonment of the protective policy by the American government… will produce want and ruin among our people’,” said Trump.

“Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes.  But when foreign companies ship their products into America, we charge them nothing, or almost nothing,” he continued.

While Trump also instructed the USTR’s office last month to prioritise bilateral deals in future US trade policymaking, the speech did not refer to any planned deals by name, despite signals that the US and UK would be interested in inking a bilateral deal once the latter exits the European Union. (See Bridges Weekly, 2 February 2017)

USTR trade strategy draws scrutiny

Meanwhile, the Office of the US Trade Representative (USTR) sent to Congress on Wednesday 1 March its annual policy document outlining the planned “presidential trade agenda” for the coming year, as required under the Trade Act of 1974.

A draft version of the document already began making the rounds earlier this week, being reported by multiple news outlets.

The draft text, according to a version posted online by the Financial Times, acknowledges that the lack of a Senate-confirmed USTR means that the office will only be able to circulate a more detailed text further down the road, a point that was reaffirmed in the final text released Wednesday.

Trump has nominated Robert Lighthizer to serve as the US Trade Representative, an international trade lawyer who previously served as a deputy USTR under the administration of Ronald Reagan. The timing for Lighthizer’s confirmation is not yet clear, given that he will need to first obtain a waiver by the Senate in light of previous lobbying work done for China and Brazil several years ago.

Within that context, the draft USTR trade policy text published by the Financial Times states that every trade-related action under the administration “will be designed to increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural or other exports.”

The text in the final document remains essentially the same in this area, replacing the terms “and other exports” with “services industry exports.”

The draft document also says that it will not put at risk US competitiveness for the sake of advancing “geopolitical” interests abroad, and reaffirms the commitment of the new administration to “focusing on bilateral negotiations rather than multilateral negotiations – and by renegotiating and revising trade deals when our goals are not being met.”

The final version maintains that the administration “reject[s] the notion that the United States should, for putative geopolitical advantage, turn a blind eye to unfair trade practices that disadvantage American workers, farmers, ranchers, and businesses in global markets.”

It also keeps in place the language regarding prioritising bilateral over multilateral trade talks, as well as on the renegotiation of existing agreements.

Key objectives

The draft version of the USTR document later outlines a series of “key objectives” that address topics such as levelling the playing field domestically and abroad for US products, along with “breaking down unfair trade barriers”; ensuring the protection of US intellectual property; being strong on trade enforcement; “resisting efforts” by countries or international bodies to increase US obligations or weaken US rights under trade deals; and taking steps to ensure that trade agreements keep pace with recent developments.

While the draft language about “resisting efforts” by others “to weaken the rights and benefits of, or increase the obligations under, the various trade agreements to which the United States is a party,” the final version is slightly modified.

Specifically, the final text inserts the words “to advance interpretations” before the reference to weakening rights and benefits of the US under trade agreements.

The draft and final document are both split into four “major priorities” relating to the protection of “US national sovereignty over trade policy,” as well as trade enforcement; pushing trading partners to lower barriers to US imports; and the negotiation of future trade agreements.

The first “priority” has particularly captured headlines since the draft was circulated by the Financial Times, in light of its language relating to the US’ compliance with WTO dispute settlement rulings.

The draft text notes that the WTO Agreement does grant complaining countries in a trade dispute to “have the right to be automatically authorised to retaliate by imposing trade sanctions on the losing country” should the latter not bring measures found to be illegal in line with global trade rules. The final version removes the word “automatically” but otherwise keeps this line the same.

However, the draft and final text both state later on that WTO dispute settlement rules make clear that actual legal rulings by the global trade arbiter “could not ‘add to or diminish the rights or obligations’” of its members.

Citing the “history” of the American debate on the issue prior to US lawmakers approving the Uruguay Round Agreements Act (URAA) that brought the WTO’s Marrakech Agreement into domestic law, the draft document states that “the American people were assured that, by the express terms of the [Dispute Settlement Understanding] itself, this dispute settlement process would not alter the terms of what the United States had agreed to, and what Congress thereafter expressly approved when it passed the Uruguay Round Agreements Act.”

The final version maintains this section, adding a specific reference to the World Trade Organization after the part on “the terms of what the United States had agreed to.”

Later in the both the draft and final texts, the presidential trade agenda then argues that WTO dispute settlement reports are “not binding or self-executing,” after which it states that any adverse panel or Appellate Body rulings for the US “does not automatically lead to a change in US law or practice.”

“Ever since the United States won its independence, it has been a basic principle of our country that American citizens are subject only to laws and regulations made by the US government – not rulings made by foreign governments or international bodies,” the draft text continues. However, this particular paragraph is not included in the final version.

The language suggesting that WTO rulings may not be treated as binding has drawn particular notice in the trade community. The WTO’s dispute settlement function has long been considered a landmark development in international law, especially given the established understanding that its reports, once adopted by the Dispute Settlement Body (DSB), are binding in that dispute on the relevant parties.

Furthermore, the WTO’s Marrakech Agreement says that “each member shall ensure the conformity of its laws, regulations, and administrative procedures with its obligations as provided in the annexed Agreements.”

In addition to the above-mentioned language on WTO law, the draft and final documents repeatedly suggests throughout that, given that “large portions of the global economy do not reflect market forces” and with many allegedly taking part in currency manipulation or other “unfair practices,” the Trump administration “will not tolerate” such practices.

It also advocates an “aggressive approach” to opening up foreign markets. The language in this area is slightly modified from the earlier draft, which pledged that the new administration “will use all possible leverage – including, if necessary, applying the principle of reciprocity to countries that refuse to open their markets – to encourage other countries to give US producers fair access to their markets.”

The final version says instead that the Trump Administration “will use all possible leverage to encourage other countries to give US producers fair, reciprocal access to their markets,” dropping the earlier reference to “applying the principle of reciprocity” for those who do not.

Despite the tone taken throughout the text on trade law, enforcement, negotiation, and other topics, a footnote in the both the draft and final versions also specifies that the Trump administration for the moment “is not proposing legislation with respect to the objectives of priorities outlined in this statement.”

ICTSD reporting; “Trump Trade Nominee Lighthizer Needs Waiver Over Work for China and Brazil,” BLOOMBERG, 15 February 2017; “Trump has WTO rulings in sights, leaked report shows,” FINANCIAL TIMES, 28 February 2017; “Is the WTO one of Trump’s ‘big quagmire deals’? Here’s what’s at stake,” THE WASHINGTON POST, 28 February 2017; “Trump may ignore World Trade Organization in major shift of U.S. trade policy,” THE WASHINGTON POST, 1 March 2017.

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