USTR Emphasizes Aggressive Trade Enforcement, National Interest in Annual Report

The U.S. under previous administrations passively stuck with "outdated and underperforming trade deals and allowed international bureaucracies to undermine U.S. interests," the Office of the U.S. Trade Representative said. But now, "countries that refuse to give us reciprocal treatment or who engage in other unfair trading practices will find that we know how to defend our interests," USTR said. In a 359-page report to Congress on the trade agreements program released late on Feb. 28, USTR laid out its priorities for the coming year, and defended the ongoing NAFTA negotiations. By law, Congress must renew fast-track trade authority by June 1, or NAFTA 2.0 will not be able to proceed.

U.S. Trade Representative Robert Lighthizer and USTR staff have met with dozens of members of Congress and have spent more than 1,400 man-hours in consultations. "All of this work is being done to comply with Congressional rules, build support for a new version of NAFTA, and encourage a smooth transition to the updated agreement. In short, the Administration has not simply sought to eliminate NAFTA but has made great efforts to alleviate uncertainty for those Americans who rely on it." It reiterates that it doesn't want protections for investors that USTR believes promote outsourcing, that it wants higher U.S. content in autos to qualify for duty-free status, and that it supports the Democrats' priority of improving labor union standards in Mexico, with the expectation that would lead to higher manufacturing wages there.

Philip Levy, who was a senior White House trade economist during the George W. Bush administration, said when he reads the NAFTA section, he sums up the message as: "This is terrible, this is a bad agreement, but we’re going to do it because Congress says so -- which sounds like they’re arguing with themselves."

Largely, the report's tone is a protectionist one, Levy said. "We ... have an aggressive trade enforcement agenda designed to prevent countries from benefiting from unfair trading practices. We will use all tools available -- including unilateral action where necessary -- to support this effort," USTR officials wrote. "The United States will not allow the [World Trade Organization] -- or any other multilateral organization -- to prevent us from taking actions that are essential to the economic well-being of the American people."

Trump was more muted when he spoke at the World Economic Forum meeting at Davos, but the tone of this report is very similar to how he spoke on the campaign trail, Levy said. "This looks like a throwback where he’s telling off all the Asian leaders," Levy said. The majority of Republicans in Congress disagree with that approach, but will they use the lever of trade promotion authority renewal to assert their views on trade? "Based on our discussions with Congressional leaders, we believe that there is strong support for ... an extension [of trade promotion authority], which would mean that fast-track authority will remain in place until 2021," the report said.

"This is going to be the big question of the day," Levy said. "Not 'oh, did we just discover Trump is a protectionist,' it’s 'what is Congress going to do about this?'" Levy noted that Senate Finance Committee Chairman Orrin Hatch, R-Utah, said recently that Congress will act if Trump gets out of line on trade, but then added that he didn't think Trump would do that.

Sean Ehrlich, author of the book Politics of Fair Trade, said Congress could renew trade promotion authority, but put restrictions on it, such as telling the USTR that they don't want changes to auto rules of origin. Congress could even tie Trump's hands on future safeguard duties, requiring that they pass Congress.

Hostility in the report is not just directed at China and Mexico, sources of low-wage competition for American workers, but also at Canada, one of the U.S.'s closest allies and trading partners, and a country with similar living standards and wages. The report complains about the WTO consultations Canada sought in December (see 1801100034) on U.S. approaches to antidumping and countervailing duties, including the retroactive cash deposit requirements after “critical circumstances” determinations. "Canada’s claims threaten the ability of all countries to defend their workers against unfair trade," USTR said.

The USTR also said it does have goals to promote exports, including opening Argentina to American pork and fruit; resolving barriers to American lamb, beef, horticultural products and processed foods in Japan; resolving barriers to beef exports in Australia and the European Union; convincing India to accept American poultry and pork; and to get permission to export rice year-round in Colombia, Nicaragua and China.