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House Leader Casts Cautious Eye on Trump Trade Agenda

Monday, June 26, 2017
Sandler, Travis & Rosenberg Trade Report

At a June 22 hearing on the Trump administration’s trade policy agenda, House Ways and Means Committee Chairman Kevin Brady, R-Texas, signaled concerns with some of the administration’s positions and actions along with cautious support of others.

In his opening statement Brady took issue with Trump’s negative characterization of U.S. trade policy over the past few decades. Countering claims that trade agreements have been disastrous for U.S. workers, Brady said the country’s network of “strong, enforceable trade agreements” has “expanded economic freedom so that our businesses, workers, and consumers can thrive.” He asserted that the U.S. has held its competitors accountable through “strict enforcement of the rules we created and our leadership in the World Trade Organization,” whereas Trump has held that foreign trading partners have taken advantage of the U.S. Brady also alluded to the broader geopolitical importance of a “steadfast commitment to the principles of free enterprise, open markets, and rules-based international commerce,” particularly in the face of growing competition from China.

Brady defended NAFTA and urged caution as the administration moves to renegotiate the nearly 25-year-old agreement. While this and other U.S. free trade agreements have come in for consistent criticism from the White House, Brady asserted that they “have created American jobs, lowered prices for consumers, and helped our businesses compete and win in all three crucial sectors of our economy – agriculture, services, and, yes, manufacturing,” NAFTA does need to be updated “to reflect the modern realities of trade on digital commerce, intellectual property, state-owned enterprises, and customs barriers,” he said, but this modernization “must be accomplished in a manner that retains current benefits in a seamless way that does not disrupt the current agreement, ongoing trade, or the millions of American jobs at stake.”

More broadly, Brady said, the White House should move quickly on “an ambitious network of deals that break down barriers and allow us to sell American all over the world.” He cited particular interest in the Transatlantic Trade and Investment Partnership with the European Union, which has not been a particular emphasis for the administration, as well as bilateral FTAs with Japan and the United Kingdom, which Trump has appeared more favorable toward. Brady also stressed the importance of U.S. leadership on trade in the Asia-Pacific region “so that we do not lose ground to China,” a possible criticism of the president’s decision to withdraw the U.S. from the Trans-Pacific Partnership agreement a dozen countries concluded in 2016.

Among Brady’s strongest positions was his objection to the administration’s emphasis on lowering trade deficits and its threats to raise trade barriers to achieve that goal. “There are many factors behind our trade deficit – some may be related to trade, but most are not,” he said, echoing the views of a number of economists. “Examining the trade balance as black or white conceals what is really going on.” In addition, while the White House has stressed the concept of reciprocity as a way of addressing trade deficits (i.e., raising tariffs on goods from countries that impose higher tariffs on U.S. goods, and vice versa), Brady said “history shows that the most successful approach is not protectionism – it’s breaking open new markets.”

In this context Brady expressed particular concern about potential restrictions on steel and aluminum imports if separate ongoing section 232 investigations determine that such imports are endangering U.S. national security. If section 232 authority is used improperly, he said, “we cut off supply that our companies need to stay competitive. Done hastily, we raise costs and prove to our partners that we aren’t reliable. Done indiscriminately, we harm countries that trade fairly and send a protectionist signal to those looking for an excuse to do the same.” The Commerce Department could make its recommendations in these cases as early as the week of June 26, though press reports state that disagreements within the administration could push that back.

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