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Trump May be Seeking Ways to Skirt WTO, Increase Tariffs

Thursday, July 05, 2018
Sandler, Travis & Rosenberg Trade Report

President Trump is reportedly considering a draft bill that would give him authority to ignore World Trade Organization rules and increase U.S. import tariffs. However, any such bill would have major ramifications and is not likely to be approved by Congress.

According to press reports, the president believes the WTO has been detrimental to U.S. interests, and in fact was “designed by the rest of the world” to be that way, despite the fact that the U.S. has won the vast majority of the cases it has initiated at the WTO since its inception in 1995. He is also known to be focused on lowering the U.S. trade deficit through what he calls “reciprocal” trade; i.e., imposing the same tariffs on U.S. imports from specific countries as they impose on U.S.-made goods. His ability to put this into practice, however, is limited by WTO rules that prevent the U.S. from arbitrarily increasing tariffs on goods from individual countries or raising tariffs above agreed rates.

In response, a draft bill that Trump was reportedly briefed on in May would essentially ignore those rules by providing that if the president determines that a foreign country imposes a tariff or non-tariff barrier on a particular good that is “significantly higher” than such measures imposed by the U.S. on that good, the president may (a) negotiate an agreement to lower that tariff or eliminate the non-tariff barrier or (b) increase the U.S. import duty equal to the foreign tariff or the effective duty rate imposed by the non-tariff barrier. If the foreign country retaliates with its own tariff increase, the president could follow suit. Before taking any such action the president would have to consult with the Senate Finance and House Ways and Means committees, publish a notice in the Federal Register, and seek advice from trade advisory committees. However, it does not appear that approval from any of these sources would be necessary for tariff increases to become effective.

According to press reports, any such bill stands little chance of being enacted into law. In that case the president could consider withdrawing the U.S. from the WTO altogether, but that appears to be unlikely as well, at least at this point. An Axios article noted that the president could not unilaterally declare a withdrawal, which U.S. law “states quite plainly … requires an act of Congress.” In addition, the president reportedly said over the weekend that “I’m not talking about pulling out” of the WTO, a claim reiterated by several administration officials, though he warned July 2 that if “if they don’t treat us properly, we will be doing something.” On the other hand, a Business Insider article cited Council on Foreign Relations senior fellow Edward Alden as saying a withdrawal could be moot because the president “has already shown that he can pursue the policies he wants without regard to WTO rules.”

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