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Congressional Elections Could Impact Trade Policy

Tuesday, November 13, 2018
Sandler, Travis & Rosenberg Trade Report

Last week’s congressional elections could result in changes to some aspects of the Trump administration’s trade policies but may not have a significant effect on others. The House Ways and Means and Senate Finance committees will each have new leaders, and Ways and Means will also see substantial changes in its Republican membership. In addition, Democrats wrested control of the House of Representatives from the Republicans but the GOP strengthened its hand in the Senate.

In the House, the Ways and Means Committee will lose 12 of its 24 current Republicans, fieof which are also on the Trade Subcommittee, while 18 of the committee’s 20 current Democrats will return. When the 116th Congress convenes in January the membership of the committee and subcommittee will be revised to reflect the new Democrat majority in the House, meaning not all of the 12 departing Republicans will be replaced and Democrats will add more members. Rep. Richard Neal, D-Mass., is expected to take over the committee chairmanship from Rep. Kevin Brady, R-Texas, who will become ranking member. It remains unclear who will become the chair and ranking member of the Trade Subcommittee.

In the Senate, Finance Committee Chairman Orrin Hatch, R-Utah, is retiring and could be replaced by former chair Charles Grassley, R-Iowa, though he could elect to remain at the helm of the Senate Judiciary Committee. Sen. Ron Wyden, D-Ore., is expected to remain the committee’s senior Democrat. International trade subcommittee chair John Cornyn, R-Texas, could replace Hatch but is thought more likely to remain in his current position, as will subcommittee ranking member Bob Casey, D-Pa. Republicans will need to replace Hatch and Sen. Dean Heller of Nevada while Democrats will need to replace Sen. Claire McCaskill of Missouri and possibly Sen. Bill Nelson of Florida. The committee’s ratio of Republicans to Democrats is not expected to change significantly as a result of Republicans’ stronger majority in the Senate.

Observers largely believe that the changes in congressional representation will allow President Trump to continue his hard line on trade issues. There has been support among both Republicans and Democrats for Trump’s focus on objectionable Chinese trade policies (though somewhat less for the particular methods he has chosen), which could embolden him to continue that approach. For example, he could make good on threats to raise tariffs on even more imports from China or open a new investigation on worker rights issues in that country. Both parties have been more muted in their support for other trade restrictive measures the president has taken or threatened, including higher tariffs on steel, aluminum, automobiles, and auto parts, but analysts say that with each party controlling one chamber of Congress prospects for any effort to overturn those measures are dim.

However, the changes could also make it more difficult to secure approval of the U.S.-Mexico-Canada Trade Agreement, some observers say. For example, Rep. Neal and other Democrats have said they intend to push Trump to further strengthen the agreement’s labor, environment, and enforcement provisions, even though they represent an upgrade from NAFTA. While the current trade promotion authority law guarantees a congressional vote on a USMCA implementing bill regardless of any Democrat objections, if those concerns are not sufficiently addressed a Democrat majority could either vote the bill down or revoke its TPA protections, which in either case would effectively kill the agreement. On the other hand, in such an event Trump could opt to withdraw from NAFTA and blame Democrats for leaving U.S. workers worse off.

House Democrats have also said they plan to subject Trump administration trade policies to more active scrutiny through investigations and hearings. This oversight could influence the development of trade agreements the White House plans to negotiate with the European Union, the United Kingdom, and Japan. It could also serve as a brake on more extreme measures the president might consider such as withdrawing the U.S. from the World Trade Organization. There could also be a renewed effort to advance legislation limiting the trade authorities wielded by the executive branch, an effort that has gained some bipartisan support but is not deemed likely to succeed in the near future.

For more information, please contact Nicole Bivens Collinson at (202) 730-4956.

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