Trade Cases

Pentagon Backs Limited Action on Section 232

February 24, 2018

Ironically, the Department of Defense is among the least enthusiastic about the Section 232 investigations into the impact of steel and aluminum imports on national security. After reviewing a draft of the Section 232 report last year, the DoD determined that trade restrictions proposed by Commerce Secretary Wilbur Ross would “unnecessarily vex U.S. allies.”

The Pentagon reiterated that stance in a memo to Commerce released this week. “DoD continues to be concerned about the negative impact on our key allies regarding the recommended options with the (Section 232) reports,” the Department wrote.

Although, the Pentagon “believes that the systematic use of unfair trade practices to intentionally erode our innovation and manufacturing industrial base poses a risk to our national security,” the memo notes that supporting U.S. military requirements requires only 3 percent of U.S. aluminum and steel production.

“Therefore, DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel or aluminum necessary to meet national defense requirements.”

The Department adds, “However, DoD recognizes that among these reports’ alternatives, targeted tariffs are more preferable than a global quota or tariff.”

The DoD suggests that an interagency group refine the targeted tariffs “so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment.”

If tariffs or quotas are imposed, they should be conditional, said DoD. If action is taken on steel imports, action on aluminum imports should be delayed. “The prospect of trade action on aluminum may be sufficient to coerce improved behavior of bad actors.”

The memo concludes: “This is an opportunity to set clear expectations domestically regarding competitiveness and rebuild economic strength at home while preserving a fair and reciprocal international economic system as outlined in the National Security Strategy. It is critical that we reinforce to our key allies that these actions are focused on correcting Chinese overproduction and countering their attempts to circumvent existing antidumping tariffs – not the bilateral U.S. relationship.”