Leibowitz on Trade: The Long, Slow Unwinding

Instead, it’s worth recounting the many decisions that President Trump made in trade policy and look at how they may change with the new administration. I’ll look at three today.

1. The WTO—The last Appellate Body member’s term expired Nov. 30, so there are now exactly zero members of the Appellate Body, the WTO’s “supreme court.” When the new administration takes over, what will be the attitude toward the WTO, especially the dispute settlement system?

As we’ve seen in previous columns, the Democrats and Republicans share some skepticism about the WTO. The loss of quite a few dispute settlement cases on antidumping and countervailing duty matters was sour-tasting medicine for both Democratic (Obama) and Republican (George W. Bush, Donald Trump) administrations. So is the behavior of China, which was admitted to the WTO with high expectations that its policies would change away from state control and theft of intellectual property and, by most accounts, has not done so. A “reset” (a great 21st Century word that means many things to different people) for the WTO will probably await confirmation of the trade team (chiefly the USTR and the Secretary of Commerce and their deputies). In the meantime, such things as the tariffs on China and Europe (in retaliation for Airbus subsidies) will remain. The WTO membership will have to figure out how to achieve consensus with respect to reform of dispute settlement as well as the new members of the Appellate Body, assuming that continues in being. There is no clear or early solution for that problem.

2. Section 232 tariffs and quotas—Not only the future of the steel and aluminum tariffs, but additional investigations that are pending could result in presidential proclamations before President Trump leaves office on Jan. 20, 2021. These tariffs have been challenged in court—as I indicated last week, the challenges to product exclusions have led the government to settle a few cases, and exclusions could soften the impact of these tariffs on U.S. manufacturers, who employ vastly more workers than the steel and aluminum production industries. But whatever happens in the courts, there will be an imperative to achieve greater cooperation with our allies on issues that are of primary importance, including China. There is at least a fair chance that the steel and aluminum tariffs and quotas will be relaxed, although probably not terminated suddenly.

There are three Section 232 investigations currently before the Commerce Department or the president. The transformer component action, which, rumor has it, is at the White House for final decision, could result in a presidential proclamation before Jan. 20. Cliffs CEO Lourenco Goncalves has threated to close the AK Steel Butler, Pa., plant if tariffs are not levied on imports of cores and laminations, important components of electric transformers. If relief is announced before Jan. 20, President Biden will have a politically consequential decision to make—whether to rescind the tariffs immediately and risk political fallout in the battleground state of Pennsylvania, or to keep them in place until some other approach is devised.

3. Safeguards—Large residential washing machines and solar panels and cells are the subject of ongoing safeguard remedies. The International Trade Commission recently voted to extend safeguard measures on washing machines (primarily benefiting Whirlpool) just last week. The way safeguards work will require less “hands on” decision-making by the new president. The washing machine tariffs have played at least some role in convincing two major international companies (LG and Samsung) to invest in U.S. production. The initial safeguard remedies were due to expire in February 2021 and the ITC vote last Wednesday allows the president to extend the measures.

The solar panels case has several interesting aspects. There are two major sectors of the industry at loggerheads with each other. The Trump administration sided with U.S. manufacturers of solar cells and panels in 2018. However, a large segment of the industry installs solar panels and cells, many of which are either in short supply or not made at all in the United States. With a new emphasis on renewable energy and measures to deal with climate change in the next administration, balancing protective instincts against increasing the competitiveness of the solar industry with other forms of energy will generate an intense debate. For the moment the safeguard measures on solar will remain in place. The pressure on both sides will be intense.

Trade assumed a major role in international affairs over the last four years. It will be no less important in the next four—and the likelihood that favored industries and companies will have an easy time keeping the protection they have, let alone obtaining new protection, appears to be decreasing. We are cursed to live in interesting times.

Lewis Leibowitz

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