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Executive Trade Policy Authority: A Threat to America’s Global Leadership on Trade

July 31, 2018 5 minute Read
By James Lake
Congress could start clawing back trade policy authority that it has long delegated to the president.

Despite the U.S. Constitution giving Congress the power to regulate international trade, Congress has increasingly delegated trade policy authority to the executive branch since the 1930s. However, the Trump administration’s unprecedented use of executive trade policy authority, including the actual and threatened tariffs on over 20 percent of U.S. imports, has Congress thinking about clawing back their authority. This could defend the assault on U.S. trade policy today by the extraordinarily protectionist executive but, in the long run, Congress is likely more protectionist than the executive.

Unlike today, the executive branch is not always more protectionist than Congress. After all, Congress represents regional constituencies rather than the national interest. This helps explain Congress delegating the negotiation of reciprocal trade agreements to the executive branch via the 1934 Reciprocal Trade Agreements Act and subsequent forms of “trade promotion authority”. Indeed, this executive authority underpins U.S. leadership in the post-1930s era of global trade liberalization and is the key to further integrating the U.S. into the global economy. Yet, unlike the trade policy agenda of prior administrations that revolved around reciprocal negotiation of trade liberalization, the Trump administration relies on arcane executive authorities embedded in Congressional delegation.

Citing national security concerns, President Trump has levied steel and aluminum tariffs on $40 billion of U.S. imports and the administration is investigating auto tariffs on over $200 billion of U.S. vehicles and auto parts. Section 232 of the Trade Expansion Act of 1962 allows the Executive branch to impose such trade restrictions, without constraint on their severity. However, use of such authority is exceedingly rare; excluding oil imports, it was only used once before in the 1980s by the Reagan administration. Yet, the administration’s apparent view of equating national security with economic security is systematically undermining the current rules-based WTO system that limits political manipulation of trade policy by governments.

Recent tariffs levied against China over unfair trade practices regarding intellectual property and technology transfer come from Section 301 of the Trade Act of 1974, again without constraint on their severity. These tariffs already cover $34 billion of U.S. imports and the administration plans to cover an additional $216 billion. In the pre-WTO world without an effective international dispute settlement system, the Reagan administration systematically used Section 301. However, although not codified by WTO or U.S. law, the U.S. promised to stop unilaterally using Section 301 upon WTO creation in 1994.

If tariffs eventually impact their planned target of over $500 billion of U.S. imports, and foreign retaliation continues or the administration uses other rare examples of Executive trade policy authority, we should expect intensified opposition in the U.S. Such opposition would include farmers, automakers and, once they start hurting from tariffs on consumer goods, consumers. Congress understands this situation and that Section 232 and Section 301 essentially grant unconstrained Executive authority. By a vote of 88-11, the Senate passed a non-binding measure to include language that claws back Congressional trade policy authority in a reconciled spending bill. And, a group of bi-partisan senators have repeatedly tried, unsuccessfully, to require Congressional approval of Section 232 tariffs via amendments to other important bills. Such attempts could become much more successful amid pains from tariffs on an additional $416 billion of U.S. imports and growing Congressional concerns over executive trade policy authority.

Ultimately, it would be a cruel irony if Congress fully rescinded their delegation of executive trade policy authority. While rejecting the extreme protectionism of the current Executive, it would undermine the Executive authority that fundamentally supports today’s integrated global trade system and the global prosperity it has created.

James Lake, Ph. D., is an Assistant Professor of Economics at SMU, specializing in International Trade Policy.

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