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The Transforming Picture Of “America First”

09.06.2017 Deborah Elms
The Transforming Picture Of “America First”

Washington, DC—It’s been nearly six months since the Trump administration came into office. Viewed from the outside, it appears that American trade policy has undergone a shift over this period. What hasn’t been so clear is whether this change is one of emphasis or a deep transformation.

Partly this confusion over the direction of trade policy has been a function of missing staff members. In trade, as in nearly every other federal government area of responsibility, most of the top ranks of officials still have yet to be appointed. But also, as the days have passed and the outlines of policy have become clearer on trade, many bureaucrats have departed or have begun making plans to leave.

Many are leaving because it does look like US trade policy is not just a change in emphasis but a major revision in approach that goes beyond just the President’s deeply felt and personally expressed world views. It increasingly extends to members of the administration involved in making policy decisions in various departments and agencies.

Thus far, decision making on trade remains tightly held by a very small group of individuals. It should also be noted, of course, that much of Washington is distracted by news about many issues other than trade policy. But trade has not fallen completely off the radar. In fact, to the extent that this administration has an agenda moving forward, trade seems to be the most active element at the moment.

So what does the new US trade agenda look like? It really does reflect “America first.” This means that the bilateral trade deficit in merchandise trade is the single metric used to measure everything. It means that all multilateral solutions to trade are viewed as, at best, second rate solutions to bilateral options.

To deal with these deficits, the US needs to export more and import less.

The worldview from those in charge appears to be genuinely that the US has the single largest market. Other countries will want to have better access to this market and will do whatever it takes to get improved access. Hence there should be a line of countries ready and willing to engage in bilateral agreements now that the Americans are prepared to start.

Because the United States is the world’s greatest market, it should—by definition really—run trade surpluses in goods with everyone. The fact that it does not is therefore automatic evidence of cheating. Bigger trade deficits are confirmation of deeper duplicity on the part of trade partners.

The rest of the trade agenda, therefore, should be turned to figuring out how to stop everyone else from cheating by cracking down on such unfair practices and return the US to nothing but surpluses again. This may mean using novel interpretations of laws or regulations to eliminate devious behavior from others.

Admittedly, this trade agenda is not stated quite so baldly, but if boiled down to the essence, this is what it looks like.

There appears to be no use in trying to use logic to unpick any element of this agenda and show how and why it is wrong, unlikely to bring about the desired results, or just plain crazy. This is not an agenda that can be untangled by data, altered by evidence, or adjusted by argument.

It is true, of course, that not every member of the administration shares the same views and it is certainly the case that many of the officials in various agencies related to trade likely do not.

Thus far, policy implementation has proceeded fitfully. Most notably, the President cancelled US participation in the Trans-Pacific Partnership (TPP).

He has started the process to renegotiate the North American Free Trade Agreement (NAFTA) with Canada and Mexico (discussed in last week’s blog from Ottawa). While US Commerce Secretary Ross has confidently announced plans to complete negotiations by the end of the year, this is likely to be a tough deliverable—even if the agenda is kept carefully limited on all sides.

Trump has also issued a series of Executive Orders (EOs). Most of the existing EOs task various agencies to examine different aspects of US trade policy, including one to look at trade deficits and one that just returned nearly 1600 pages of public comments on the use of a very dusty old US law, Section 232, on possible limits to US steel imports on national security grounds (the subject of next week’s blog post).

Some of the trade agenda was hampered by a long delay in confirming Robert Lighthizer as the US Trade Representative (USTR). Since taking up his post just ahead of the APEC summit in Hanoi last month, Lighthizer has been busy meeting his counterparts in various settings, including attending the OECD ministerial in Paris this week.

Once Lighthizer returns and many of the EOs are completed by the Commerce Department, further action is likely. Stepped up enforcement is certainly on the docket.

Beyond that, it is less clear what will happen next. At some point, members of Congress may become more involved on trade. Certainly, as the NAFTA talks proceed, Congress will weigh in and will have to vote on the final outcome.

The American business community, thus far, has been largely silent about the substantial transformation of the trade agenda in Washington. They have been waiting for tax reform and regulatory changes and have been willing to bide their time over trade policy.

Thus, those from overseas who were hoping for a return to “normal” in Washington on trade are going to be disappointed. This is not an administration that sees value in traditional trade policies that have unpinned US actions through both Republican and Democratic leaders for decades.

America First is not just rhetoric. It is the policy for trade in Washington, increasingly spread across agencies, and it seems unlikely to change anytime soon.

 

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