The August 9th to August 15th, 2021 roundup of major trade developments, with L.C.
The Biden administration is abandoning US post-World War II leadership in trade as resolutely as it has abandoned US national security interests in Afghanistan. The consequences of the former will be as disastrous economically as the latter is proving for US credibility.
Secretary of State Antony Blinken made clear the Biden administration’s wish to abdicate playing a serious role in world trade in the course of an August 9th speech at the University of Maryland’s engineering school. Blinken indicated that the Biden team doesn’t see trade as a positive force. “[T]rade must take a back seat to domestic progress,” he said. “Our domestic renewal comes first.” Blinken’s speech was titled “Domestic Renewal as a Foreign Policy Priority.”)
The main points of the speech were that the strength of the US domestic economy and its infrastructure are key to its competitiveness with China and to its overall strength abroad. Therefore, the domestic economy and investment, prominently including government investment, take priority over trade. He suggested that the administration doesn’t see trade expansion as playing a positive role in domestic economic growth – that role is assigned to “serious investments” — meaning government investment in infrastructure and industrial policy.
In keeping with Blinken’s speech, new trade agreements are nowhere on the administration’s agenda for the foreseeable future.
More consternation among Pacific allies
The lack of any cooperation with allies on trade issues puts the US at variance with what its Indo-Pacific allies have been urging. They want the US in the CPTPP or at least in a digital trade deal. After the administration’s Afghanistan disgrace, it should be doing everything possible to build real, not verbal, alliances with allies to prevent China’s very real threat of dominating Asia. But Blinken said not a word about the danger to US interests posed by China’s leadership role in the RCEP and its bid to join the CPTPP – another reflection of his and the administration’s refusal to recognize the positive link between trade and strategic concerns. Instead, Blink said:
“President Biden has made it clear that before making more trade deals, we must first make a generational investment in our own competitiveness. Our domestic renewal comes first. If we do that, we will compete in the 21st-century global economy from a position of strength.”
In other words, the administration will do government-funded crony capitalism and trade union protectionism for now and perhaps get back into the international trade and export game later, i.e., once the 2022 and 2024 elections have been purchased with Democratic handouts.
Capitulation on Chinese software
Biden administration claims to be strengthening the US vis-à-vis China ring hollow in the face of its dropping the Trump administration’s efforts to prevent Chinese apps from collecting data on US citizens. Although the Chinese software companies were reportedly winning their counter suits in US courts, the Biden administration decided to not even fight the lawsuits and let the Chinese companies continue their access to US citizens’ private data. So the data will ultimately end up with Chinese Communist intelligence.
Democrats pushing for a carbon border tax on imports
Democrats are throwing an additional monkey wrench into trade relations by moving to imitate the European Union by imposing a carbon border adjustment mechanism (CBAM). This is supposedly to protect US industries burdened with the Biden administration’s anti-CO2 regulations from being undersold by “less green” foreign imports.
There are now efforts in the House and Senate to develop CBAM legislation, but some Republican senators are pushing back. The US would have special difficulty imposing a carbon tariff because it doesn’t have a domestic carbon market and therefore doesn’t have a way to determine the burden that domestic industry faces from carbon reduction programs. Nonetheless, the Biden administration has become less critical of the CBAM proposed in July by the EU (the “Fit For 55” plan) and similar proposals under consideration by other countries, now including Canada.
Republican opposition to CBAM
A bill to create a US CBAM has already been introduced in the House – the pompously and falsely named “Fair, Affordable, Innovative, and Resilient Transition and Competition Act.” The bill is sponsored by Sen. Chris Coons (D-DE) and Rep. Scott Peters (D-CA). Many Republicans oppose it, as do many industries and consumer groups. There is also concern about the negative impact the tax would have on developing countries.
This week a group of 19 Senate Republicans led by Sen. Kevin Cramer (R-ND) wrote to Biden urging him to oppose the EU’s CBAM plan, calling it “unfair to the US” and a “guise to promote green protectionism.” Although it initially would mainly harm US manufacturers that use inputs like metal, cement, electricity, and fertilizer, the EU will probably expand the scope in the future, placing a “significant burden” on US industry.
More private sector pressure to end the Section 301 tariffs
Unlike the Biden administration so far, the Trump administration was concerned with trade – it just had perverse 17th century mercantilist ideas on the subject. Trade had to be balanced nation by nation, as though New York needed a balance of trade with Florida. So Trump tried to promote exports, especially to China, and restrict imports. The Blinken speech is just one more indication that the Biden administration isn’t really interested, at least for now, in either imports or exports. Thus, the Biden administration hasn’t lifted a finger to drop the Trump Section 301 tariffs against Chinese imports. The tariffs have not just been hurting manufacturers and consumers but also, it’s now apparent, US retailers.
A coalition of seven national associations active in the retail sector filed a “friend of the court” amicus brief in the US Court of International Trade, supporting the challenges filed by thousands of domestic companies to the Section 301 tariffs on Chinese exports. The amicus brief is significant because the associations represent major companies in a key economic sector, one that was hit especially hard by the pandemic, putting further pressure on the administration to lift the tariffs. The seven groups are the National Retail Federation, Retail Litigation Center, American Apparel & Footwear Association, Consumer Technology Association, Footwear Distributors & Retailers of America, Juvenile Products Manufacturers Association, and Toy Association.
Procedures violated
The filing of the brief follows last week’s letter by over 30 of the most prominent US business and industry associations calling on USTR Katherine Tai and Treasury Secretary Janet Yellen to end the China tariffs. It also follows a recent win by the plaintiffs when the Court of International Trade granted a preliminary injunction suspending liquidation of the duties.
The thousands of challenges – now consolidated into a core group – claim that the tariffs on List 3 and List 4A goods violated the timing requirements in the Section 301 statute because these goods were added over a year after President Trump made his original determination under Section 301, and the US Trade Representative office violated the Administrative Procedure Act in how it conducted its investigation. The brief states that “If USTR had satisfied its obligation to allow for meaningful comments from amici and others and had actually considered them, it would have recognized the considerable harm its actions would inflict. The tariffs are a hidden tax on US consumers, hurting domestic producers, retailers, and customers alike. And, as predicted, they have had a significant adverse impact on the US economy.”
In short, the administration’s anti-trade policies, considered in the context of its deficit-exploding green-energy boondoggles, taxes, and inflation, is threatening an economic setback as profound as the foreign policy setback just registered in Kabul.
L.C. reports on trade matters for business as well as Founders Broadsheet.
8/7/2021: Garbled tex in a Biden quote has been corrected. Content was not affected.
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