Experts Debate Future of Trade Policy If Trump Wins or Loses
An informal adviser to the Joe Biden for President campaign and a former Trump administration political appointee at the Office of the U.S. Trade Representative disagreed on the success of President Donald Trump's approach to trade and on the right way to take on China's heavy subsidization of industry and intellectual property theft.
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But at a webinar hosted by the Brazilian International Trade Scholars Sept. 10, the two agreed that the U.S. and Europe could be headed toward “a very significant trade war” at the end of this year or early next year.
Jennifer Hillman -- who emphasized she does not speak for the Biden campaign -- said the relationship at the moment is very difficult, citing tariffs on $7.5 billion worth of European imports in retaliation for Airbus subsidies, the soon-arriving tariffs on U.S. exports in retaliation for Boeing subsidies, and that the Organization for Economic Cooperation and Development is unlikely to resolve the disagreement on digital services taxes.
“You have a real witch's brew of issues,” she said, but added it's in everyone's interest to resolve them.
Trade lawyer Stephen Vaughn, former general counsel at USTR under Robert Lighthizer, agreed with Hillman's diagnosis of the problems but said European officials like the trade landscape at present. “They really don’t have much of an incentive to change anything at all,” he said, nor did they take U.S. negotiators seriously during the Obama administration, as the two sides tried to reach a trade deal.
“If there’s a second Trump administration, I would expect very productive conversations with the Europeans,” he said. “Just like we saw with Canada, just like we saw with Mexico, just like we saw with China.”
Hillman, USTR general counsel during the Clinton administration, disputed how successful the conversations were with China that led to the phase one agreement. “Whatever small gains we have gotten from this agreement with China, they came at way, way too high a price,” she said, noting American consumers have been paying tariffs on $360 billion worth of goods and it cost taxpayers $28 billion to compensate farmers for the loss of sales in China caused by the trade war.
Is the goal to create a tariff wall around the U.S., she asked, or to push a full decoupling?
Vaughn replied, “You can always sit there and say we could’ve gotten more.” But, he continued, phase one is more than purchase promises, it's also 100 pages of detailed commitments to make structural changes -- more than the Obama or George W. Bush administrations achieved.
“Apparently she just wants to lift the tariffs,” Vaughn said. “Are you just going to lift them unilaterally as a gift to China? Are you going to try to negotiate and try to get something in exchange for [lifting] them?”
He said China had hoped “they could buy their way out of these [demands] through these purchases,” but the U.S. held firm for structural change. There's still work to do, he acknowledged. “That’s one of the reasons the tariffs are still in place, because the unfair trading practices are still in place.”
He also was dismissive of the argument that convincing China to change would be more effective if the European Union, Japan or others joined the fight. The Obama-Biden administration had eight years to get other countries to work with us, he said. The reason they were so ineffective is that Germany's trading relationship with China is very different from ours, Vaughn said. Why would that change now, he asked.
Hillman said, “I’m not going to be Pollyanna -- oh, yes, this will be a piece of cake.” But, she said, something has to change, either by expanding on the trilateral diplomacy USTR has done on the topic or through the World Trade Organization. The WTO cannot survive if the two biggest trading nations in the world are fighting a trade war, ignoring WTO constraints, she said.
Vaughn said Lighthizer wants revisions in dispute settlement and bound tariff policy at the WTO. The EU and China will be less stubborn in defending the status quo at the WTO in a second Trump administration, Vaughn said.
If Democratic nominee Joe Biden is elected, Hillman said, there will be a “reassessment of whether the Trump administration’s approach to trade has worked.” She described it as trade policy by tweet and by chaos. She said she would expect to see a major shift in the treatment of allies, and cited the reimposition of tariffs on some Canadian aluminum as a trust-violating action. “Our allies simply cannot count on us for anything,” she said.
Biden has said publicly that the U.S. won't be working toward new trade deals “unless and until we get our domestic house in order,” as Hillman put it, with investments in infrastructure and worker training to make American manufacturing more competitive. But, Hillman said, there could be “an immediate willingness to try to address the irritants” with trading partners, and pointed to the recent restriction on Brazilian steel quotas as an example.