What to Expect From Trade Policy
A New Administration and a New Congress Come to Washington
President-elect Donald Trump was in Scotland promoting one of his golf properties last June when the results of the United Kingdom referendum on its European Union membership came down.
In contrast to President Obama, who warned Britons that they would have to wait at the end of the line for a U.S. trade agreement if they voted for Brexit, Trump welcomed the results of the referendum and has since promoted the notion of a U.S.-UK trade agreement, a policy that happens to resonate with House Speaker Paul Ryan.
It probably shouldn’t come as a surprise: Trump’s election is seen by many as a reflection on the other side of the Atlantic of the Brexit sentiment. And Trump is on record favoring bilaterial trade deals over multilateral ones.
Trump’s “willingness to ensure trade with the United Kingdom after the country formally withdraws from the EU is one possible bright spot for trade policy,” noted a report from the law firm and lobbying group Squire Patton Boggs, which was released immediately after the election. “President-elect Trump has already expressed a willingness to move forward with U.S.-UK trade discussions, as have some members of Congress,…possibly setting the stage for a new bilateral trade relationship.”
Beyond that, there is not much positive to report. Trump will enter the White House amidst a severe decline in global trade growth. A recent World Trade Organization report indiscated that 2016 marks the slowest pace of trade and output growth since the 2008 financial crisis.
The question becomes if and how the president-elect Trump will work with lawmakers to develop U.S.trade policies that promote economic growth.
President-elect Trump was clear in his opposition to the Trans-Pacific Partnership on the campaign trail. Once settled into office, the Squire report suggests that Trump may move to reopen the TPP for renegotiation. But other TPP members have said they would reject such a move, leaving the alternative that “it simply will not move forward.”
The report also suggests Trump will re-evaluate the Transatlantic Trade and Investment Partnership (TTIP). The Obama Administration and the European Union (EU) put those negotiations on pause after talks stalemated before the November elections.
“President-Elect Trump will also need to consider resuming negotiations with the EU on the TTIP deal,” the report said.
The Obama Administration and EU remained committed to pushing forward with the agreement; now Trump will have to decide what his policy will be. EU Council President Donald Tusk and European Commission President Jean-Claude Juncker wrote Trump after his victory, the report noted, “requested a meeting in the near-term to ‘chart the course’ for U.S.-European relations over the next four years.”
The TTIP deal has its opponents in the EU—who object to the agreement’s investor-state dispute settlement mechanism and the alleged compromise of EU health and safety standards—so that resumed negotiations acould be fraught with peril, if Trump decides to move in that direction. Elections next year in France and Germany further complicate TTIP’s prospects. (EU trade ministers put an EU-Canada trade deal on hold after it was thought to be a done deal.)
Other trade issues that will face the Trump administration include trade enforcement, sanctions policy, and Cuba.
Both candidates in the recent presidential election supported strong trade enforcement, especially in the case of U.S. trade with China. “President-elect Trump is expected to focus on strong trade enforcement,” said the report, “including through new tools to counter anti-dumping/countervailing duty evasion established by the Trade Facilitation and Trade Enforcement Act (TFTEA) passed by Congress earlier this year.” The U.S. will also have to consider granting China market-economy status, which will have an impact on future anti-dumping/countervailing duty investigations.
Trump is expected to review the effectiveness of existing sanctions against Russia over its actions in Ukraine. He is on record criticizing the Iran nuclear deal negotiated by the Obama Administration. The lame-duck session of the 114th Congress is expected to renew the Iran Sanctions Act for ten years before it expires at the end of this year.
On Cuba, the president-elect rejected Obama’s policy of rapprochement with Cuba. Congress remains divided on U.S. policy toward Cuba, including among its Republican majority.
Trump Sees Little Political or Economic Downside to Tariffs