Leibowitz on Trade: China, NAFTA, Autos in Play

• The White House also announced investment restrictions on Chinese companies and continued pursuit of a WTO case against China on compulsory licensing of intellectual property. At least to that extent, the administration believes in the WTO as a forum for adjudicating disputes.

• The Commerce Department released a Federal Register notice on the newly initiated national security investigation on imports of automobiles and automotive parts. The notice announces a public hearing on July 19 and 20. Requests to appear at the hearing must be filed by June 22, together with a summary of the proposed testimony. Rebuttal comments are due by July 6. Oral testimony will be limited to five minutes. The proceeding will be similar to the steel and aluminum national security proceedings conducted last year. One difference—there is no provision for post-hearing public comments.

A key part of the investigation will involve automotive parts. They will be covered by the investigation, as well as passenger cars, SUVs, vans and light trucks. If substantial tariffs are imposed on auto parts, the domestic parts industry could be hurt by product shifting of automotive assembly overseas.

• This Friday, the steel and aluminum tariffs will take effect for imports from all countries except Argentina, Australia, Brazil and South Korea. The European Union, Canada and Mexico are looking to get a renewed exemption, but there are few voices that confidently expect this to happen by Friday.

Steel product exclusion filings (including exclusion requests, objections and general comments) have now exceeded 10,000. Of these, 6,530 have been posted online. The comment period has closed on 653 requests. Many, but by no means all, have received objections. Aluminum exclusion filings total 1,347, with 813 posted online. Of the requests posted, 36 have passed the comment deadline. There are many objections, but not all requests have received objections. Still no approvals or rejections.

• NAFTA negotiations have been stalled for weeks. Canadian Trade Minister Chrystia Freeland is in Washington today and tomorrow, and will meet with U.S. Trade Representative Robert Lighthizer. The three NAFTA parties are, according to Ambassador Lighthizer, nowhere close to a deal. Mexican Economy Minister Ildefonso Guajardo will not be in Washington this week, but in Paris for OECD meetings. Perhaps Mexico is exploring other trade relationships.

What Does All This Mean?

The administration clearly sees an opportunity to apply tariffs to a wide variety of imported goods. They see the national security theory as an ideal way to impose tariffs. Under their theory, all WTO members are free to impose trade barriers without WTO scrutiny if they utter the words “national security.”

The initiation of the automotive investigation is a clear indication that the national security issue is very broad indeed. These investigations could proliferate endlessly. In the U.S. system, only Congress or the courts could place limits on this strategy. Clearly, the administration will not willingly place limits on itself in the trade area.

The tariffs on China, assuming they actually take effect by the end of June, provide another means of imposing new and extensive tariffs. Section 301 was widely viewed as a trade remedy subject to WTO scrutiny. Under that theory, a WTO case would be necessary to determine whether another country was violating its trade commitments. The Trump administration is taking the position that WTO cases are not necessary, with the possible exception of intellectual property. The 25 percent tariffs will take effect before any WTO decisions are made about intellectual property or technology transfer. China will certainly bring cases to challenge this view.

NAFTA does not appear to be getting done. The parties differ on what a new NAFTA would look like. Therefore, agreement is not likely any time soon. Mexican elections will take place in five weeks, and the congressional calendar in Washington is already extremely tight for a vote before the November elections. The key issue is whether President Trump will terminate U.S. membership in NAFTA or continue with the existing deal. Termination could cause a constitutional crisis, because it is far from clear whether the president has the legal authority to terminate U.S. membership without congressional consent.

All these initiatives and others (to wit the Iran deal, North Korean summit, etc.) have something in common—fundamentally changing, if not destroying, the postwar economic order. It could be that our allies will cave in under the pressure and negotiated trade deals that favor U.S. interests (as the president perceives them). It could also be that our trading partners will pursue areas of mutual interest with non-U.S. partners (such as the Trans Pacific Partnership) and retaliate against unilateral U.S. actions.

Lewis Leibowitz

SMU Note: Lewis Leibowitz will be the first speaker at this year’s SMU Steel Summit Conference. He will be answering questions about Section 232, tariffs, exclusions (country and product), AD/CVD status and circumvention as well as anything else trade related that pops up between now and August 27. You can find information about our conference on our website: www.SteelMarketUpdate.com/events/steel-summit or by contacting our office at 800-432-3475.

Here is the contact information for Lewis:

The Law Office of Lewis E. Leibowitz
1400 16th Street, N.W.
Suite 350
Washington, D.C. 20036

Phone:(202) 776-1142
Fax:(202) 861-2924
Cell:(202) 250-1551

www.lellawoffice.com