FT premium subscribers can click here to receive Trade Secrets by email.
Hello from the US capital where, in a few hours, Donald Trump will be signing the implementing legislation for the USMCA trade deal with Canada and Mexico.
Now only Ottawa is left to give its parliamentary consent, and it may not come quickly.
But that’s hardly the biggest news in town, between Trump’s unfolding impeachment trial, the upcoming Iowa caucuses and the State of the Union address around the corner next week.
We are also closely watching the health crisis in China, including its impact on global trade and the economy. One key question: will this make it harder for Beijing to meet its purchasing commitments under the phase-one trade deal with the US?
Today, however, we will be examining the ways Trump is trying to expand presidential powers in trade. Our Person in the News today is Luisa María Alcalde, Mexico’s labour secretary, and our chart of the day focuses on US tariffs hitting imports of Chinese auto parts.
How big a slice of US trade power can Donald Trump grab?
On January 19, the Trump administration was facing a legal deadline to give Congress its report about the risks to US national security posed by automotive imports — the basis of its incessant threats to impose tariffs on cars and car parts from the rest of the world.
But to the dismay of many on Capitol Hill, the Department of Justice fired off a letter explaining why the administration would not comply. Claiming the “constitutional doctrine of executive privilege”, Steven Engel, the assistant attorney-general, said the document would remain under wraps.
“The report is a confidential presidential communication, the disclosure of which would risk impairing ongoing diplomatic efforts to address a national security concern,” Engel wrote. Pat Toomey, a Republican senator from Pennsylvania, was fuming. “The department of commerce is wilfully violating federal law,” he said. “This is unacceptable.”
The administration’s invocation of executive privilege has a familiar ring in Washington — Trump’s legal team is frequently using the same argument to defend the president’s communications with Ukrainian officials in the impeachment scandal, and to try to block key witnesses from testifying in the trial.
Nonetheless, to see it brought up in the context of international trade is striking. The US constitution gives Congress the primary role in trade matters, but over time lawmakers have delegated many of those powers to the executive branch and Trump is increasingly testing the limits of how much of that authority he can grab.
Republican senator Pat Toomey accused the US commerce department of ‘wilfully violating federal law’ over the report on security risks © Samuel Corum/Getty
Last Friday he made another legally controversial move: the White House abruptly announced that it was expanding its steel and aluminium tariffs imposed in 2018 on national security grounds to include “derivative” products such as nails. Trade lawyers pointed out that the legal deadline for acting to curb steel imports under section 232 of the Trade Expansion Act of 1962 had long passed.
Administration officials believe they are on firm ground and show no signs of backing down. The legal deadline for imposing car tariffs, for example, passed last November, but commerce secretary Wilbur Ross said that from his perspective the deadline was “imaginary” — implying Trump could act at any time.
Although Toomey and others in Congress are keen to pass legislation to restrain Trump’s authority to impose tariffs on national security grounds, there are no signs of broad support on Capitol Hill.
If a Democrat wins the White House in November, would they want to reel in their own powers to take punitive action on trade? It is far from clear that they would.
The world may have to learn to live with a US president facing far fewer domestic legal constraints on trade than in the past.
Charted waters
Person in the news
© Bloomberg
Who is it?
Luisa María Alcalde, Mexico’s labour secretary
Why are they in the news?
In honour of the US ratification of the USMCA trade deal, we are singling out the woman who is in charge of a key aspect of the deal’s implementation. The agreement hinges on Mexico tightening its labour standards and Alcalde will be in charge of monitoring the reforms, and keeping the US in the loop, and satisfied, with progress.
The reason the labour standards are so important is that Donald Trump is betting they will drive up wages in Mexico, reducing the benefit for US companies to open factories there to produce goods that would be sent back to the US — which in the minds of critics was the biggest flaw in Nafta.
Don’t miss
- Never in my lifetime has a British government been so determined to inflict economic damage on its own people, writes Martin Wolf. The government’s own analysis, published in November 2018, concluded that, under a bare-bones free trade arrangement of the type the government seeks, UK gross domestic product per head is likely to be about 5 per cent smaller than it would otherwise be, over the long term.Read more
- Northern Ireland dominated the first phase of Brexit talks because of bitter divisions over the land border with the Irish Republic. Yet more tension looms in the second phase, this time over new Irish Sea trade checks between Northern Ireland and Britain.Read more
- The “south-south” trade might be expected to become ever more important as an era of structurally weak growth in Europe and Japan prompts faster-growing emerging markets to increasingly trade with each other. But south-south trade accounted for just 41 per cent to 42 per cent of EM exports last year. Read more
Tokyo talk
The best trade stories from the Nikkei Asian Review
- As it chooses a partner to develop a new fighter jet, Japan is caught between the US, its closest ally, and a British proposal led by BAE that would give Tokyo more control over development and costs.
Read more - Japanese retailers have halted operations in China indefinitely as the coronavirus spreads, including 100 Uniqlo stores, 10 Muji branches and 30 Yoshinoya restaurants.
Read more
Source: Economy - ft.com
