Curtis Washington Trade Update – March 2017
This update provides the latest from Washington concerning changes in U.S. trade law
and policy.
USTR’s
Annual
Trade
Policy
Agenda
Provides
Trump Administration’s First Articulation of Trade Priorities
On March 1st USTR released its annual National Trade Policy Agenda and Annual
Report for 2017. This report is required by law to be produced every year by March 1st.
The report is significant because it represents The Trump Administration’s first written
articulation of President Trump’s new trade agenda.
We note that the structure and tone of this report represents a vast departure from past
precedent. With regard to structure, this year’s report contains a preamble the type of
which has not been included in prior years. It is almost certain that this report was
drafted in two parts: The “body” of the report appears to have been drafted well in
advance by professional staff at USTR.
However, the report also includes a seven page policy-focused “Preamble,” which (by all
indications) appears to have been written by the White House and added to the report
just recently. In fact, the Table of Contents and the incorrect page numbering makes it
clear that the Preamble section was later inserted into the report after it was completed.
The new Preamble makes very clear that President Trump desires to adopt a trade policy
very different from that adopted by President Obama and by previous Presidents. Last
year’s report, for example, embraced free trade, multilateral trade deals, existing trade
deals, and “pragmatic multilateralism” under the umbrella of the WTO. In contrast, the
preamble of this year’s report embraces economic nationalism, bilateral trade deals, and
criticizes the WTO and existing trade deals.
The most important passages from the preamble are as follows:

The
report
calls
for
holding
trading
partners
accountable:
“[W]e will hold our trading partners to much higher standards of fairness, and
we will not hesitate to use all possible legal measures in response to trading
partners that continue to engage in unfair activities.”
More broadly, the preamble promises a four-pronged trade policy that would (1) defend
national sovereignty over trade policy, (2) strictly enforce U.S. trade laws, (3) use all
possible sources of leverage to open foreign markets, and (4) negotiate “new and better
trade deals.” Specifically:
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
Defending national sovereignty: The report emphasizes that WTO dispute
settlement decisions are not automatically binding for the USG. The report states
“even if a WTO dispute settlement panel – or the WTO Appellate Body – rules
against the United States, such a ruling does not automatically lead to a change in
U.S. law or practice.” The paper asserts that the Trump Administration “will
aggressively defend American sovereignty over matters of trade policy.”

Enforcing trade remedy laws: The administration promises the robust use of
U.S. trade remedy laws. The document reminds readers that the Department of
Commerce has the right to self-initiate AD/CVD cases if circumstances warrant,
and highlights possible Section 201 (safeguard) and Section 301 investigations.
Highlighting possible Section 301 investigations is particularly noteworthy given
there have not been any Section 301 investigations for 20 years. The
administration says it will “act aggressively” to counter WTO rulings that
undermine the use of any remedy.

Using leverage to open foreign markets: The report says the Trump
Administration could use the threat of cutting off access to the U.S. market unless
other countries open theirs to more U.S. exports. “It is time for a more aggressive
approach,” the document says. “The Trump administration will use all possible
leverage – including, if necessary, applying the principle of reciprocity to
countries that refuse to open their markets – to encourage other countries to give
U.S. producers fair access to their markets. The purpose of this effort is to ensure
more markets are truly open to American goods and services and to enhance,
rather than restrict, global trade and competition.”

Negotiating new and “better” trade deals: The report bashes NAFTA, the
WTO, China’s entry into the WTO, and “a series of trade agreements.”
Essentially for all of these issues the report points to growing trade deficits in
relation to all of these agreements. The solution that the report proposes is to
focus on bilateral negotiations, and “hold our trading partners to higher
standards of fairness,” including using “all possible legal measures.”
Essentially, what the report signals is that the United States will be looking for ways to
more aggressively block imports, will care less about the WTO consistency of doing so,
and will more aggressively seek points of leverage to force changes in foreign market
access issues of importance to U.S. business interests.
Robert Lighthizer, USTR Nominee, Finally Received a
Confirmation Hearing, but Still No Agreement on a Waiver;
New Acting USTR Named:
President Trump’s nominee for U.S. Trade Representative finally received a
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confirmation hearing before the Senate Finance Committee on Tuesday, March 14th.
However, the waiver that is needed to confirm him as the U.S. Trade Representative has
yet to be obtained. Mr. Lighthizer will need the Senate and House to approve of a
waiver because of his past work representing at least one foreign government. We note
that for Charlene Barshefsky, the last USTR for whom a waiver was required, a
confirmation hearing was held on January 29th and President Clinton signed a waiver
into law by March 17th.
On March 3rd there was an interesting twist to this story when White House counsel
Donald McGahn sent a letter on March 3rd to Senate Majority Leader Mitch McConnell
and Finance Chairman Orrin Hatch in which he appeared to question the legality of the
waiver requirement. Specifically, the letter cited and attached a legal opinion from the
legal counsel that advised President Clinton in 1996, the last time a waiver was needed
to confirm a USTR nominee. The cited published opinion argued that the provision in
the Trade Act of 1974, requiring Congress to pass a waiver for a USTR nominee who has
represented a foreign government, violates the Appointments Clause of the
Constitution. McGahn’s letter also noted the Department of Justice’s Office of Legal
Counsel, who wrote the original opinion, continues to hold a view that the provision of
the Trade Act is unconstitutional. However, it is unclear what practical affect this letter
will have, as Senator Hatch as stated that Lighthizer has to have a waiver, and even the
Clinton administration asked for and signed a waiver for Barshefksy.
Meanwhile, a new acting USTR has been named: Stephen Vaughn. Vaughn was a
member of President Trump’s USTR transition team, and was expected to be chosen for
the general counsel’s job in tandem with Robert Lighthizer’s confirmation as USTR 1.
Vaughn is a Partner in the International Trade Group at the law firm of King & Spalding
LLP, where he has represented the U.S. steel industry. Before King & Spaulding,
Vaughn was at Skadden Arps where he worked closely with Trump’s USTR nominee,
Robert Lighthizer.
Commerce Secretary Wilbur Ross Indicates Movement on NAFTA
Renegotiation; US Mulls Separate Bilateral Deals
On March 10th, Commerce Secretary Wilbur Ross and Mexican Economy Minister
Ildefonso Guajardo Villarreal held a joint press conference where they discussed the
NAFTA renegotiation. After the meeting, Ross told reporters that he anticipated that
the White House will issue the legally required notification letter to Congress very soon,
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Jenny Leonard, Vaughn Named Acting U.S. Trade Representative and General Counsel,
INSIDE U.S. TRADE (March 3, 2017) https://insidetrade.com/daily-news/vaughn-named-acting-ustrade-representative-and-general-counsel.
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possibly between this week and next. Ross also stated that it was his impression that
“real” NAFTA negotiations likely won’t begin until the “latter part” of this year.
Ross also explained that the discussions on NAFTA will lead either to “two parallel
bilateral agreements with symmetrical provisions or one new trilateral.” Such Ross
statement echoes multiple comments by both President Trump and National Trade
Council Director Peter Navarro that bilateral trade negotiations are preferred to
enhance the leverage of the United States.
Key Members of Congress Throw Cold Water on Peter Navarro’s
Suggestion to Tie Trade Agreements to Deficit Reduction
In a meeting last month with key members of congressional trade committees, National
Trade Council Director Peter Navarro suggested that trade agreements should be
automatically renegotiated if the U.S. begins to run trade deficits. Peter Navarro
reiterated this idea in follow-up speeches to business groups in early March.
However, this past week, key members of congressional trade committees rejected this
idea. Most notably, Senate Finance Committee Chairman Orrin Hatch (R-UT)
commented that “I don’t think we’re in the business of forcing other countries to buy our
products.” In addition to Hatch, House Ways & Means ranking member Richard Neal
(D-MA) and former ranking member Sander Levin (D-MI) stated that they are also
uncomfortable with Navarro’s proposal.
Peter Navarro Attempts to Influence Commerce AD Decision
On March 8th National Trade Council Director Peter Navarro sent a memorandum to
the Commerce Department that sought to influence the Commerce Department’s final
determination in an AD case concerning Oil Country Tubular Goods (OCTG) from
Korea. The letter indicated support for the U.S. petitioner’s argument that the
Commerce Department should undertake adjustments to the production costs reported
by the Korean producer exporters because of alleged “particular market situations.”
Peter Navarro’s written communication to the Commerce Department was very unusual
because (a) the Commerce Department had just made a preliminary decision on this
very issue just a few weeks earlier and (b) the Commerce Department is an Executive
Branch Agency under the direction of the President. Stated differently, Peter Navarro’s
letter is akin to one Executive Branch Agency publicly disagreeing with the factual and
legal conclusions of another Executive Branch agency. While White House agencies
have in the past sought to influence decisions by Executive Branch Departments, they
have customarily done so informally, rather than by a public letter.
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