President Trump has followed through on his promise to impose significant tariffs on imports of steel (25%) and aluminum (10%). Canada and Mexico were exempted in the context of the ongoing tri-lateral negotiations. As the President put it; “… we’re going to hold off to see “see whether or not we’re making a deal on NAFTA.” The threat of this action and then announcement that the duties will go into force within the next fifteen days has led to swift responses from U.S. trade partners and raises the spectre of a global trade war. The president appears to welcome a trade war as “good (and) easy to win.”
The U.S. Administration is proceeding pursuant to Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) which authorizes the U.S. Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the United States. Although this issue appears to be new, the Department of Commerce initiated the Section 232 investigation in April 2017 in response to an order from the President. It has now completed its work It released its findings last week.
Some may find that Section 232 is part of the Trade Expansion of Act of 1962 to somewhat ironic in that that legislation was passed by Congress in order to give the White House the to negotiate the deep tariff reductions that lead to the successful conclusion of the Kennedy Round of GATT. Ironic in that some commentators fear that we may now be moving back to the time of high tariffs and other trade barriers which helped contribute to the Great Depression of the 1930’s. Section 232 was written in the dark days of the Cold War and was included in the Act in order to give the President the ability to protect the national security of United States by reviewing the effects of imports of any articles in that context. If the Secretary of Commerce finds that imports threatens to impair U.S. national security, the President has broad power to impose trade remedies such as tariffs and quotas. It was inspired by and tailored to the national security exception provided for in GATT Article XXI – a provision which reflected the overriding importance of national security in the post- WW II and emerging Cold War context.
While to concept is not difficult to understand the exception itself and the self-declaratory way it operates have proved to be problematic. This current and the international (and U.S. domestic) outcry case is a good example of why. One the one had if domestic steel and aluminum protection is a valid pretext for the use of this exception why not food security, the protection of a supply management system, telecom markets, cultural products, endangered r species … the list could be infinite . On the other hand, does a nation want to have its view as to want is in its sovereign national security interest subject to review by a third party? Almost three years ago we published an article – GATT Article XXI’s National Security Exception – The Ultimate Trade Policy Conundrum [ http://www.wl-tradelaw.com/?s=virr] – which may be worth reviewing in the of Section 232 which is unique in U.S. trade law. This relatively seldom used provision grants the Executive Branch with wide discretion which appears to be unfettered by direct Congressional approval or oversight nor independent domestic administrative process (e.g. trade tribunal) which are a normal part of the U.S. system of checks and balances and due process.
Over the next few days we will examine this matter in more detail from various points of view and looked at possible implications for the both the NAFTA partnership, the three and the future direction of global trade.