Mon, Mar 12, 2018 - Page 6 News List

Walter Lohman On Taiwan: Asia and the future of American trade leadership

This week, President Donald Trump announced the imposition of new tariffs on steel and aluminum imports. In the 15 days before they are set to take effect, Washington will be in a furor as members of Congress, American security allies, trading partners and industry groups from the Wheat Growers to the Chemistry Council try to change his mind. They will have the facts on their side.

The President’s actions follow on two reports by the US Department of Commerce that the “quantities and circumstances of steel and aluminum imports threaten to impair the national security of the United States.” Sounds ominous.

The case they make, however, is extremely suspect.

In both reports, in fact, Commerce makes clear that there is far more than sufficient domestic production to meet America’s defense needs. In the case of steel, the Department of Defense (DoD) requires only about three percent of US steel production. The precise “small percentage” of domestic aluminum needed is redacted in its report, but a recent DoD memo opposing a broad swipe at imports estimates that also at three percent.

This is not the only problem with the case for tariffs. Even if one were to set aside the matter of already sufficient capacity, roughly half of what America does import comes from its security treaty allies. These are countries that the United States is sworn to defend in the event of war. Trump has decided, for now, to exempt Canada from the tariffs, but it is no less difficult to imagine what could motivate other allies, like Japan and South Korea, to hobble the US military.

Similar logic applies to Taiwan. It also provides the US market with steel.

The closest thing to an adversary among the top ten sources of America’s imported steel is Russia, which constitutes six percent. China, which the Trump administration has rightly prioritized as a strategic challenge, sends the US much less than that. Even in the case of aluminum, Canada alone ships more than twice as much to the US as Russia and China combined.

The security crisis projected by the Commerce Department would have to assume a catastrophic drop in America’s domestic production and key allies and partners (like Taiwan) abandoning interest in their own national security.

To say that this scenario is implausible is an understatement.

So if security concerns are not actually driving the Commerce Department’s recommendations, what is? The answer represents a potential sea change in American trade policy, a new approach that — if fully carried out — will profoundly affect America’s influence in Asia.

Over the last year, the Trump Administration has been laying the groundwork for a policy of tightening international access to the American market to the benefit of selected, well-connected businesses. It has imposed “safeguards” against imports of washing machines and solar panels. It prides itself on the massive increase in anti-dumping and countervailing duties (AD/CVD) cases brought against foreign suppliers in the administration’s first year. And many are predicting steep tariffs in retaliation for very real Chinese violation of intellectual property rights. In the meantime, USTR is in the midst of contentious efforts to renegotiate — and perhaps withdraw from — America’s two largest trade agreements, NAFTA and the US-Korea Free Trade Agreement.

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