201803

March 2, 2018 11:22AM

Putin’s Shiny New Missile Threatens Nonproliferation

Vladimir Putin's public speech Thursday night hit many of its objectives: a memorable branding moment for a politician heading into an election this month, boasted a new image of Russia after years of economic stagnation and military decline, and debuted a shiny new missile to emphasize that point. 

The new nuclear-powered cruise missile could have serious implications for U.S.-Russia relations by complicating the bilateral New START treaty that intended to downsize the world's two largest nuclear arsenals. The state of American nonproliferation efforts seems to be at a low in recent history. President Trump frequently threatens to rip up the Iran Nuclear Deal and antagonizes North Korea, another rogue nuclear power. Hopefully policymakers can resist using this new Russian missile as an excuse to undercut New START and cease advocating for nonproliferation on the global stage.

For a full run-down, read my analysis published yesterday at Reuters.

March 1, 2018 3:10PM

Yet Another Study Points to The Potential of Cannabis for Reducing Opioid Use

The Minnesota Department of Health reported today that 42 percent of the more than 2,000 first-time medicinal marijuana users with intractable pain enrolled in its research study obtained significant pain relief. In announcing the results, the Minnesota Health Commissioner said, “We need additional and more rigorous study, but these results are clinically significant and promising for both pain treatment and reducing opioid dependence.”

The study found that 63 percent of the patients who were taking opioids for their chronic pain when they started taking cannabis were able to reduce or eliminate their opioid use after six months.  Some patients were also able to reduce their use of other pain medicines, as well as benzodiazepines.

This is not the first study to point to the potential of cannabis in reducing opioid use. A study reported in JAMA in 2014 by researchers looked at all 50 states from 1999-2010 and found opioid overdose rates approximately 25 percent lower in states with legalized medicinal marijuana during that time period. A RAND study published in the March 2018 Journal of Health Economics reveals similar findings. And researchers at the University of Michigan reported in 2016 64 percent of chronic pain patients were able to reduce their use of opioids. Researchers at the University of California at Berkeley reported last June that 97 percent of the chronic pain patients they studied were able to reduce their opioid use.

Opponents of cannabis, including Attorney General Sessions, believe it is a “gateway” drug to more potent and dangerous drugs. But this is not born out by the evidence. Since cannabis was legalized for recreational use in Colorado and Oregon, opioid overdose rates have actually come down, making a case that  cannabis is an “off-ramp,” not a “gateway.”

If anything, cannabis may have potential benefits as a substitute for opioids in the management of pain. And if the federal prohibition of cannabis is lifted then research can be more easily done, and we can find out if cannabis has a role to play in medication-assisted treatment for opioid addiction. If politicians in Washington want to do something constructive to address the opioid overdose problem, then lifting the federal ban and allowing states to go their own way would be a positive move.

March 1, 2018 10:05AM

Trump’s Steel and Aluminum Tariffs Will Open Pandora’s Box

Reports are circulating that President Trump is convening a gathering at the White House this morning to announce, in the interest of national security, his plan to impose restrictions on imported steel and aluminum.  Though the details of his plan remain unclear as of this moment, Commerce Department reports published last month concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the president can more or less do whatever he wants here.

In Forbes this morning, I go into some detail about what could happen and what’s at stake:

Media report that President Trump intends to announce import restrictions on steel and aluminum at a press conference or signing ceremony today. Where exactly that leads is anyone’s guess, but it is certain to be a place less stable, less predictable, and less cooperative than the place we are right now.

In reports published last month, the U.S. Department of Commerce concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president. Those reports were the culmination of two investigations conducted under Section 232 of the Trade Expansion Act of 1962, a seldom used statute that authorizes the president to respond to perceived national security threats with trade restrictions.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the supposed “cure” of these restrictions would prove far worse than the disease.

According to the Commerce Department reports, trade restrictions would induce U.S. producers to build and use more domestic capacity, which would reduce U.S. dependence on foreign—potentially hostile—sources of supply of materials deemed critical to national defense.  Oddly, the reports say nothing about the adverse effects of steel and aluminum restrictions on the U.S. producers who purchase those basic inputs to manufacture the very materials deemed critical to national defense.  Those U.S. producers would be weakened by trade restrictions, exposing them to competition from foreign rivals with lower production costs capable of offering lower prices in the U.S. market.

Of course, the problems wouldn’t end there. Any U.S. decision to restrict imports based on the argument that an abundance of low-priced raw materials from a diversity of sources somehow threatens national security would lower the bar so significantly as to invite every other member of the World Trade Organization to invoke national security to protect favored industries.

Under WTO rules dating back to the establishment of the General Agreement on Tariffs and Trade in 1947, member governments are permitted to raise trade barriers for purposes of protecting national security without obligating them to demonstrate that their rationale conforms to some agreed definition of national security or national security threat.  While the GATT’s original contracting parties were well aware of the importance of trade openness to the goals of economic growth and goodwill among nations, they were also in agreement that attending to the security and protection of their citizens was government’s primary obligation. So, Article XXI of the GATT—the “National Security Exception”—was weaved into the agreement with the expectation that it would not be invoked without the most compelling of reasons.  So far those expectations have been met.

Should President Trump deviate from the norm and impose restrictions on imported steel or aluminum under Section 232, the presumption is that—if challenged by another member as a WTO violation—the United States would invoke its privileges under Article XXI.  However, most international trade law scholars believe the likelihood of the WTO Dispute Settlement Body issuing a rebuke of the U.S. government’s rationale for concluding that its national security is threatened or impaired is pretty close to zero.  The DSB is already deferential when facts aren’t clearly established or when obligations aren’t clearly delineated.  But on matters of national security, which necessarily require subjective risk assessments and nuanced analyses of murky gray areas, maximal deference would likely prevail.

Trade partners ill-affected by the measures could invoke GATT Article XXIII, claiming that the benefits due to them under the agreement have been “nullified or impaired,” but the lengthy duration and uncertain outcome of that approach might encourage members to invoke their own national security rationales to block certain imports.  Beijing certainly sees its dependence on foreign semiconductors and other technologies to represent a threat to China’s national security.  Trump’s restrictions on steel or aluminum could give license to the Chinese government to harass, compel technology transfer, and discriminate against foreign companies on a grand scale under the rubric of protecting national security.  That, in turn, could subvert any solutions that may be incubating as a result of the U.S. Section 301 investigation into Chinese technology and intellectual property policies.

Likewise, the 232 remedies could give India’s protectionist government justification for quotas on imported wheat and rice in the name of food security.  Brussels might respond by adopting rigid restrictions on data flows in the name of information security, kneecapping U.S. companies like Google and Amazon.

Recently, Beijing initiated investigations into imports of U.S. sorghum under China’s antidumping and countervailing duty laws. Although use of those laws is permissible under WTO rules, provided that they are written and implemented in accordance with those WTO rules, it is widely assumed that the cases against sorghum amount to de facto retaliation for the recent U.S. decision to impose tariffs on solar panel components under the U.S. Safeguard law.  American soy exports could be targeted next.  As a major importer of agricultural products and among the largest export markets for many American commodities, U.S. farmers and agribusinesses could suffer the brunt of any Chinese retaliation.

Alternatively, some governments might choose to bypass the formalities and go straight to retaliation against U.S. exporters. The Europeans might target citrus from Florida, tobacco from Kentucky, textiles from North Carolina, or dairy from Wisconsin in order to arouse strategic U.S. opposition to the steel and aluminum restrictions.

How government’s react—and what happens to the trading system as a result—will largely be determined by the nature, duration, and magnitude of the U.S. remedies.  The more modest the restrictions, the less the collateral damage.  But the bottom line is that once Trump opens Pandora’s Box by rationalizing protectionism as a national security imperative, the durability of the rules based trading system will be tested like never before, with global economic security hanging in the balance.