July 15, 2020 9:50PM

Congress Acquiesces to Tariffs by Fiat

This post is to call your attention to a brand new paper of mine titled “Tariffs by Fiat: The Widening Chasm between U.S. Antidumping Policy and the Rule of Law.” First, some background.

Article 1, Section 8 of the U.S. Constitution gives Congress authority “to lay and collect Taxes, Duties, Imposts and Excises…and to regulate commerce with foreign nations.” From the founding of the republic until the early 20th century, the separation of powers with respect to trade policy held up reasonably well. Congress controlled trade policy—mostly through tariff bills—and the president was consistently and properly deferential.

The changing demands of a rapidly industrializing and expanding 20th century economy, including greater commercial interest in foreign markets, encouraged Congress to write and pass new laws both to facilitate and frustrate trade. Of course, new laws meant an expanded administrative role for the executive branch.

Especially following World War II, as tariffs were lowered and international trade increased, Congress wanted to be sure domestic industries had recourse to new tariffs under certain circumstances, such as to respond to so‐​called unfairly traded imports (antidumping and countervailing duty laws), a surge of imports that might cause serious injury to a domestic industry (Section 201 of the Trade Act of 1974), unfair foreign practices abroad that impeded U.S. trade (Section 301 of the Trade Act of 1974), and threats to national security (Section 232 of the Trade Expansion Act of 1962 and the International Emergency Economic Powers Act of 1977), to name some.

The president was widely perceived as being more capable of responding with dispatch to these urgent matters, less prone than Congress to parochial or reactionary protectionism, and more likely to be mindful of the national interest. So, the legislative branch acquiesced in this larger role for the executive.

Under most of those laws, Congress imposed conditions to circumscribe the president’s actions—requirements of affirmative evidence of injury caused by import surges; time limits after which measures would expire; limits to the types and magnitudes of the remedies imposed; judicial review, etc. The national security laws came, as it turns out, without many conditions or constraints placed on the president.

Last week I moderated a discussion about the erosion of the separation of powers on trade policy. My guests were two of the attorneys who, on behalf of the American Institute for International Steel, challenged the constitutionality of Section 232 of the Trade Act of 1962, which gives the president authority to restrict trade in response to a perceived threat to national security. Infamously, President Trump invoked this law to impose and maintain (to this day) tariffs on imported steel and aluminum, and he has threatened to impose tariffs on automobiles under the same authorities.

The plaintiffs in the case, which ended with the Supreme Court declining to hear the appeal late last month, wrote a compelling brief (as did Cato’s Ilya Shapiro and Will Yeatman) arguing that Section 232, by giving the president carte blanche to define a national security threat and to respond to that threat however he sees fit, amounts to an unconstitutional delegation of legislative authority. The law, they argued, includes no “intelligible principle” to guide the president’s actions, which courts have looked for in deciding whether the non‐​delegation doctrine has been violated.

Unfortunately, even when laws are constitutional, they can contain unwise, vague, lazy, or deferential language that often bestows extraordinary amounts of discretion on the administering agencies. The courts, then, can do very little to rein in all but the most egregious abuses of that discretion because of the primacy of legal precedents that give vast latitude to agencies to administer reasonable interpretations of the law. The courts are not to blame for executive abuses of the trade laws; Congress is.

That brings us to the next example, which concerns recent changes to the U.S. antidumping law. In this new paper, I provide some background about the evolution of U.S. antidumping policy before homing in on some egregious changes made to the law in 2015, especially those concerning what the Commerce Department can do when it finds a so‐​called “Particular Market Situation” (PMS). The antidumping law has long afforded Commerce vast discretion over consequential, in‐​case decision‐​making, even though (as I note in the paper) the Commerce Department also “counsel[s] U.S. industries on how to petition the U.S. government to seek relief from injurious and unfairly traded imports.” There is a clear conflict of interest.

The U.S. courts have been helpful (to an extent) at curbing the government’s worst abuses of that discretion, but the new provisions under the statute seem to give Commerce seemingly endless latitude to reject record information submitted by respondents without having to meet even the slightest conditions. This will prove a formidable barrier to judicial review of bogus, politically‐​driven administrative decisions in antidumping cases going forward. Ultimately, a braver Congress than we have had for many years will have to do its part to rein in the powers it has unwisely (and, possibly, unconstitutionally) bestowed upon the president.

The PMS issue is raising its ugly head in other countries too, as other governments have been building out and weaponizing their own antidumping rules. As predicted, U.S. exporters increasingly are getting ensnared in those “coming home to roost” rules. A World Trade Organization panel even ruled against Australia in December 2019 in a case in which it invoked PMS to cook the books and generate higher dumping margins on Indonesian exporters of A4 Copy Paper. My paper does not get into the WTO issues mostly because of space constraints, but also because in the current international trade environment, I fear a WTO ruling against a member’s antidumping practice will have the perverse effect of warming certain U.S. policymakers to that practice. It would have the opposite effect I am hoping my paper will inspire.

Ultimately, we will need a Congress that is braver, more committed to preserving the separation of powers, and more willing to assert its Article I authorities than we have had in many, many years.