More on the Rhetoric and Reality of Trump’s Trade Policy

If you did not see President Trump’s press conference yesterday, you might want to watch.  It was quite the spectacle.  His statements on “Buy America” issues may not have been the highlight of the event, but they raise some interesting questions.  Here’s what he said:

We have also taken steps to begin construction of the Keystone Pipeline and Dakota Access Pipelines. Thousands and thousands of jobs, and put new buy American measures in place to require American steel for American pipelines. In other words, they build a pipeline in this country, and we use the powers of government to make that pipeline happen, we want them to use American steel. And they are willing to do that, but nobody ever asked before I came along. Even this order was drawn and they didn’t say that.

… And I’m reading the order, I’m saying, why aren’t we using American steel? And they said, that’s a good idea, we put it in. 

I mentioned this issue on this blog a couple weeks ago.  As I pointed out then, Trump is saying that he put measures in place to require pipeline companies to use American steel, but the Presidential memo he signed does not, in fact, do this.  Instead, it instructs the Secretary of Commerce, as part of an inter-agency consultation, to “develop a plan” under which pipelines “use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.”

This is a much more limited approach than what he is publicly suggesting. Let’s look at how this general policy is likely to work in practice, if applied. Take the example of the Keystone XL pipeline. Here’s what a Reuters article had to say about this pipeline’s steel:

When U.S. President Donald Trump signed orders to revive two controversial energy pipeline projects this week, he pledged to require new pipelines to use American-made steel, a gesture to workers in the hard-hit industry who helped propel him to power.

But U.S. steelmakers will receive negligible benefit from the multi-billion dollar Keystone XL project, one of the two projects Trump ordered to proceed, because they have limited ability to meet the stringent materials requirements for the TransCanada line.

Meanwhile, in the quiet prairie town of Gascoyne, North Dakota, deer wander among gleaming stacks of steel tubing intended for the Keystone pipeline. The company bought the material years ago when the U.S. debate was raging over whether the project should go ahead.

About half of the pipe was forged in Arkansas, at a plant owned by India’s Welspun. About a quarter came from a Russian-owned plant in the Canadian province of Saskatchewan, and the rest came from Italy and India.

So according to this article, while some of the steel for the pipeline is from U.S. sources, U.S. steelmakers could not produce all of the steel that was needed, and therefore TransCanada had to buy it from foreign sources.  As a result, using exclusively American steel was not possible here.  This may violate Trump’s public pronouncements, but according to the terms of the Presidential memo (use American inputs “to the maximum extent possible”), it is likely that the Keystone XL pipeline would be allowed to use this foreign steel.

With all this in mind, where is U.S. trade policy headed?  Is it going to reflect the declarations of policy that Trump makes at press conferences, which take economic nationalism further than we have seen it in a long time?  Or is it going to be more like the carefully worded memos that someone who knows a bit about trade law and policy is writing and having Trump sign, which only go a little beyond our existing protectionism?  There’s a large gap between these two.  In the coming months, we will see who is hired for key positions at the main trade agencies, and we will try to guide them away from the protectionist extreme.