protectionism

Trump Plan For Pharmaceutical Importation A Small Step In The Right Direction

On July 31 Secretary of Health and Humans Services Alex Azar announced a proposal that would allow US pharmacies, distributors, and states to import drugs from Canada that are sold there by US drug makers at prices well below the prices for which they are sold in the U.S. US pharmaceutical companies sell many of their products at much lower prices demanded by Canada’s central health ministry called Health Canada.

Bad Policy Begets Insecurity

The New York Times is reporting a major spike in aggressive cyber attacks by Iran and China against businesses and government agencies in the United States. “[S]ecurity experts believe,” the Times reports, that the renewed cyber attacks “have been energized by President Trump’s withdrawal from the Iran nuclear deal last year and his trade conflicts with China.”

A Contemporary Economist’s Account of the “Crowning Folly of Tariff of 1930”

“[T]here came another folly of government intervention in 1930 transcending all the rest in significance. In a world staggering under a load of international debt which could be carried only if countries under pressure could produce goods and export them to their creditors, we, the great creditor nation of the world, with tariffs already far too high, raised our tariffs again. The Hawley-Smoot Tariff Act of June 1930 was the crowning folly of the who period from 1920 to 1933….

Despite Growing Tensions, There Is Still Scope to Avert a U.S-China Trade War

If 2017 was the year of fiery trade talk, 2018 has been the year of provocative trade actions. During the first four months, President Trump imposed or announced intentions to impose tariffs on thousands of products stemming from five investigations conducted under three different, seldom-used laws. Talk of trade war is rampant and, as May begins, the troops are in formation—a circular formation, but a formation nonetheless! By Memorial Day, it should become much clearer whether their orders will be to shoot, hold fire, or demobilize.

Trump to Impose Restrictions on Imports and Investment from China

This afternoon, for the second time in the space of a month, President Trump is expected to invoke his authority under a rarely used statute to levy restrictions on a vast swath of imports and investment from China. The cause for today’s measures is behavior that the U.S. Trade Representative has characterized as rampant, sustained theft of U.S. intellectual property by Chinese entities and the Chinese government.

Although allegations—and the evidence supporting those allegations—that China routinely transgresses in the realm of intellectual property have been accumulating for many years, it does not follow that the appropriate response is to restrict trade and investment. In fact, the collateral damage inflicted by those restrictions will be widespread.

President Trump’s “remedies” are likely to raise production costs for U.S. businesses, diminish U.S. productivity, squeeze real household incomes, reduce the revenues of U.S. farmers and other export-dependent industries targeted by Chinese retaliation, exacerbate tensions with China and other countries adversely affected by the restrictions, and hasten the demise of the rules-based trading system.

Under the Guise of Security, Trump Sets a Protectionist Fire

Protecting citizens from threats domestic and foreign is the most important function of government.  Among those very threats is a government willing to concoct and aggrandize dangers in order to rationalize abuses of power, which Americans have seen in spades since 9/11. Justifying garden variety protectionism as an imperative of national security is the latest manifestation of this kind of abuse, and it will lead inexorably to a weakening of U.S. security.

The tariffs on imported steel and aluminum that President Trump formalized this afternoon derive, technically, from an investigation conducted by the U.S. Department of Commerce under Section 232 of the Trade Expansion Act of 1962.  The statute authorizes the president to respond to perceived national security threats with trade restrictions. While the theoretical argument to equip government with tools to mitigate or eliminate national security threats by way of trade policy may be reasonable, this specific statute does little to ensure the president conducts a rigorous threat analysis or applies remedies that are proportionate to any identified threat.  There are no benchmarks for what constitutes a national security threat and no limits to how the president can respond. 

In delegating this authority to the president, Congress in 1962 (and subsequently) simply assumed the president would act apolitically and in the best interest of the United States.  The consequences of this defiance of the wisdom of the Founders—this failure to imagine the likes of a President Trump—could be grave.

Distilling the Trade Policy Signal from the Protectionist Noise

It is not surprising that so many Americans believe President Trump has spent the past year erecting tariff walls around the United States. From Trump’s bombastic, anti-trade rhetoric to media’s and social media’s conflation of that rhetoric with real protectionist actions, hardly a day has passed without publication of an analysis or editorial about how especially protectionist this administration has been. The facts are quite different.

Despite promising 45 percent duties on imports from China, 35 percent duties on re-imports from Mexico, tighter restrictions to limit access to U.S. government procurement markets to U.S. firms and workers, requirements that oil pipeline builders use only American-made steel, and more, the Trump administration has not undertaken any of those actions. There has been no discretionary protectionism imposed by President Trump. None. Not yet anyway.

Certainly, President Trump’s instincts are protectionist. He’s already inflicted incalculable damage by withdrawing the United States from the Trans-Pacific Partnership, playing loose with his aggrandized sense of U.S. indispensability to the trading system, and deliberately throwing sand in the gears of the World Trade Organization’s Dispute Settlement Body. His view of trade as a zero-sum contest played between national monoliths (i.e., Team America vs. Team China), where winning means achieving a trade surplus by way of policies that maximize exports and minimize imports, certainly provides fertile ground for protectionism to take root and flourish. But when it comes to actually imposing tariffs or other trade restrictions, so far Trump has been remarkably circumspect. Why?

First of all, the president’s trade policy actions are constrained legally, politically, and practically. The U.S. Constitution gives Congress, not the president, authority to regulate foreign trade. However, at various points and for various reasons over the past century, Congress delegated—through legislation that became statute—some of its authority to the president. For example, the president can impose tariffs without need of congressional action or consent under several different laws.

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