The pandemic caused extreme economic disruptions and 2020 saw the biggest decline in world merchandise trade since 2009. Yet in 2021, merchandise trade bounced back increasing an estimated 22.4 percent compared to 2020. This remarkable recovery is a testament to the continued strength of the global economy, especially given continued COVID-19 concerns and myriad trade restrictions, particularly U.S. tariffs, that remain in place.
Reflecting on 2021, the Cato trade team looks back at the Biden administration’s trade policy accomplishments. Unfortunately, the administration made little progress—even worsening the situation in some cases—and is maintaining many of its predecessor’s policies. Thus, our 2022 wish list reiterates many of the wishes from last year’s list.
Limit Executive Branch Trade Powers
The U.S. Constitution gives Congress the power to regulate international commerce, including the imposition of tariffs and other taxes, but the legislative branch has delegated vast swaths of its trade-related powers to the president through several laws. Some of these statutes circumscribe the president’s authority, but the Trump years saw increasing recourse to vague Cold War-era statutes that gave the president significant discretion in taking trade actions without congressional oversight. And President Biden appears in no rush to change course.
As Cato’s Scott Lincicome and Inu Manak wrote last year, for example, Section 232 of the Trade Expansion Act of 1962 was used to impose “national security” tariffs on steel and aluminum (25% and 10%, respectively) imports with little economic or geopolitical justification. President Biden could have lifted these tariffs upon taking office but has not done so. Instead, he has negotiated a managed trade arrangement with the European Union to turn those tariffs into tariff-rate quotas that allow an historically low volume of metal to enter duty-free and remaining volumes to face tariffs. As Lincicome and Manak noted, this deal violates both domestic and international trade rules and, given its terms and complexity, may provide little relief for American manufacturers who rely on readily accessible, affordable metals.
The Biden administration has also continued the Trump administration’s policy under Section 301 of the Trade Act of 1974 to impose tariffs on hundreds of millions of dollars in Chinese imports—another clear abuse of the broad procedural and substantive discretion that Congress granted to the president under the law, as well as its textual ambiguity. As Lincicome showed last year, these measures have imposed significant economic costs while failing to achieve their geopolitical objectives.
Congress should take action to limit procedural loopholes in these laws and restore some balance between the executive and legislative branches on tariff and trade policy.
Return to Open Markets and Economic Confidence
While certainly no angel on trade, the United States did use to champion liberalization and lead multilateral and regional trade agreement negotiations. Today, however, U.S. policymakers are increasingly moving away from trade liberalization in support of industrial policy steeped in nostalgia and economic insecurity. The Sections 301 and 232 tariffs and current proposals in Congress to subsidize domestic production of semiconductors and other “critical technologies” are indicative of this move toward protectionism, as is the U.S. government’s expanded use of trade remedies (antidumping, countervailing duty, and safeguards) to restrict imports from certain countries. New provisions to these laws have, in fact, made it even easier for the Commerce Department to abuse its discretion and riddle American businesses and consumers with higher taxes—even for critical goods like construction materials (especially lumber) and intermodal chassis in a time of national emergency.
Meanwhile, a long list of tariff and non-tariff barriers on basic necessities—food, clothing, footwear, etc.—and industrial inputs pre-date the Trump administration and have avoided scrutiny for far too long. For example, marketing orders on produce distort prices and reduce the variety of fruits and vegetables. A wide range of other tariffs, such as 48 percent tariffs on shoes (including ones for children), also remain in effect, forcing American families to pay more for basic necessities such as food and clothing.
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