Beneath the headlines of renegotiating NAFTA and torpedoing the Trans-Pacific Partnership, President-elect Donald Trump has often spoken about improving trade law enforcement, especially against China. On the campaign trail, he beat that drum in pretty much the same rhythm as Hillary Clinton.
While Clinton specifically proposed a new trade “prosecutor” and to triple the enforcement staff at office of the U.S. Trade Representative, the Trump campaign promised to use “every lawful presidential power to remedy trade disputes if China does not stop its illegal activities” and to bring new trade law cases in this country and at the World Trade Organization.
Trump is no stranger to litigation, but how can he and his administration execute on this promise?
Today, the main forum for enforcement of trade rules is the “dispute settlement” process at the World Trade Organization. Adjudicated by neutral legal experts, these WTO decisions have real force because a country that ignores an adverse decision can lose trade advantages, hurting its own exports.
Since the WTO’s founding in 1994, there have been more than 500 dispute settlement cases. In this system, America is already the No. 1 litigant: the U.S. has initiated 111 cases and has been a defendant in 127. In other words, almost half of all disputes have involved the U.S. as either complainant or respondent. When it comes to advocating our view of everyone’s trade obligations, the U.S. is hardly a wallflower.
That doesn’t mean there isn’t more work to be done – there certainly is. For example, of the 500-plus WTO disputes, China has been the respondent in only 37 cases. That surely under-represents how the Chinese often bend and sometimes ignore trade rules.
So, how do we presently decide to bring a WTO case? Almost every case starts with U.S. companies complaining about market access in other countries, heavily subsidized imports or other actions that seem to tilt competition unfairly. Then the administration needs to be convinced that there is a strong legal case, i.e., that the other country is not meeting its treaty obligations to the U.S.
That second part is easier said than done: It usually requires complex, detailed knowledge of the law, regulations and/or administrative practices in the other country. Sometimes it requires evidence of informal business practices; sometimes it requires statistics on local market conditions. In short, the industry concerned usually has to have made a substantial investment gathering evidence before the problem even gets serious consideration in Washington.
The downsides in this approach are evident. First, since our government brings a WTO case only when some Americans complain loudly enough, it’s all ad hoc, and we have never developed a systematic litigation strategy to help American industries and American workers. Contrast this with how the NAACP developed a strategy to attack legalized racism in our country.
Over the course of decades, Charles Hamilton Houston and Thurgood Marshall attacked segregation step by step, precedent by precedent, until they finally achieved desegregation in Brown v. Board of Education. We need that kind of approach to trade law. We should develop a set of strategies for how we want trade law to develop in major areas of concern: service industries, intellectual property, labor standards, environmental protection, state industries and subsidies, and “rules of origin.” Then, we have to commit ourselves to a long, step-by-step path to favorable outcomes in each area.
Second, such a systematic program to develop and enforce the trade rules won’t always be what “corporate America” wants. Often our multinational companies do not want the U.S. government to bring WTO cases for fear of subtle or not-so-subtle retaliation in countries where they have big investments.
Today, GM builds more cars in China than the U.S.; Apple sells more iPhones in Asia than in the U.S.; and Hollywood gets more than 70 percent of its annual box office from ticket sales abroad. When the post-World War II trade system started, perhaps “what (was) good for General Motors (was) good for the country,” but that is no longer clearly the case.
That means a truly muscular trade enforcement agenda has to think not in terms of the “corporate America” but in terms of “America Inc.” – in the sense that we used to talk about “Japan Inc.” as a set of policy choices by Japanese officials that put Japanese manufacturing, Japanese employment and Japanese wealth first.
Less reliance on input from corporate America means President Trump will need to expand the USTR enforcement staff (as Clinton proposed) and make the components of the U.S. government that monitor foreign business environments – agencies within the Commerce and State departments – do a better job (something so wonkish not even a Clinton policy paper mentioned it).
Lastly – and most controversially – when we see clear violations of the WTO rules, the U.S. should respond more immediately with countermeasures. A real problem of the international system is that WTO decisions only require prospective changes and never compensate countries for market share they have lost. If the U.S. took countermeasures immediately – something that should be in the wide tariff discretion of the president – behavior in some of our trading partners might change.
In all this we should remember that the U.S. has already been the defendant in more WTO actions than we have initiated. The more we take countries to task for their trade policies, the more ours will also be subject to scrutiny. But then Trump is no stranger to litigation as a defendant, either.
Justin Hughes teaches international trade and intellectual property courses at Loyola Law School, Los Angeles. He served in the Obama administration from 2009 to 2013 as senior adviser to the undersecretary of commerce. Contact him at firstname.lastname@example.org.