Trump’s war on offshoring jobs easier said than done

US maybe exposed to trade retaliation

In his high-profile battle against offshoring US jobs, President-elect Donald Trump has threatened Mexico, China and multinational corporations with punitive tariffs and retaliation.

But to make good on such threats, Trump will have a narrow set of legal tools at his disposal and risks exposing the United States to retaliation. Swept into the White House in part on a promise of bringing jobs back to the United States, the president-elect this week reiterated his vow to slap a “major border tax” on companies that use cheap Mexican labor to export to the US market.

But can he really do this? The US Constitution gives Congress the authority to impose taxes and regulate foreign commerce but it grants the president the power to negotiate international trade pacts, which still are subject to approval by lawmakers. Over the 20th century, however, Congress significantly extended the president’s authority in matters of trade.

Broad powers from Congress

“Current US laws give the president an enormous control over restricting trade,” said Gary Hufbauer, a former senior Treasury Department official in charge of trade poli- cy who is now at the Peterson Institute in Washington. Adopted in 1917, the Trading with the Enemy Act allows the president to suspend imports from countries during periods of conflict. President Franklin Roosevelt used the law in 1941 to freeze trade with Japan and some analysts say Trump could try to use it today, on the basis of continuing hostilities in Iraq and Afghanistan.

Other retaliatory measures could be on surer legal footing. The 1974 Trade Act allows the executive branch to impose duties on a country’s imports if its trade practices are “unreasonable,” or to suspend a treaty if it imposes an economic “burden” on the United States.

One of Trump’s favorite targets, the North American Free Trade Agreement, which links the United States with Canada and Mexico, could be an inviting target under the Trade Act.

The law also allows the administration to slap surcharges on imports for a maximum of 150 days to correct a “disequilibrium” in the US balance of payments. The United States habitually runs a massive deficit with China, for example. Even if permissible under the law, such actions still could carry serious economic and political risks.

“It would set off a round of retaliation,” said Clif Burns, a Washington attorney specializing in trade matters. And “countries would probably try to back that up by filing complaints at the WTO or a dispute under NAFTA.”

A subtler tack

Imposing import duties on individual companies, as Trump has threatened against General Motors or Toyota, is a taller order. The Constitution guarantees equal protection under the law, which could prohibit such tailor-made sanctions. Burns said Trump could still invoke the 1977 International Emergency Economic Powers Act, which would allow him to take temporary measures in cases of exceptional danger to the economy that would be less likely to become bogged down in the courts.

“When you try to challenge a presidential action taken under this law, the president normally says that’s it’s the exercise of his foreign policy power and the courts generally agree with that,” Burns said. Trump could also opt for a subtler tack: imposing duties not on the business but on the specific parts it uses, in particular for the auto sector, Hufbauer said. “He could name the highly itemized kind of products that the company imports, such as cars chassis of a certain size or engines.” —AFP