On March 31, 2017, President Trump signed an Executive Order directing the Secretary of Commerce and the United States Trade Representative (USTR) to prepare an "Omnibus Report on Significant Trade Deficits". The report will assess the major causes of the United States' trade deficit with several of its major trading partners, including whether alleged unfair or discriminatory trade practices contribute to US trade deficits. The report also will assess the effects of each trading relationship on the US economy and national security. Though it is not explicitly stated in the Executive Order, the report appears to be aimed at informing future unilateral trade actions by the Trump administration.
The Executive Order requires that the report examine "those foreign trading partners with which the United States had a significant trade deficit in goods in 2016." Secretary of Commerce Wilbur Ross has stated that the following countries will be included in the report: China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, South Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia and Canada.
Section 2 of the Executive Order states that the report must:
- assess the major causes of the trade deficit, including, as applicable, differential tariffs, non-tariff barriers, injurious dumping, injurious government subsidization, intellectual property theft, forced technology transfer, denial of worker rights and labor standards, and any other form of discrimination against the commerce of the United States or other factors contributing to the deficit;
- assess whether the trading partner is, directly or indirectly, imposing unequal burdens on, or unfairly discriminating in fact against, the commerce of the United States by law, regulation, or practice and thereby placing the commerce of the United States at an unfair disadvantage;
- assess the effects of the trade relationship on the production capacity and strength of the manufacturing and defense industrial bases of the United States;
- assess the effects of the trade relationship on employment and wage growth in the United States; and
- identify imports and trade practices that may be impairing the national security of the United States.
The Executive Order does not specify what actions the Trump administration will take if the report concludes that unfair or discriminatory practices of a major trading partner contribute to US trade deficits, or that certain imports or trade practices may be impairing US national security. However, the language of the Executive Order suggests that the report may be used to inform potential unilateral trade actions under statutes that have rarely been used by recent administrations – namely Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974.
Section 232 authorizes the Secretary of Commerce to investigate whether imports of an article "threaten to impair the national security" of the United States.1 Following such an investigation, the President may impose tariffs or other restrictions in order to "adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security."2 President Trump's Executive Order seeks information on imports and trade practices that "may be impairing the national security of the United States", indicating that the administration may consider initiating new investigations under Section 232 based on the findings of the omnibus report.
Section 301 authorizes USTR to impose tariffs or other import restrictions in response to unfair trade practices, including violations of trade agreements or "an act, policy, or practice of a foreign country that is unreasonable or discriminatory and burdens US commerce."3 President Trump's Executive Order seeks information on foreign government actions that meet similar criteria ("imposing unequal burdens on, or unfairly discriminating in fact against, the commerce of the United States by law, regulation or practice"). This and other recent statements by President Trump's advisors suggest that, based on the findings of the report, the administration may pursue Section 301 challenges to foreign government actions that arguably are not covered by the WTO agreements. US law restricts USTR from taking action under Section 301 in connection with any claims covered by the WTO agreements without first bringing a challenge to the WTO and receiving WTO authorization to impose countermeasures.4 However, USTR may use Section 301 to challenge discriminatory practices that are not covered by the WTO agreements.5
Neither Section 232 nor Section 301 are specifically mentioned in the Executive Order, which describes the purpose of the omnibus report in general terms: "it is essential that policy makers and the persons representing the United States in trade negotiations have access to current and comprehensive information regarding unfair trade practices and the causes of United States trade deficits." However, the information sought by the Executive Order and its use of specific terminology that parallels these statutes implies that the administration may pursue such actions, based on the findings of the omnibus report.
Terminology similar to that included in Sections 2(a) and 2(b) of the Executive Order can also be found in Section 338 of the Tariff Act of 1930, which permits the President to impose duties on imports from foreign countries that have been found to discriminate "against the commerce of the United States…in such manner as to place the commerce of the United States at a disadvantage compared with the commerce of any foreign country."6 However, Section 338 has never actually been used to impose duties on imports from a foreign country, and significant legal and practical limitations render its future use unlikely (for example, the provision entrusts the US International Trade Commission with ascertaining whether "discrimination" by a foreign country exists, and any use of Section 338 would almost certainly be met with an immediate WTO challenge).
Pursuant to the Executive Order, USTR and the Commerce Department must submit the omnibus report to the President within 90 days (i.e., by June 29, 2017).
The Executive Order is available here.
1 19 U.S.C. § 1862
2 19 U.S.C. § 1862(c)
3 19 U.S.C. § 2411
4 This practice has been codified into US law in the Statement of Administrative Action (SAA) accompanying the Uruguay Round Agreements Act (URAA).
5 SAA at 1035.
6 19 U.S.C. § 1338 (a)
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