January 7, 2019
It is normal at the beginning of a new year to look back on the old one and forecast the new one. Since this column is not intended as an official record of anything, I am not going to provide a litany of 2018 events or a calendar for 2019. Others are doing that better than I can. Instead, I want to provide a few lessons from last year, discussions of what the administration and Congress face, and, finally, some comments on the World Trade Organization (WTO). Don't worry—this will take several weeks, so columns will be their normal length. Today’s piece will focus on the administration.
When last year began, I said that 2017 was a year of bark, and 2018 would be a year of bite. That turned out to be largely true—tariffs on steel, aluminum, and lots of stuff from China went into effect, to the annoyance of their intended targets as well as a surprising number of Americans who suffered collateral damage either through retaliation or because their inputs sudden got more expensive.
At the same time, there was no shortage of barking in 2018 as well. Frequent threats of automobile tariffs. Section 232 investigations on autos and uranium. An angry ending to the G7 summit in Quebec. Threats to pull out of the North American Free Trade Agreement (NAFTA) or otherwise punish Canada and Mexico if they didn't do what we wanted. More threats to Japan and the European Union to leverage negotiations with them. When the din subsided, and the sparks stopped flying—no doubt temporarily—what did we get out of all this?
- A lot of happy steel producers and a few happy aluminum makers, a whole bunch of unhappy customers whose products have become less competitive, and farmers who have suffered retaliatory tariffs
- An agreement with Korea whose most significant provisions were steel quotas and further postponement of reductions in the truck tariff
- The United States-Mexico-Canada Agreement (USMCA), which contains some useful upgrades, avoids most of the administration's odd ideas and will make our auto industry less globally competitive over the long term, and which faces an uphill battle for congressional approval
- Incipient negotiations with Japan and the European Union pushed off into the new year, and UK talks waiting for their Brexit exit
- A high stakes negotiation with China also punted into 2019
- A lot of offended allies
- A large number of confused WTO members who cannot figure out what we are trying to accomplish there
This is a mixed record at best. The president demonstrated he can close agreements—Korea and USMCA—but he pushed more of them into the new year. In doing so, he demonstrated a tendency to push the other party to the brink—and then fold in the clutch. He was played rather artfully by Japanese prime minister Abe and European Commission president Juncker, who won the temporary removal of tariff threats and some upfront exclusions from the negotiations in return for—agreeing to talk. Even Chinese president Xi Jinping, while not avoiding tariffs, has been successfully stretching out negotiations for 20 months so far without yet conceding anything important.
So, what does that portend for 2019? Certainly, more barking. That's the safest prediction anybody can make. Other safe predictions are that the president will feel compelled to keep his promise to negotiate free trade agreements with Asian countries—in lieu of the Trans-Pacific Partnership (TPP)—and at least one African country, although it may prove difficult to find appropriate candidates in either region. They will begin in 2019 but not likely conclude until 2020.
Talks with Japan and the European Union will take place after extended arguments over what is open for negotiation, which really mean is agriculture in or out? There may be a lot of other topics, but for Trump, it will mostly be about auto quotas. He wants to go to Detroit and say, "I got you a great deal on cars," not, "We reached a good agreement on conformity assessments."
China is harder to predict and will be the subject of future columns. Right now, based on his performance so far, I will stick my neck out and tell you to expect an agreement on a sizable market access package along with some more or less cosmetic commitments on intellectual property bolstered by a boatload of monitoring, enforcement, and snapback provisions intended to make sure the Chinese keep their word. That decision may be taken against the advice of Robert Lighthizer and Peter Navarro, but it will be a reflection of the main thing we learned in 2018—there is only one U.S. trade representative, and his name is Donald Trump.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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