from Renewing America

Trump's 2017 Trade Agenda: Signs of a Sensible Direction

March 1, 2017

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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Since the Trade Act of 1974, Congress has required the administration each year to submit an annual “trade policy agenda” outlining its goals for the coming year. It has long been a welcome exercise in transparency, forcing the administration to articulate for the Congress – which retains the constitutional authority over foreign trade – its trade policy priorities.

The new Trump administration released today its version for 2017. If this does indeed provide a blueprint for the administration’s coming approaches to trade policy, there may be less to fear and more to cheer than would be thought from the president’s own statements to date. There is no lambasting of NAFTA as “the worst trade deal ever negotiated,” no empty promises to restore millions of lost manufacturing jobs, no threats to slap large tariffs on imports. Instead there is a sober critique of the limitations of some of the current trade arrangements, problems that many critics – myself included – have long identified as serious challenges for U.S. trade policy.

At the outset, I should say clearly that no one yet knows who speaks for this administration on trade policy. Peter Navarro, who heads the new White House National Trade Council, has floated such radical ideas as repatriating much of the supply chain of U.S.-headquartered multinational companies, and doubling the percentage of Americans working in manufacturing jobs. Wilbur Ross, the new Commerce Secretary, who was just confirmed by Congress this week, has said he is "pro-trade, but pro-sensible trade." Robert Lighthizer, the likely U.S. Trade Representative, has yet to get a hearing in Congress. Nonetheless, the new trade agenda document was prepared by USTR, and seems to have Lighthizer’s fingerprints on it. But there is certainly danger in reading too much into it.

The good news, however, is that it represents, for the most part, a clear-eyed effort to rethink U.S. trade policy. It starts, for example, from the premise that the goal of U.S. trade policy should be to “increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural and other exports.”

All of this seems boilerplate, except that the United States has long used trade policy to promote other, largely foreign policy, goals. As I wrote in my recent book, Failure to Adjust: How Americans Got Left Behind in the Global Economy, “U.S. trade policy has long had multiple goals – strengthening military alliances, developing the economies of allies, encouraging foreign investment in developing countries, expanding the international rule of law, and, if all goes well, increasing the competitiveness of the American economy.” In contrast, I wrote, other countries have “focused narrowly on economic advantage.” Given the challenges facing the U.S. economy, and the growing prosperity of many U.S. trading partners, it makes sense for the United States to starting behaving a bit more like others in pursuing its trade goals.

The document rightly notes that the economic reality of U.S. trade arrangements has not lived up to the promise, particularly since 2001 when China joined the World Trade Organization. It cites many of the same statistics I used in my book, including the slight decline in median household income over the past 15 years, the growing trade deficit with China and other countries, and the steep loss of manufacturing jobs during the 2000s.

The paper rightly puts trade policy in its place as part of a larger strategy to create “a more vibrant, and more competitive, economy.” It says that the administration intends "to work with Congress to lower taxes, reduce regulations, [and] increase funding for infrastructure.” This is a partial list unfortunately, with the biggest omission being the need for worker training, apprenticeships and other programs to ensure that Americans have the skills to prosper in a rapidly changing economy. And it should add that Washington will work more closely with state and local governments that are trying to attract investment, promote exports and spur job growth. But linking trade policy closely with U.S. economic competitiveness is a step in the right direction.

The document, also encouragingly, does not suggest that the United States is prepared to blow up the dispute settlement rules of the WTO, which played such an important role in discouraging countries from returning to “beggar-thy-neighbor” import restrictions during the Great Recession. But it rightly notes, as Lighthizer and others have argued, that the WTO dispute bodies have at times overstepped their authority in challenging U.S. trade laws in such areas as the "safeguard" rules designed to protect U.S. industries from a sudden, harmful surge in imports. More importantly, it calls out the limitations of WTO rules in ensuring fair trading relationships with “large countries that do not adhere to free-market principles in the organization of their economic systems” -- an unspoken reference to China. It suggests, as a growing number of scholars have, the need to adjust trading rules to address this challenge.

The agenda unfortunately – though not surprisingly – affirms President Trump’s mistaken decision to pull the United States out of the Trans-Pacific Partnership, claiming that this was a symbol of the administration's “new approach to trade issues.” That was a blunder, because TPP was potentially an important tool for tackling exactly those trade distortions – especially in China – that seem to most trouble the authors of the new trade agenda. But one can hope that there will be future opportunities for the administration to revisit the TPP decision.

It is important, as I said, not to read too much into all of this. The balance of power between the White House “economic nationalists” like Navarro and Stephen Bannon and the sovereignty-minded trade professionals like Lighthizer has yet to be resolved. But it is clear from the administration’s 2017 Trade Policy Agenda that there remains the possibility of a new, strategic and disciplined trade policy for the United States. That is a good sign.

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