Last week, Joel had a post entitled "US Presidential Power to Terminate Trade Agreements," in which he discussed the difficulties that a U.S. President would have in ending U.S. participation in existing trade agreements, without Congressional consent. His post may have been reassuring to some people worrying about the future of U.S. participation in its trade agreements, and I don't mean to cause anyone unnecessary worrying, but there is some counter-analysis of the situation from White & Case. This is from the section on various recent U.S. bilateral FTAs:
Bilateral FTAs with Australia, Chile, Colombia, Korea, Panama, Peru, and Singapore
Given the powers conferred through the Constitution and the Trade Act of 1974, President Trump would very likely have the unilateral authority to trigger the United States’ termination of its bilateral trade agreements with Australia, Chile, Colombia, Korea, Panama, Peru, and Singapore. Moreover, a strong argument can be made that such termination would automatically terminate the implementing acts for these agreements, thereby undoing the United States’ FTA commitments with respect to these countries.
Alternatively, President Trump would arguably have the unilateral authority to raise tariffs on imports from these countries to those levels that were in place on the date of enactment of the TPA law that authorized the relevant bilateral agreements (i.e., August 6, 2002). The relevant legal text for each agreement is provided in the Annex; because these provisions are essentially the same, they are summarized together in the following sections.
Termination
The United States’ bilateral trade agreements with Australia, Chile, Colombia, Korea, Panama, Peru, and Singapore provide that such agreements will terminate six months after one party notifies the other that it wishes to terminate the agreement. For example, termination of the US-Korea Free Trade Agreement (KORUS) is governed by Article 24.5. (Entry Into Force and Termination), the relevant excerpt of which reads as follows:
2. This Agreement shall terminate 180 days after the date either Party notifies the other Party in writing that it wishes to terminate the Agreement.
Upon the United States’ termination of its bilateral FTA with Australia, Colombia, Korea, Panama, or Peru, the other party would be free to terminate immediately preferential treatment afforded to the United States under such agreement.
President Trump also would have a legitimate claim that the implementing acts for each of these FTAs actually self-terminate after he terminates the relevant FTA, because the implementing acts state that the provisions set forth therein have no legal effect upon termination of the relevant FTA. For example, Section 107(c) of the KORUS implementation act states:
(c) TERMINATION OF THE AGREEMENT.—On the date on which the Agreement terminates, this Act (other than this subsection and title V) and the amendments made by this Act (other than the amendments made by title V) shall cease to have effect.
The implementing acts for the Colombia, Korea, Panama, and Peru FTAs contain similar or identical language on termination. Thus, there is a strong argument that the implementing acts for each of these FTAs self-terminate after the President terminates the relevant FTA. Upon such termination, the President would likely be free to unilaterally raise relevant duties or other import barriers through Section 125(e) of the Trade Act of 1974.
Tariff modification
The implementing acts for these bilateral trade agreements grant to the President the same tariff modification authority as the NAFTA and CAFTA-DR implementation acts (i.e., the authority to issue new presidential proclamations imposing “such additional duties” as the President determines to be necessary or appropriate to maintain the “general level of reciprocal and mutually advantageous concessions” with respect to the other party or parties provided for by the relevant agreement.) These provisions could give the President the unilateral authority to undo the tariff reductions under these agreements, subject only to consultation and layover requirements.
Imposing “additional duties” is further permitted under Section 2103(a)(1)(B)(iii) of TPA 2002 (which governed the implementation of the bilateral FTAs listed above, as well as the CAFTA-DR) “as the President determines to be required or appropriate to carry out any such trade agreement” concluded pursuant to TPA. However, Section 2103(a)(2) limits these increased duties to the “rate that applied on the date of enactment of this Act” (i.e., August 6, 2002).
I tend to think the Trump administration will not go down the road of withdrawing from trade agreements, or unilaterally raising tariffs. But it was surprising to me how much legal uncertainty there is about the U.S. statutes in this area, in terms of the President's power. This is definitely something to consider the next time a trade agreement is being negotiated and implemented.
