Comments by Steve Charnovitz on 232 Autos Investigation Filed 8 June 2018
Comments by Steve Charnovitz on US Department of Commerce Section 232 Investigation of Automobiles, DOC-2018-0002
June 8, 2018
As I noted in my April 26, 2017 comments on the 232 Steel investigation, “the idea that imports of goods, services, or capital could undermine national security is farfetched”[1] My observation was supported by the subsequent impairment finding by the Commerce Department which offered no evidence that steel imports are impairing national security or that a hefty tariff will safeguard national security. Had the Department taken my comments into account, Secretary of Commerce Ross might have avoided all of the damage to the US economy and US national security that has occurred since then as a result of the US steel and aluminum actions. The evidence that the Department did not take my comments into account is that the impairment decision omits my comments from the list of the public comments.
The issue now before the Department is the automobile sector. Having a ready supply of automobiles and auto parts is important to the US economy and to US national security, but whether these cars or parts are made in the United States or in other countries is not particularly important to US consumers, to the military, or to US industry generally. A high level of domestic production in the auto sector is of interest to domestic automakers and autoworkers, but those are special interest concerns that are separable from the general interest in strong US economic and military security.
Unfortunately, Section 232 does not distinguish clearly between the public interest and the interests of particular industries in receiving import protection. Secretary Ross and President Trump could find that a high tariff on imported automobiles from all countries or from particular allies will help to safeguard national security even though such a finding would be at variance with economic and political realities. The problem is that Section 232 lacks any intelligible principle to govern the actions of the Commerce Department and the President on issues that should be determined by the Congress. For that reason, I now believe that Section 232 violates the US Constitution.
In conducting its autos investigation, I would urge the Department to keep three key points in mind:
First, the best way to keep the US auto industry strong is for it to be in constant dynamic competition with innovative auto companies in other countries and for US companies to be able to export to open foreign markets. Any US government policy that shelters domestic companies from foreign competition will ultimately make those companies flabby and reduce US employment in high wage, high skill jobs. Also, imposing protection on other countries will inevitably lead to counterbalancing foreign actions to prevent export opportunities for US companies. Therefore, even if better priced imports of autos or auto parts are hurting particular US companies, the Secretary should still recommend inaction under Section 232.
Second, increased tariffs (or even worse quotas) in the auto sector will violate the rules of the World Trade Organization and the rules of applicable free trade agreements. For the United States to be an international law scofflaw will lower the standing of the United States in the world community and undermine the effectiveness of international trade agreements. By its many actions to sabotage the World Trade Organization, the Trump Administration has reduced the potential for the WTO to help open foreign markets to US exporters. This dark shadow on world trade will reduce the economic welfare of most US industries, and lead to unemployment, decreased revenues into the Treasury, loss of skills, and loss of investment which are among the factors noted in 19 USC §1862(b).
Third, the import adjustment authority in Section 232 is much more likely to impair national security than it is to safeguard national security. As the implementation of the steel tariffs has shown, the arbitrary decisions of quotas, tariffs, and negotiations that have been carried out under Section 232 have deeply damaged US relationships with its closest allies such as Canada, Mexico, South Korea, Japan, Australia, and the European Community. In other words, the Section 232 cure been much worse for the patient than the Section 232 disease of alleged non-competitiveness of the US steel industry. Although many critics of the Trump Administration’s Steel actions have suggested that the US animus should be focused on China rather than other countries, seeking to protect US industries from Chinese imports is just as debilitating to the American economy as seeking to erect tariff walls against Canada and Mexico. Obviously, Canadian productivity is not a threat to US national security, but neither is Chinese productivity.
Fourth, although we are now in the second year of Secretary Ross’s leadership at the Commerce Department, he continues to neglect sorely needed initiatives on policies to enhance US competitiveness. Every time I see Secretary Ross on TV talking about Section 232, I lament his missed opportunity to be talking up the positive side of the Commerce Department’s jurisdiction on key issues such as export promotion, advanced technology, economic development, data generation and analysis, patents, and the protection of the atmosphere and oceans.
[1]Seehttp://worldtradelaw.typepad.com/ielpblog/2017/04/comments-of-steve-charnovitz-to-the-section-232-steel-investigation.html.