When the Biden administration took office, many of us hoped they would undo the domestic policy and international relations damage caused by the Trump administration's use of Section 232 and Section 301 to impose tariffs. In at least some cases, there were real underlying problems of various sorts that needed to be addressed, but Section 232 and Section 301 did not seem like good ways to deal with those problems.
At the same time, we are all aware of how politics can get in the way of good policy, and the Biden administration's reluctance to withdraw measures taken by the Trump administration under both statutes was at least understandable, although I wouldn't necessarily have made the same political calculations myself.
What is less understandable, however, is the use of these same statutes by the Biden administration in new investigations. And yet a new White House report suggests the Biden administration is considering initiating a Section 232 investigation of its own:
[Recommendation 4:]
4. Strengthen international trade rules, including trade enforcement mechanisms
While the Administration welcomes fair competition from abroad, in too many circumstances unfair foreign subsidies and other trade practices have adversely impacted U.S. manufacturing and more broadly, U.S. competitiveness. The practice of “pumping and dumping,” in which countries heavily subsidize an industry, gain market share and then flood the market with cheaper products to wipe out competition, has been documented in a number of industries including pharmaceuticals and clean energy. The U.S. government must implement a comprehensive strategy to push back on unfair foreign competition that erodes the resilience of U.S. critical supply chains and industries more broadly
...
- Evaluate whether to initiate a Section 232 investigation on imports of neodymium magnets: Neodymium (NdFeB) permanent magnets play a key role in motors and other devices, and are important to both defense and civilian industrial uses. Yet the U.S. is heavily dependent on imports for this critical product. We recommend that the Department of Commerce evaluate whether to initiate an investigation into neodymium permanent magnets under Section 232 of the Trade Expansion Act of 1962.
I'm skeptical that tariffs are needed here, but even if the Biden administration is determined to impose tariffs on neodymium magnets, there are ways to get them that respect the rule of law. For example, a GATT Article XXVIII renegotiation is a perfectly legal way for a government to raise tariffs on particular products. Invoking national security, by contrast, can threaten the entire trading system if the concept is abused. When countries stretch the boundaries of the definition, there is a risk that the system will unravel: If every country does this, the rules start to become meaningless.
With the Trump administration, it was obvious how little some of the key players respected the system, so there wasn't much that could be done. If other countries copied the Trump administration's tactics, it would probably have made some of the Trump folks happy, by hastening the demise of the system. People were just trying to wait things out until Trump left office. As a result, we didn't see a spiral of invocations of security as a basis to impose tariffs because people hoped things would eventually get back to normal and wanted to preserve some degree of trade peace in the meantime.
But if normal U.S. administrations are going to invoke Section 232 like this, then I'm not sure others will continue to hold back. Thus, using Section 232 in this way is a dangerous road for the Biden administration to go down.
One caveat is that if these particular magnets are all or mostly about China, which I think they are, then this action could be seen as just part of the U.S.-China relationship, which is already operating outside of trade norms. That could keep this particular Section 232 action from causing more general damage to the trading system. But there would still be a big risk to doing this.