Jamieson Greer had his Senate nomination hearing yesterday. Here are a few exchanges that I found to be of interest.
Historical Examples of Successful Universal Tariffs
Senator Ron Wyden (D-OR) asked a great question about the historical record of universal tariffs, which is something that Trump has talked about:
Wyden: I thought I'd start by asking you, can you give us an example ... in the country's history, where there were universal tariff hikes and where somehow the country benefited? Where are the examples that you cite for this Trump approach in American history?
Greer: Senator Wyden, thank you for that question, and I think it's indeed instructive to think about our history with respect to trade policy. As many on this committee likely realize, until about 1913 the United States government was entirely funded, almost entirely funded, from tariff revenues, including during the latter part of the 19th century, when America truly was exploding as an international industrial powerhouse and we had a relatively high tariff rate. At the same time, we saw countries like the United Kingdom lowering their tariff rates and actually falling out of industrial competitiveness. I would say also, you have instances in the past where we have seen what happens when the reverse happens. For example, when we gave China permanent market access to the United States ...
Wyden: What I'm asking about is an example for the idea that the President has made number one on the trade policy list: a universal tariff. I like a tool box. I'm prepared to put a tariff in there, and there are instances where it's valuable. But I'd like to see some kind of lode star here that shows us why we ought to go in the direction the president's going, because I haven't seen one.
Greer: Certainly. Well, when you look at the trade policy memo that the Administration released, they have a part about fair and balanced trade, and a part of that, they discuss what you've mentioned, Senator, which is the possibility of a universal tariff, and it's talked about in the context of our trade deficit, which is over a trillion dollars. And part of the question is, how large of a trade deficit do we want? Because the trade deficit represents in large part manufacturing jobs that have gone overseas and other things like that. And a universal tariff is something that should be studied and considered to see if it can't reverse the direction of that deficit and the offshoring that I don't ...
Wyden: I'll hold the record open. I've asked three times for an example of where there was history that the President's approach, the across the board tariff approach, rather than the targeted one, made sense. We'll keep the record open. Let the record note that I asked it three times and there were no examples.
It will be interesting to see if Greer comes back with anything on this as part of the questions for the record.
I will also note here that additional U.S. tariffs aren't likely to deal with the trade deficit (which Greer brought up), if you consider that to be a problem. If the deficit is a real concern, the Trump administration should look at the macroeconomic causes.
WTO Dispute Settlement vs. Section 301
Senator Bill Cassidy (R-LA) brought up the issue of using WTO dispute settlement for market access:
Cassidy: You have ... expressed skepticism about the need for binding dispute mechanisms at the WTO. But my rice producers and others have won decisions at the WTO on commitments by other countries on agricultural subsidies, and yet they're not enforced. And so are my agricultural people out in the cold? There are disputes that they win, but they now don't even have a dispute, and if they get the dispute it's not enforced. Help my rice producer, how are they going to handle it.
Greer: Senator, I think you're exactly right, and that's part of the reason why I show skepticism sometimes about the WTO, because we win a case, we get a result, and then it's not fixed, or it's fixed on the surface ...
Cassidy: There's two different issues, though. One, you got to win the case, and then you got to enforce it. But the first step is winning the case, and that I said, there's been some progress in. It's a lack of enforcement, which is critical. But that doesn't necessarily throw out winning the case, if you follow what I'm saying.
Greer: Certainly. I mean, listen, if you're trying to get rid of a trade barrier, there are a few ways to do it, right. You can try to negotiate it, which is, on its face, not always successful if you don't have the leverage behind it. If you have a case, you have some legitimate authority to go to them and say to change it. We also have domestic laws like Section 301 and others that can identify and detect unfair trading practices.
Cassidy: Now those are, 301 and all those are kind of like economic necessity. Are you saying that we would use other mechanisms, abandon, if you will, WTO IDR, to use a bunch of abbreviations, and rely upon existing laws domestically to provide a tariff relief?
Greer: So I think we need to use any tools we have available to get relief so we can have the market access ..
Cassidy: The question is, why would we be tossing a tool out? If we want any tool, but we're tossing out the tool, the IDR, even if there's been faulty commitment, it seems to me like we're taking a tool, and we're getting rid of it, when we just said we want every, any tool that we can.
Greer: Senator, I think, part of the problem we've had with with the WTO, and this has been, you know, bipartisan, I've seen letters from the chairman and the ranking member talking about how we need to make sure that the WTO doesn't undermine our trade rights and our trade laws. Listen, if we can use the WTO effectively to negotiate rules or to get a good panel result, that's fine, but we need to, to your point, we have to have enforcement. And at the end of the day, what that means is USTR has to go to the country and enforce the law, and sometimes that means imposing tariffs on them. We say trade enforcement, that means tariffs.
I'm glad Cassidy raised this, although I'm not sure the conversation got at the points I was hoping would be discussed. (And I wasn't sure what he meant by "IDR" -- if I even heard that right. Maybe International Dispute Resolution?)
On the substance, a key issue here is this: How effective is WTO dispute settlement for the U.S. in opening foreign markets, as compared to the use of Section 301 as an independent tool? This is a difficult thing to quantify, but my impression is that WTO dispute settlement is somewhat effective in many if not most cases, whereas Section 301 on its own is not very effective at all (using Section 301 to enforce adverse WTO dispute settlement rulings is something different). However, my impression is also that Greer and the Trump administration disagree with that view, and plan to use Section 301 on its own a lot more. As a result, in four years we should have some new data to analyze for this comparison.
Digital Trade and Discrimination against U.S. Companies
Several Republican Senators brought up concerns with foreign digital taxes and regulations, and Greer shared their concerns, so I think the rest of the world better get ready for a U.S. offensive here. Here were the exchanges:
Senator Mike Crapo (R-ID):
Crapo: Let's move to digital trade. We lost ground during the last administration because we turned our back on digital trade rules, including promoting data flows, combating forced technology transfer and promoting non-discrimination. A number of jurisdictions, including the European Union and South Korea, utilized that opportunity to advance measures that target US technology companies with special requirements or taxes while exempting their domestic companies or even Chinese companies. Do you agree that ensuring US technological leadership means that we need to confront these types of measures?
Greer: Yes, Chairman, I strongly believe that we need to do that again. This is an area where the United States is very competitive, and I understand that ... we are having a domestic conversation about how to regulate digital trade and technology companies, etc. And my view is, that is where the conversation should be happening. We should not be outsourcing our regulation to the European Union or Brazil or anyone else, and they can't discriminate against us, and it won't be tolerated.
Senator Todd Young (R-IN):
Young: Mr. Greer, if confirmed, how will you work to prevent the discriminatory treatment of US companies in key global markets and ensure they're competing at a level playing field when it comes to digital trade?
Greer: Senator, in the first Trump administration, we took action under Section 301 to combat discriminatory digital services taxes. I know there are many jurisdictions in the world right now that are doing this and other measures to try to control the business models of our digital champions, and I want to make sure that if anybody's regulating our digital companies, it's going to be us, and they can't discriminate against it. And I think that we need to explore using Section 301, and other measures to make sure that we're able to stay competitive global.
Senator Thom Tillis (R-NC):
Tillis: I would like, with unanimous consent, to submit this commentary from Mr. Greer just recently on the posture that we should have towards South Korea.
...
South Korea, you've very articulately, in your commentary, have identified the threat there, and the way that they're trying to counter unfairly, I believe, our big tech, and high tech in general, businesses, and some in their own country, and silent on China.
I assume the Greer commentary referenced by Tillis is this one.
With regard to all of these digital trade concerns, I'll just mention the issue that I've brought up many times: What does everyone mean by "discrimination"? Is this about the intent of the regulation, or is disparate impact on U.S. companies enough to qualify? These are very different approaches, with a much different effect on regulatory autonomy/sovereignty.
Security Exceptions
Senator Tina Smith (D-MN) was worried about how Trump's recent tariff threats/tariffs might affect negotiations of trade agreements, and Greer cited the essential security exception in response:
Smith: How do you go in and try to negotiate in good faith with potential trading partners when we have a president who appears willing to tear up agreements on a whim, on an issue that might be completely unrelated to trade?
Greer: It's important to remember that when we have trade agreements, they all contain an exception for measures related to essential security. And if dealing with illegal migration of criminals or dealing with fentanyl or issues like that come up, this is very clearly an issue of essential security.
Not that there was much doubt, but this confirms that the Trump administration will take a broad view of invoking the security exceptions in trade agreements.
Values-Based Trade
Senator James Lankford (R-OK) brought up some non-trade issues such as religious liberty:
Lankford: Countries want to trade with the United States, because we produce great products, and our manufacturers are tremendous at what they do, and they put out a good product there, but the whole world wants it. But that also means when you sit down with them and people say, we want to open up a trade agreement, people are going to want to talk about, me and my colleagues are going to talk about, labor agreements and how we're making sure there's not unfair labor practices, what we're doing to be able to make sure that we're not having unfair competition. But we also have standards in there for things like religious liberty and a free press and all those things. So I would just encourage you, you are an ambassador in many ways, on many issues. And when you sit down on trade agreements, you have the ability to be able to sit down to be able to press countries around the world that are oppressing their people on issues like religious liberty, and to say, if you want to trade with us, we want to trade with you. We want to be fair trade, but we also want to see some action in your country as well that begins to balance out our people trading with your people, that we also know that you're respecting things like labor rights or free press or the freedom of religion. So I'd encourage you just to be able to take that action as well, while you're also watching out for American workers.
Greer: Thank you, Senator, we'll be sure to align with the State Department, who is very good on these issues, to make sure that all of our messaging is aligned to encourage the kind of standards and values we would expect.
On this issue, one of the problems I see is that the "standards and values" promoted by the U.S. vary a lot by administration. As a result, what happens is, the U.S. pushes one set of standards and values for four years, and then pushes a very different set for the next four years. My sense is that many U.S. trading partners may be treating this as a short-term exercise that they should pay lip service to until the U.S. administration changes, but I confess I haven't really looked into this deeply.
Trade Promotion Authority
Senator Tillis asked about a variation of using TPA:
Tillis: Given the limitations of executive agreements, they only last for the duration of a president's term, in this case, it would, of course, be four years, and then the necessity of congressional approval for binding market access deals, do you believe USTR would be in a stronger position if Congress provided a clear legislative framework similar to TPA, but tailored for sector specific agreements like those for critical minerals?
Greer: Senator, I want to think about that, because I think that's creative. I think that any trade agreement that the USTR might bring to Congress, ... I want to have full support, right? I mean, with USMCA, we had 89 Senators vote for it. We had almost 400 folks in the House vote for it. That's the level of support I want. And if Congress thinks that a legislative framework will help with that, I'm happy to talk about what makes sense.
I didn't get the sense that Greer was particularly enthusiastic, but he didn't reject it either, so who knows, maybe this might go somewhere.
