Free to Prosper: Trade

View the full chapter on trade here

The new Congress has two urgent tasks on trade policy. First, it needs to help heal the damage from President Trump’s trade war by repealing his tariffs and rebuilding the World Trade Organization (WTO). Second, it needs to resume progress on several difficult issues. Those include addressing China’s illiberal economic, political, and human rights policies; rebuilding alliances; and finalizing several trade agreements.

Renewing Trade Promotion Authority will be a key congressional contribution to that process. Congress should also repeal the Jones Act of 1920, which has nearly eliminated the U.S. domestic shipbuilding industry, and makes domestic shipping artificially expensive, and uncompetitive internationally.

The Trump tariffs cost the average American household more than $1,200 per year, above and beyond existing tariffs. They made a difficult pandemic even harder for millions of people. They will continue to bear that cost until Congress repeals the tariffs. Doing so would have three political benefits. First, it would provide an immediate economic stimulus that does not require new spending. Second, Republicans would get a tax cut they can tout to their constituencies.

Third, Democrats would get a clean break from the Trump era they can tout to their constituencies—something that might also benefit some GOP members. To guarantee against a future president’s abusing tariff authority, Congress should repeal Section 232 of the Trade Expansion Act of 1962, and Sections 201 and 301 of the Trade Act of 1974, which were President Trump’s unilateral tariff-making tools.

It is especially important for Congress to act on removing the Trump tariffs since President Biden has indicated he is unlikely to reverse the tariffs unilaterally.

The United States also needs to reengage with the World Trade Organization. The WTO’s dispute resolution system is one of the most effective weapons the United States has in dealing with unfair trading practices. The United States wins more than 85 percent of the cases it brings. The Trump administration let the terms of all seven judges expire, essentially dismantling the entire system. Congress and President Biden need to work with allies to revive that important tool for trade liberalization and diplomatic strength.

The Phase One agreement will make a formal bilateral agreement with China more difficult. Although Phase One prevented further tariff increases, it did not decrease them to previous levels. It also tightened government management on both sides of U.S.-China trade. For instance, the Chinese government agreed to buy specified amounts of U.S. crops as negotiated by the U.S. government. In market economies, buyers and sellers make those decisions.

But the United States can build stronger economic and diplomatic relationships with other Asian countries that can provide a counterweight to China by rejoining the Trans-Pacific Partnership. Trade agreements with the European Union and United Kingdom will add to the China counterweight while ensuring against protectionist policies from important trading partners. Congress should renew Trade Promotion Authority to expedite those negotiations. Doing so would also make it easier to pursue other bilateral and multilateral agreements in regions such as Africa and South America that would prefer to do business with the United States rather than China, all else being equal.

In this chapter:

  • Do Not Normalize the Trump Tariffs and Work to Free Trade, Not Manage It
  • Reclaim Congress’ Tariff Authority
  • Reengage the WorldTrade Organization
  • Repeal or Reform the Jones Act
  • Avoid, or at Least Minimize, Trade-Unrelated Provisions inTrade Agreements
  • Promote Liberalization in China through Constructive Direct and Multilateral Engagement
  • Pass a United States–United KingdomTrade Agreement
  • Pass a United States–European UnionTrade Agreement

View the full chapter on trade here.