How easy would it be for a President Trump to reverse trade liberalization? Pretty easy, as a new Peterson Institute report argues, and as I argued to Justin Wolfers in today’s New York Times.
As the study show, tariff commitments can be reversed for national security purposes. Trade deals decades old could be exited by summer. Advocates of trade expansion have long advocated shifting power over trade from Congress to the executive. It would be the height of irony for a President Trump to use those powers to undo their agenda.
But Simon Lester posed this argument on Twitter: “I agree w/
@JustinWolfers that Pres Trump could do damage on trade; but Cong. would have say on leaving WTO/NAFTA”.
This raises an interesting point. Treaties used to be deals struck by the executive, with two-thirds advice and consent of the Senate. But modern so-called “treaties” often take the form of congressional-executive agreements, where the president strikes the deal, and both chambers of Congress have to pass implementing legislation by a majority vote.
This quirk means that – while the WTO and NAFTA have provisions that would allow Trump to withdraw on six months’ notice – the laws implementing how WTO and NAFTA commitments are codified in national law are not so easy to reverse.
The law around these questions is very unsettled, as Oona Hathaway writes:
Though it specifies the process for making treaties, [the Constitution] is silent on the question of withdrawal. Some have argued that because the President has the power not to ratify a treaty even after the Senate’s consent has been given, the President must have the parallel authority to withdraw that ratification regardless of the Senate’s position on withdrawal. The Restatement endorses this view, stating that “[u]nder the law of the United States, the President has the power. . . to suspend or terminate an agreement in accordance with its terms.” This view has never been formally upheld by the courts and remains controversial. The courts have twice refused to settle the issue, declining to intervene to prevent unilateral withdrawal from a treaty by the President on the grounds that the challenge to the President’s authority posed a political question, among other reasons.
The Senate, perhaps not surprisingly, opposes the idea that the President can unilaterally withdraw from a ratified treaty. The Senate Foreign Relations Committee has repeatedly contended that the termination of treaties requires the participation of the Senate or Congress. A Report prepared in 2001 by the Senate Foreign Relations Committee concluded that whether termination of a treaty “requires conjoint action o f the political branches remains. . . a live issue which the Supreme Court has sidestepped in the past .” Yet it admitted that “[a]s a practical matter. . . the President may exercise this power since the courts have held that they are conclusively bound by an executive determination with regard to whether a treaty is still in effect.”…
[In contrast] Congress cannot prevent the President from communicating with foreign governments about the termination of a congressional-executive agreement (as long as the termination is consistent with the terms of the statute that created the agreement). Hence the President could unilaterally withdraw the United States from a congressional-executive agreement by communicating the withdrawal to the foreign parties. Yet the act of withdrawing from the international agreement does not undo the statute on which the agreement rests—which cannot be undone without the cooperation of Congress. Even though the President may be able to “unmake” the international commitment created by a congressional-executive agreement as a matter of international law, the President cannot unmake the legislation on which the agreement rests. … The President is not able to terminate a statute unilaterally, and hence cannot terminate the statutory enactment that gives rise to a congressional-executive agreement. And insofar as the statute specifies a course of action by the United States, the President is required to execute it unless and until the underlying statute is repealed or superseded.
This poses an interesting quandary. In the UK, voters demanded Brexit to regain control of immigration. But the deals the UK will have to make to retain access to European markets will likely require open immigration access. Similarly, in the US, Trump could deliver on threats to exit NAFTA, but may be stuck with NAFTA rules, thanks to the nature of congressional-executive pacts.
It’s a bit of a distinction without a difference, as Wolfers and the Peterson study make clear. Trump would not have to erase the “NAFTA tariff statute” in order to raise barriers to Mexican goods. He has plenty of statutory authority to restrict trade (see here, here, and here).
That’s the U.S. side of the equation. What about other countries?
When Trump starts blatantly breaking the rules, it’s anyone’s guess whether the rest of the world will stay boy scouts or not. There are a few scenarios here.
First, Trump could leave the WTO, then other countries could retaliate as much as they want on U.S. exports and the U.S. would have no legal rights or remedies.
Second, Trump could stay in the WTO, but break the rules and refuse to legally defend his actions. This would probably irritate other countries, so they would start breaking the rules as well. In this scenario, the WTO exists, but it’s a dead letter.
Third, Trump could stay in the WTO, violate core rules like most favored nation (MFN), and then participate in and drag out the litigation. Assuming other countries see this as a good faith effort, and they respond in good faith, then the WTO rules greatly limit the speed and severity of authorizable sanctions against violators. This would be the smartest from a realpolitik perspective, as I argued to Jordan Weissman at Slate.
Finally, Trump could stay in the WTO, break the rules, and attempt to invoke the GATT national security defense. This is an unusually broad defense. Article XXI is “self-judging”, i.e. any member can take actions “which it considers necessary for the protection of its essential security interests.” (Compare this with the general exceptions for labor, environment, and public interest policies, which are subject to a battery of non-self-judging difficult-to-meet hurdles. Basically countries’ militaries got a sweetheart exemption that their environmental ministries didn’t.)
The national security exception has gotten very little interpretive attention from GATT/WTO panels. I’ve heard colleagues argue that it’s so broad it’s meant to not be used, and that there’s a gentleman’s agreement to not litigate cases that a country claims is national security related. That said, the U.S. has been the main invoker in the past, which it has used to bring countries to settlement.
Would Trump be as savvy as Reagan and Clinton were in using the national security exception to bring countries to the negotiating table? Maybe, maybe not. My sense is that, if Trump’s protectionism were extreme, if the connection to national security weak, and if the defense were put to the Appellate Body of the WTO, it would be hard for them not to authorize some kind of sanction. It would be one of those kinds of cases where the raison d’etre for the organization would be put to the test. If they failed that test and allowed the U.S. to abuse the rules, the WTO would be a dead letter. (And we’re back to #2 above.)
Gold bugs argue that our monetary system is based on nothing but faith in the power of reversible legal promises. This study shows that’s true of the whole global economy.