TRADE CASES & TRUMP’S TARIFFS — Restricting Reliance on National Security?

 

My op-ed in the Richmond Times-Dispatch (June 17, 2019) ………….

 

                            TRADE CASES AND TRUMP’S TARIFFS —

                           Restricting Reliance on National Security?

 

                                             By Stuart S. Malawer

 

I predict that three major federal court cases, which might involve the U.S. Supreme Court, will rein in President Trump’s abuse of trade legislation by November 2020. They all involve presidential claims of national security to impose tariffs and other trade restrictions. To do so would be in the best national security interests of the United States and American democratic governance.

The most recent trade restrictions — who knows which others will arise — concern national security claims as a basis for new tariffs on Mexican goods to induce greater immigration control, restrictions on Chinese telecom giant Huawei in the name of national security, and national security claims for imposing tariffs on steel applicable to many of our trading partners and closest allies.

Two significant court actions already are pending against the Trump administration for its trade actions. The first, which is pending at the Supreme Court, concerns steel imports from many U.S. trading partners, including China. The second, which was just filed, concerns investment and trade restrictions on Huawei. A third case concerning the “Mexican immigration tariffs” is imminent and probably will involve the U.S. Chamber of Commerce, among others.

Filed by steel importers, the first case involves the older Supreme Court case FEA v. Algonquin SNL Inc. (1976), which concerned tariffs and the national security provision (Section 232) of the Trade Expansion Act of the 1960s. This case is now appealed to the Supreme Court by the steel importers, following an adverse decision by the Court of International Trade. The lower court grudgingly upheld President Trump’s steel tariffs because it hesitated to overrule even questionable precedents.

The second case just filed by Huawei addresses the constitutional prohibition against congressional bills of attainder that single out persons, companies or groups for punishment. Congress seemingly singled out Huawei by imposing restrictions on it for national security reasons under the new National Defense Authorization Act (Section 889).

The third possible case, threatening tariffs on Mexican imports, is based upon President Trump’s claim that Mexican immigration policy is a threat to U.S. national security under the International Emergency Economic Powers Act. Any legal action would certainly raise the threshold issue, if that claim is sufficient to satisfy the national security requirement that allows for a valid emergency declaration.

Federal courts review presidential actions even when they involve foreign policy.

This goes back to United States v. Curtiss-Wright Export Corp. (1936), a Supreme Court case involving an arms embargo declared by President Roosevelt during the Chaco War in Latin America, and Youngstown Sheet & Tube v. Sawyer (1952), where the Supreme Court addressed President Truman’s seizure of steel mills during the Korean War. In this case, the court clearly stated that the president’s powers as commander in chief do not include seizing domestic steel mills. Justice Robert Jackson stated the president is commander in chief of the military, not commander in chief of the nation.

Presidential actions — even when the president argues they are not reviewable by courts — are indeed subject to judicial review. This is what is called the rule of law. Congress makes the laws, and all laws and executive actions must comply with the U.S. Constitution to uphold the structure of the federal government and to preserve individual rights. This is the essence of America’s exceptionalism.

Under the U.S. Constitution, Congress has exclusive authority over trade. However, much of this authority has been delegated to the executive branch over the decades. So far, Congress has failed to reclaim its trade authority.

Congress has the sole constitutional authority to enact new taxes. Congress never intended to abrogate its taxing authority by allowing any president to unilaterally impose new tariffs, which are taxes on U.S. imports paid by U.S. firms and consumers. Tariffs and foreign retaliatory tariffs hurt everyone, including farmers, importers, consumers and domestic producers. They are detrimental to state and national economic development.

I predict the federal courts will uphold the separation of powers in face of this unprecedented onslaught of presidential tariff and trade actions by a president relying on dubious claims of nation security. This system has been the foundation of U.S. foreign and national security policy since 1945 and remains so today. The preservation of this system is in the national security interest of the United States, as well as basic American governance.

 

Stuart S. Malawer is Distinguished Service Professor of Law and International Trade at George Mason University’s Schar School of Policy and Government. Contact him at stuartmalawer@msn.com.

 

 

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National Security & Trade Law: New U.S. and WTO Cases — Troubles for Trump’s Trade Policy?

   

National Security & Trade: New U.S. and WTO Cases —

 An Invitation to Even More Struggles for the Trump Administration

 

Stuart S. Malawer, J.D., Ph.D. Distinguished Service Professor of Law and International Trade at George Mason University (Schar School of Policy and Government). Member of Virginia’s Advisory Committee on International Trade.

                                                     ………………………………..

 

Two historic cases involving the issues of national security and trade have been decided recently, one by a federal court and one by a panel at the World Trade Organization (WTO). Despite the grave importance of these two cases for the United States and the global trading system, not much attention has been given to them.

         The first case, American Institute for International Steel v. United States, was decided by the Court of International Trade in New York on March 25, 2019. This upheld the president’s authority to impose tariffs under Section 232(b) of the Trade Expansion Act of 1962 in cases involving threats to national security. This is the first time in over forty years that a federal court has addressed this issue and upheld the president’s delegated authority to do this.

          The second case, Ukraine v. Russia Concerning Traffic in Transit, was decided by a panel within the dispute resolution system of the WTO on April 5, 2019. The panel upheld the right of the Russian Federation to impose restrictions on Ukraine under GATT Article XXI, the national security exception. This is the first time the WTO has ever applied this provision. The panel decided that national security as a defense was reviewable by the WTO. Additionally, it determined that Russia’s reliance on it was justifiable.

   

    The US submission, as a third-party, argued against the WTO’s jurisdiction to hear this issue. This is pprobably because it intends to raise this same defense in the barrage of litigation already filed in the WTO against the U.S. tariffs on steel and aluminum, which rely upon Section 232. The U.S. probably will also rely upon the GATT Article XXI defense when its new sanctions on Cuba are utilized which allow extensive litigation against a wide range of foreign companies dealing with nationalized properties.

     What do these cases mean for the U.S. and the Trump administration’s trade and tariff polices? To me, they mean big trouble. Why?

     Reading the federal case closely discloses serious concerns about the court’s judgment: “To be sure, section 232 regulation plainly unrelated to national security would be, in theory, reviewable as action in excess of the President’s section 232 authority.” A blistering separate opinion questioning the delegation of authority to the president is provided in an even graver tone: “If the delegation permitted by section 232, as now revealed, does not constitute excessive delegation in violation of the Constitution, what would?”

     The report of the WTO panel concluded, “This is the first dispute in which a WTO dispute settlement panel is asked to interpret Article XXI ….” It argued that under customary international rules of interpretation, the panel can judicially review invocation of national security and that Russia met its requirements. The panel went on to warn, “However, this does not mean that a member is free to elevate any concern to that if an ‘essential security’ interest.”

     So what does this mean for the Trump administration?

     It ought to be very concerned. The Court of International Trade decision will undoubtedly be appealed directly to the US Supreme Court. The warnings in its opinions are ominous. The WTO panel decision is more than ominous. It considers claims of national security to be both reviewable by the WTO panel and subject to a decision on their merits.

     My guess is that the Trump administration will fight to preclude a Supreme Court review of the issue of the legality of the delegation of national security powers and will outwardly be even more hostile to the WTO, if that’s even possible. No one can say that law and trade aren’t among the crucial issues of the day.

 

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US Court of International Trade — Pending §232 Steel Case — Real Danger for the Trump Administration.

      This article discusses American Institute for International Steel v. the United States, which is pending in the little-known United States Court of International Trade in New York. It involves an attempt to declare that the US legislation delegating authority to the president to impose trade restrictions is an unconstitutional delegation of legislative authority. A loss would legally curtail the president’s discretionary power to use national security as a reason to impose punitive measures against trading partners. The article identifies legal trends, where this case fits into the trade policy debates, and why it is so important. The article concludes that domestic U.S. litigation in 2019 may well have a tremendous impact on U.S. law and the global trading system. Many in the domestic and international trading communities (as well as those in the foreign policy and national security communities) are waiting for the results of this little-known steel litigation.

Malawer, “Section 232 Litigation in the U.S. Court of International Trade and President Trump’s Trade Policies.  5 CHINA & WTO REVIEW No. 1 (Feb. 2019).

 

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IS TRUMP’S TRADE POLICIES REALLY ABOUT TRADE? Hint, Maybe Not.

To me the US – China trade dispute is not really that much about trade, tariffs or technology. What I would call T3.  

It’s about changing the rules of the game, global relations. In particular, it’s about President Trump’s innate desire to destroy almost everything that preceded him –– alliances, trade flows, global norms and multilateral institutions, Not sure why. But that’s his psychology and method of operating as to everything. Creating havoc. Period.  

In terms of formulating a US trade policy. It would be most effective for the Trump administration (those officials that actually have some real control over policies and who have a minimum sense of diplomatic history, international relations, international economics and international law) to actually utilize the WTO’s dispute resolution system to address real issues.  

This would help channel US-China trade disputes into an international mechanism that can actually assist in resolving real issues. And away from very real and dangerous conflicts and military confrontations.  

The WTO dispute resolution system has a good track history of diplomatic and legal settlement of concrete disputes. It has precluded these disputes from escalating out of control. After all this global system was the American intent behind being the principal architect of the post-war system and the WTO’s dispute resolution system.  

This American policy of fostering an international judicial mechanism reflects the core American belief in a rules-based system and the American values of relying upon a fair judicial determination of conflicts. Not reliance on unilateral actions, raw power politics, the law of the jungle, or bluster and threats.

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US Dept. of Justice Enlisted in Trade War With China — What’s the End Game?

China Technology  

   The U.S. Department of Justice (National Security Division) has now been enlisted by the Trump administration into its expanding trade war with China. This marks a significant escalation of legal and economic weapons used by the United States.

  US international economic legislation gives the president broad powers to conduct economic warfare. However, the use of such legal powers is always a policy issue. I’ve written before on Chinese economic espionage and technology. I agree it’s a problem—it has multiple dimensions. But what is the best remedy? What’s the end game?

On November 1st, Attorney General Sessions proclaimed a new China initiative that augmented the administration’s prior use of trade retaliation (Section 301) and aggressive trade actions under a national security rationale (Section 201).

Simultaneously with this new initiative, on November 1st, the Justice Department announced that a federal grand jury indicted a Chinese state-owned enterprise (SOE) with crimes related to theft of technology and trade secrets. In addition, the Justice Department filed a civil lawsuit on the same day, seeking to enjoin the SOE from future transfers of technology and from exportation of products to the United States relying upon such technology.

In addition to the above, Attorney General Sessions also stated on November 1st that this new anti-China initiative would include vigorous application of other pieces of U.S. international economic legislation, including the Foreign Agent Registration Act, rigorous implementation of the new foreign investment rules (CFIUS) as to Chinese investments and transactions in the US, more extensive application of the Foreign Corrupt Practices Act, and better utilization of mutual legal assistance agreements.

The enlisting of broad criminal prosecutions and the reliance on a wide range of international economic legislative enactments represent a significant escalation of the trade war with China. (This raises the larger issue of the role of domestic courts in foreign affairs, a topic for another posting). How this plays into bringing about a diplomatic resolution of a broader range of non-technology trade issues remains to be seen.

While criminal prosecutions have a significant and justifiable role to play in enforcement of intellectual property rights,  I would personally prefer to see more conciliation and international action than greater criminal prosecutions. (Prosecutorial discretion is extraordinarily important in state and federal criminal prosecutions.)  This would include greater use of the dispute resolution process of the WTO in coordination with other countries. (The United States has won over 2/3 of the cases it has brought in the WTO.)

   It is trade and economic negotiations, without duress and threats that will finally resolve US-China disputes and result in better management of trade relations as well as larger political relations. It is in the foreign policy and national security interests of the United States that criminal prosecutions and overly-broad unilateral reliance on domestic economic legislation (for example, sanctions and export controls) are not used as threats and political theater.

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U.S. and China Trade Disputes in the WTO (since Trump) — Some Real Facts.

China Litig in WTO (March 2016)

U.S.–China trade relations are the most important bilateral trade relations today. The conflict between these countries has already progressed to a trade war. What is not well known is how this conflict is playing out in the WTO’s dispute resolution system.

An examination of the trade cases filed by both China and the U.S. in the WTO during the first two years of the Trump administration is extraordinarily illuminating. Careful analysis reveals important facts that are not well known and are often miscast as reality.

This litigation has implications for trade relations with China; broader U.S. trade policy; and even broader U.S. policy toward international law, multilateral institutions, and the international political system.

Between January 2017 and October 2018, China initiated five cases against the United States. These questioned the conformity of various signature trade actions by the Trump administration. For example, China attacked the imposition of tariffs on solar panels as a safeguard measure. It also attacked the imposition of other tariffs on steel and aluminum by the U.S. as a national security measure. Two cases also questioned the U.S.’s unilateral retaliation against a broad range of China’s exports to the U.S.

Most recently, China contested the validity of U.S. tariffs on exports that were imposed as retaliation for alleged intellectual property rights violations. The U.S. contends that China requires forced technology transfer as a condition for entering into joint ventures. China considers that these are essentially private corporate transactions that are utilized worldwide by many firms as a means of doing business and securing market access.

The U.S. has only belatedly filed two cases against China. One alleges that the Chinese response to new U.S. tariffs because of intellectual property rights violations was filed too early. The other argues that China’s retaliatory tariffs, imposed in response to U.S. tariffs on steel and aluminum imports, which were based on a national security rationale, cannot be reviewed by the WTO. 

It is clear that China is trying to rely on the WTO’s dispute resolution system as a means of managing U.S.–China trade relations. The Trump administration has only barely begun to catch up.

The backdrop to this series of litigations by both parties is the Trump administration’s very public disdain for the WTO. The administration has condemned the WTO’s ability to negotiate newer trade rules (the WTO’s negotiations have been a failure). It called for possible withdrawal from the WTO. In addition to this threat, the Trump administration has focused its criticism particularly on the dispute resolution system, where it claims the decisions have ignored the law and the US has lost all its cases.

The facts demonstrate otherwise.

The U.S. was a major supporter of the establishment of the WTO. In addition, it was the principal architect of the dispute resolution system, which involves both diplomatic negotiations and, if they fail, binding adjudication with enforcement. The U.S. negotiated this because it was perceived to be in its national interest and exercise of its national sovereignty.

The U.S. wanted to create a rules-based trade system as a means of diplomatically resolving and adjudicating disputes—a system that would mirror the U.S. legal system and its unique values. In this system, rights and obligations are assumed by all nations as a means of creating a multilateral system. Where the law of the jungle (power politics) gives way to the rule of law with mutual benefit for all.

Since 1995, the U.S. has been the greatest user of the WTO’s dispute resolution system. The U.S. has won most of its cases. In fact, surprisingly, China has implemented all decisions that have gone against it. The U.S. has not.

My conclusions are as follows: first, it is in the national interest of the U.S. to remain in the WTO. Second, it is similarly in our interest to remain part of the dispute resolution system. Third, a wide variety of U.S.–China trade disputes have been litigated. China has implemented all adverse decisions, but the US has not, especially regarding the methodology of determining dumping and subsidy cases.

There is no reason U.S.–China trade issues cannot be settled in the WTO’s dispute resolution system. Facts support this. It is better to settle trade disputes in the WTO than on the global stage, where trade disputes can easily spill over to a real battlefield.

 

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Trump and Weaponization of Treaty Termination — Constitutional and International Legal Issues.

Trump and Treaty Termination (Oct. 2018)

President Trump is aggressively terminating treaties. The U.S. Constitution establishes procedures for treaty making but says nothing about treaty termination. This treaty-making power is shared with the Senate. Little case law addresses the issue of treaty termination, which raises significant international law and constitutional issues impacting U.S. foreign policy and national security.

The following are some announcements concerning terminating treaties that the Trump administration made just this October:

  • The Trump administration announced pulling out of the 1955 bilateral treaty with Iran. This announcement came immediately after the International Court of Justice ruled in Iran’s favor and awarded it provisional measures in Iran’s action contesting renewed U.S. trade sanctions.
  • At that time, the administration declared that it would review all treaties that give the International Court of Justice (ICJ) jurisdiction to decide disputes with the U.S.
  • Also at that time, the administration declared that it would no longer be bound by the Vienna Convention on Diplomatic Immunity’s “optional clause,” which the U.S. accepted as giving the ICJ jurisdiction over treaty disputes involving the U.S.
  • Immediately afterward, the administration announced its intention to withdraw from the 144-year-old International Postal Treaty (Universal Postal Union).
  • Most recently, this month, the Trump administration announced it will withdraw from the Intermediate-Range Nuclear Forces Treaty (INF) with Russia.

 

Of course, the administration previously withdrew from the multilateral nuclear agreement with Iran, threatened to withdraw from the North American Free Trade Agreement, continuously threatens to withdraw from the World Trade Organization, and refused to continue negotiating the Trans-Pacific Partnership on the administration’s first day in office. The administration continuously threatens to withdraw from various bilateral trade deals. This threat of treaty termination is made alongside the administration’s threats to withdraw from a host of multilateral organizations and other diplomatic undertakings.

So, what’s the relevant U.S. constitutional law concerning the president’s authority to terminate treaties?

In 1979, the Supreme Court upheld President Carter’s unilateral withdrawal from the defense treaty with Taiwan. It considered treaty termination to be a non-justiciable “political question.” In a subsequent case involving the termination of the Anti-Ballistic Missile treaty by President Bush in 2002, a federal district court held that treaty termination was also a non-justiciable question. However, keep in mind that even though broad deference is made to the president in foreign affairs, the Supreme Court’s Curtis-Wright Case of 1936 clearly makes this point. More recent cases have consistently reviewed executive actions that affect national security. Witness the recent federal cases concerning President Trump and various immigration matters.

Proponents of broad presidential power concerning treaty termination argue that such power is implicit in the president’s foreign affairs and diplomatic powers. This statement is true to an extent. However, it does not extend to all cases of termination, such as those concerning non-self-executing treaties that have been implemented via congressional legislation. This is especially true concerning treaties or executive agreements regarding trade issues, where Congress has exclusive authority and where the agreements are implemented through congressional legislation.

The Trump administration’s aggressive use of treaty termination amounts to a weaponization of this power that has not previously occurred.

No matter what the domestic legality of the termination of a treaty may be, presidential termination does, in fact, terminate the agreement between the U.S. and its treaty partner. However, this termination may well be a violation of the treaty if it does not comply with the withdrawal provisions of the treaty, and such termination would place the U.S. in violation of international law.

International lawyers, foreign policy experts and Congress, among others, need to seriously review this matter. Because treaties create international and domestic laws, Congress should have major input in their formation and termination. Of course, the violation of international law raises serious foreign policy and national security concerns for the entire nation.

 

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