— BACK TO THE FUTURE — Herbert Hoover & Trade Wars — No Doubt About it.
Trump aka “Trump the Trade Mister” poses a huge risk to U.S. trade and economic growth. He would have at his disposal huge delegated trade powers under existing legislation. He could cause great damage to the U.S. in its global trade relations and its domestic economy generally. No doubt about it. The potential for wrongdoing is tremendous.
Here are a several points made by recent editorials with a few by me:
- The pace of global economic growth continues to tumble and this is bad for U.S. growth.
- Trade global growth of below 2% is now well below GDP for the first time since 9/11.
- The paradox of trade politics is when things are bad people take it out on trade. It is clear many have turned against globalization and the liberal economic order as a result of popular frustration. Those benefiting from trade are always more diffused than those injured by it.
- It was the Republican President Herbert Hoover who signed Smoot-Hawley in 1930 that escalated the stock market crash and slowdown into a global trade war and the Great Depression. This of course led directly to World War II.
- It wasn’t until FDR and his Secretary of State Cordell Hull slowly rebuilt the global trading system pursuant to the Congressional Reciprocal Trade Agreement Act of 1934 that eventually led to the Bretton-Woods system, GATT and now the WTO.
- Congress delegated under this act (RTAA) huge unilateral powers to the President. These powers are still in place and form the basis of executive actions in U.S. trade relations today. This is the way we carry on our global trade relations.
- Congress has exclusive authority to regulate trade under Article 1, Section 8, Clause 3 of the U.S. Constitution. The President has delegated authority by Congress today and this is at the disposal of a new President. Although at times this can be challenged in the federal courts and in the WTO.
- Four trade remedy tools, among others, have been delegated to the President including Super 301 (‘Retaliation‘), Section 232 (National Security), Section 201 (‘Safeguards’) and ‘Currency Manipulation.’ They all provide authority to unilaterally impose trade restrictions may in fact be considered invalid under our international obligations.
- These provisions are in addition to a host of other statutes concerning trade and investment that can hamper global trade relations. Such as CFIUS and its national security reviews of foreign investment.
- Needless to say, the President has tremendous powers to terminate trade negotiations (TPP, TTIP), trade agreements, bilateral, regional and multilateral ones. This may violate our international obligations but such treaty termination is within the unilateral powers of the President and is binding as domestic law.
So what’s the bottom line?
Trump has no understanding of international economic history. This despite the fact that he went to Wharton, which he constantly reminds us of, and of which I’m sure Wharton would like to forget.
Unfortunately, Trump would have at his disposal, as President today, powerful unilateral measures authorized by Congress that can poison our trade relations and send us back to the future.
- “Making Depressions Great Again.” Wall Street Journal (March 1, 2016).