Tuesday , October 15 2019
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Simon Lester

Simon Lester

Associate Director @CatoTrade. Formerly @WTO. Founded http://WorldTradeLaw.net . Taught trade law @MelbLawSchool, @UMichLaw, @AUWCL.

Articles by Simon Lester

The New U.S.-Japan Trade Deal

7 days ago

The United States and Japan signed a trade agreement yesterday. The U.S. Trade Representative’s Office has provided the legal texts here. Based on the various fact sheets released along with those texts, it looks like the agreement contains a modest amount of tariff liberalization. In this post, I’ll look briefly at what’s in the deal, focusing on four questions: (1) How much liberalization is in there? (2) Is this deal legal under World Trade Organization rules? (3) What is the impact of doing a U.S. trade deal as an executive agreement without Congressional approval? And (4) without dispute settlement provisions, how will the agreement be enforced?
First, with regard to how much liberalization is in there, it is much less than a comprehensive free trade agreement, as services,

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Today’s Tariff Headlines: Trump Administration To Impose Some “Legal” Tariffs

13 days ago

There are so many tariff threats, tariff announcements, and tariff impositions being tossed around these days that it can be hard to keep them all straight. With that in mind, I thought it was worth explaining the headlines today about some new U.S. tariffs relating to World Trade Organization (WTO) litigation over aircraft subsidies. These tariffs have the same negative economic impact as all the other recent tariffs imposed by the Trump administration, but it is worth noting that they aren’t quite as bad as many of those other tariffs because they are — so far, anyway — being pursued in accordance with international law. So while they are not good, they are less bad (if that’s any consolation).
Before I get to these particular tariffs, let me start off with some general background.

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Delivering a New Postal Trade Deal

19 days ago

We at Cato’s trade policy center have criticized the Trump administration’s trade policy quite a bit these past couple years, but last October I wrote positively about the administration’s attempt to reform an obscure international agency at the margins of trade policy (but kind of central to some actual trading):
The administration is concerned about the Universal Postal Union (UPU), a specialized agency of the UN.The UPU was established by the Berne Treaty of 1874 and became a UN agency in 1948. The administration has taken issue with the "terminal dues" rates issued by the UPU, under which, the administration argues, the United States has been subsidizing the shipping costs of foreign suppliers in certain countries, including China, when they send goods to the United States. The basic

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Trump’s Trade Policy So Far: Too Many Trade Wars, Very Little Trade Liberalization

August 27, 2019

This past week was an eventful one for trade policy, and not in a good way. In the trade world these days, no news is good news, and any tweets are probably bad news. President Trump’s trade policy has been stridently protectionist, abusive of the constitutional separation of powers, destructive to U.S. alliances, and fundamentally flawed as a strategy to achieve its stated goals.
Last week, President Trump was agitated by China’s retaliatory tariffs (which were in response to tariffs previously imposed by the Trump administration), and in reaction to the Chinese retaliation, Trump announced on Twitter some retaliation for the retaliation, this time bumping up the various existing and promised tariffs by 5 percentage points. In doing so, he escalated a trade war that has been quickly

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Taking on China

August 22, 2019

Yesterday, President Trump said the following about how he was “taking on” China in relation to its trade policy:
But one thing I have to do is economically take on China because China has been ripping us off for many years. President Clinton, President Bush, and President Obama, and others should have done this long before me. My life would be much easier — although I enjoy doing it — but my life would be much easier if I just said, “Let China continue to rip off the United States.” All right? It would be much easier, but I can’t do that.
We are winning against China. They’ve lost two and a half million jobs in a very short period of time. They want to make a deal. It’s got to be a deal that’s good for the United States, where they want to make a deal — probably, we will make a

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Senator Warren’s Protectionist and Misleading Trade Plan and Rhetoric

July 31, 2019

Senator Warren is said to have a “plan” for every policy area. But on trade policy, her plan and her general rhetoric on the issue are not very impressive. It would be better if she had no plan at all and just governed by tweet! (Ok, not really).
She recently announced her trade plan here. I gave it a quick rundown and concluded: “my sense is that this proposal means there would probably not be any trade deals in a Warren administration, while there would be various proposals to add new protectionism to U.S. domestic trade policy.” The Fletcher School’s Dan Drezner took some more time and offered this assessment: “Elizabeth Warren has put forward a terrible, horrible, no good, very bad trade program. Other Democratic candidates would be wise to avoid this garbage fire and come up with

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Misunderstandings on the WTO, Trade, and the Environment

June 28, 2019

These days, the Trump administration’s attacks on trade liberalization, trade agreements, and the World Trade Organization are focused on issues such as trade deficits and allegations that the United States is being treated “unfairly.” But before Trump and his trade team hijacked the trade debate, there had been a critique from the left that trade was bad for the environment in various ways. One example was that trade agreements supposedly got in the way of domestic environmental regulation. There had been some trade disputes over domestic environmental regulations, some of which had included provisions that discriminated against foreign products in favor of domestic ones, and environmental groups were concerned about the impact of adverse rulings by WTO “panels” (i.e., quasi-judicial

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Is the Trump Administration Pushing for a Cold War with China?

June 10, 2019

In a Washington Post op-ed last week, Josh Rogin argued this:
Despite what you may have read, the United States’ strategy toward China does not entail launching another Cold War, imposing a zero-sum game or even winning a “clash of civilizations.” In fact, the entire objective of the Trump administration’s Asia approach is to avoid outright conflict with China. But to do that, Beijing must be deterred from continuing on its aggressive path.
The idea that the White House’s new approach to confront China’s economic aggression and military expansion represents a “Cold War mentality” is popular with pundits both in Washington and in Beijing. But that accusation misunderstands what the United States is trying to do with China. …

Perhaps I am one of the pundits he had in mind, given that I

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Yet Another Excuse to Raise Tariffs

May 31, 2019

Back in March, I wrote: “The Trump administration seems to be looking for every possible excuse to raise tariffs.” Yesterday they found another one. As the Washington Post reports:
President Trump on Thursday said he would impose a 5 percent tariff on all goods entering from Mexico unless it stopped the flow of illegal immigration to the United States, a dramatic escalation of his border threats that could have sweeping implications for both economies.
The White House plans to begin levying the import penalties on June 10 and ratchet the penalties higher if the migrant flow isn’t halted. Trump said he would remove the tariffs only if all illegal migration across the border ceased, though other White House officials said they would be looking only for Mexico to take major action.
After

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A Truce In One of the Tariff Wars

May 20, 2019

On Friday, we had an event that is rare in trade policy these days: Some tariffs were reduced. As the Washington Post reported:
Trump did something unusual on the trade front: He removed a tariff
The United States agreed Friday to lift its tariffs on industrial metals from Mexico and Canada, clearing a major obstacle to congressional passage of President Trump’s new North American trade deal.
During the Trump administration’s time in office, there have been many excuses to raise tariffs, but few reasons to lower them, so this was good news. Of course, the administration’s actions don’t count as actual liberalization, because this wasn’t some long-standing tariff that had been bothersome for decades and we finally got rid of it. Rather, this was a tariff Trump himself had imposed on

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Elizabeth Warren’s Economic Nationalism

March 28, 2019

Economic nationalism and pandering to farmers are two classic parts of presidential campaigning. In this post by Senator Elizabeth Warren, she does both at the same time:
Advancing the Interests of American Farmers
Washington has also bowed to powerful foreign interests instead of standing up for American farmers. Congress repealed mandatory country-of-origin labeling for beef and pork in 2015 after a series of World Trade Organization challenges from Canada and Mexico, and it hasn’t established a new rule to protect American farmers. The result is that beef and pork can be given a US origin label if it is processed in the United States — even if the animals are not born and raised here. This misleads consumers looking for American-grown meat and undermines American beef and pork

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The “Reciprocal Trade Act” Is Obviously Not About Free Trade But It’s Also Not About Reciprocal Trade

January 25, 2019

Congressman Sean Duffy has introduced a piece of legislation in the House entited “United States Reciprocal Trade Act.” Based on the title alone, you can guess that the legislation will not involve free trade, and there’s a lot to dislike about it. Dan Griswold of Mercatus has a good paper on the general topic of tariff reciprocity here; Clark Packard of the R Street Institute has a good op-ed on this particular legislation here; and Cato adjunct Scott Lincicome has a good twitter thread on the legislation here. I’m going to focus on an additional problem with the legislation: Because of its cherry-picking approach to tariffs, it will not even involve reciprocal trade. Rather, it looks like nothing more than an excuse to raise U.S. tariffs.
Last year, I blogged here about a comparison

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Some Questions for the Democrats on Trade

January 7, 2019

Presidents have the power to set the agenda and drive policy debates, and President Trump has put trade policy front and center. While President Obama moved slowly on trade policy during his first term (he picked up the pace during his second term), and candidate Hillary Clinton called for a “pause” on trade policy during her campaign, Trump has made an activist (and protectionist) trade policy one of his signature issues. Among other things, he has imposed tariffs under a number of trade statutes, accused many other countries of cheating on trade, renegotiated some existing trade agreements, and challenged the functioning of World Trade Organization by blocking the appointment of appeals court judges.
This flurry of trade policy activity has brought a wide-ranging debate over the

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Will Progressives Vote for Trade Liberalization?

November 30, 2018

At the G20 meeting in Buenos Aires today, the renegotiated NAFTA – in the U.S., the new agreement is referred to as the United States – Mexico – Canada Agreement, or USMCA – was signed by the three parties. The big question now is, what will Congress think of the agreement as it decides whether to ratify it? One aspect of this question is, what will the Democrats who now control the House think of it? And to get even more specific, I’m very curious to see what progressives think of it. While she is in the Senate rather than the House, Senator Elizabeth Warren may be a good indicator of what many progressives think. Yesterday, Senator Warren gave a speech at American University in which she set out “her vision for a progressive foreign policy that works for all Americans.” She covered

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The Trump Administration’s Latest Trade Move

October 31, 2018

The latest attack on international institutions by the Trump administration distinguishes itself by being quite obscure: It’s about postage. It also may have more of a basis than most of the administration’s complaints about trade. 
The administration is concerned about the Universal Postal Union (UPU), a specialized agency of the UN. The UPU was established by the Berne Treaty of 1874 and became a UN agency in 1948. The administration has taken issue with the “terminal dues” rates issued by the UPU, under which, the administration argues, the United States has been subsidizing the shipping costs of foreign suppliers in certain countries, including China, when they send goods to the United States. The basic story is as follows (some good background is here).
When companies or

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The Trump Administration’s Trade Policy Goes Postal

October 31, 2018

The latest attack on international institutions by the Trump administration distinguishes itself by being quite obscure: It’s about postage. It also may have more of a basis than most of the administration’s complaints about trade. 
The administration is concerned about the Universal Postal Union (UPU), a specialized agency of the UN. The UPU was established by the Berne Treaty of 1874 and became a UN agency in 1948. The administration has taken issue with the “terminal dues” rates issued by the UPU, under which, the administration argues, the United States has been subsidizing the shipping costs of foreign suppliers in certain countries, including China, when they send goods to the United States. The basic story is as follows (some good background is here).
When companies or

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Is The Trump Administration Finally Going To Pursue Some Trade Liberalization?

October 16, 2018

The focus of the Trump administration’s trade policy to date has been on renegotiating existing trade deals (with a mix of minor liberalization and modest new protectionism), putting tariffs on a wide range of imports using flimsy justifications, and engaging in a high-profile trade war with China. By contrast, it has put very little effort into pushing for significant new trade liberalization.
That may be about to change. The U.S. Trade Representative’s Office has just sent letters to Congress formally notifying the administration’s intent to enter into trade negotiations with the EU, Japan, and the UK. Cato scholars have called for exactly these negotiations (see here, here, and here, and much more detail here).
There is a lot of work ahead, as these negotiations won’t be easy. They

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“Zero Subsidies” Through a U.S.-EU Trade Agreement Is Unlikely

July 26, 2018

Recall that President Trump said this yesterday in the context of his remarks with European Commission President Juncker:
This is why we agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. 
Zero tariffs on these products through a trade agreement is a plausible and useful goal. On the other hand, zero non-tariff barriers could only be achieved through the U.S. joining an EU-style single market, which I don’t think anyone has in mind here. It is possible to remove a few of the more egregious regulatory barriers, but we should be realistic about what can be achieved.
But let’s focus on subsidies. On this issue, U.S. Trade Representative Robert Lighthizer said this today at a Senate Committee hearing

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A Temporary Respite From U.S.-EU Trade Tensions

July 26, 2018

Yesterday, European Commission President Jean-Claude Juncker met with President Trump at the White House to talk about trade. Afterwards, to the surprise of many (including me), they held a press conference at which they said positive things about the U.S.-EU trade relationship. Then later, President Trump had five positive tweets about the meeting. It was more amicable than anything we’ve seen in U.S. trade policy for many months.
But obviously, positive tweets only get you so far. What does all this mean in terms of substance? That’s hard to say at this point. The key items the parties agreed on were the following:
– They will work towards “zero tariffs, zero non-tariff barriers, and zero subsidies” on non-auto industrial products. That’s not a huge category of goods, as it excludes

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What To Make of the Trump Administration’s Occasional Positive Statements about Trade Liberalization

July 23, 2018

Over the weekend Treasury Secretary Steven Mnuchin made some remarks that could be interpreted as positive for trade liberalization:
Treasury Secretary Steven Mnuchin is “very hopeful” the US can make progress brokering separate free trade deals with the European Union and Japan during a weekend summit in Buenos Aires.
“I’m encouraged by the EU’s trade agreement with Japan,” Mnuchin said Saturday in an interview with CNN at the sidelines of the G-20 meeting in Argentina.
The EU and Japan signed a massive trade deal earlier this week, cutting or eliminating tariffs on nearly all goods. The deal is in contrast to escalating trade disputes between the US and several of its major allies, including the European Union.
The EU-Japan agreement, which covers 600 million people and almost a

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Trade Deficit Confusion Is Bipartisan

July 12, 2018

President Trump and his trade advisers are the most vocal in putting forward misguided views on the trade deficit, but, unfortunately, their position is a bipartisan one. Here’s something Congressman Brad Sherman of California said recently:
But Rep. Brad Sherman (D-CA), ranking member of the House Foreign Affairs Asia and the Pacific subcommittee, told Inside U.S. Trade he would be “surprised if any [bilateral] deal is finalized in the next 12 months.” Sherman met with Gerrish late last week, he said.
“Look, we spent 50 years telling the world that the only moral and correct thing to do was to have the United States run an enormous trade deficit with the entire world,” he said. “Of course, they decided to agree. Getting them to change their minds is not something that we are doing

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Comparing Countries’ Tariff Levels

June 18, 2018

There is lots of talk from the Trump administration these days about how the U.S. is getting cheated on trade. In this context, they have done some cherry-picking of the data to emphasize high foreign tariffs, while conveniently ignoring high U.S. tariffs. For example, Trump will mention a 270% Canadian tariff on dairy products, without mentioning U.S. tariffs of up to 187% on sour cream. Or White House trade adviser Peter Navarro will mention EU auto tariffs of 10% and argue that those are much higher than the 2.5% tariffs for car imports to the U.S, but he won’t mention the 25% U.S. tariff on truck imports. 
So what’s the reality of tariff levels? The cherry-picking approach emphasizes particular products where tariffs are high, and as can be seen in the examples above there are

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Tariff Fatigue

June 15, 2018

Many of you are probably suffering from tariff fatigue right now. Every day, there is a new tariff in the news. Tariffs on Canada, tariffs on the EU, tariffs on China; tariffs on industrial products, tariffs on agricultural products; retaliatory tariffs by Canada, the EU and China; tariffs in effect today, tariffs going into effect soon. It’s hard to keep track of it all.
The latest is the announcement from USTR today of U.S. tariffs to be imposed on $34 billion of Chinese imports on July 6:
The Office of the United States Trade Representative (USTR) today released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual

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When Trump Proposes Trade Liberalization, Let’s Take Him Up On It

June 11, 2018

Some people are skeptical of taking specific statements President Trump makes too seriously/literally, and I can understand why. Nevertheless, in the midst of mostly aggressive trade rhetoric, every now and then he calls for more trade liberalization. This is from Trump’s Saturday press conference at the G7 meeting:
Q Mr. President, you said that this was a positive meeting, but from the outside, it seemed quite contentious. Did you get any indication from your interlocutors that they were going to make any concessions to you? And I believe that you raised the idea of a tariff-free G7. Is that —
THE PRESIDENT: I did. Oh, I did. That’s the way it should be. No tariffs, no barriers. That’s the way it should be.
Q How did it go down?
THE PRESIDENT: And no subsidies. I even said no

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Be Wary of Claims that Trump’s Trade Policy Is Working

June 7, 2018

Last week, Trump trade adviser Peter Navarro wrote the following in a USA Today op-ed:
A poster child for the success of President Trump’s tax, trade and worker-training policies in lifting the spirits — and incomes! — of American workers will be a new aluminum mill. This new aluminum mill will be built in Ashland, Ky., in the midst and mists of Appalachia’s rugged mountains, in one of our nation’s most poverty-stricken areas. 
Ashland is located in Boyd County off Route 60, on the banks of the Ohio River, bordering West Virginia and Ohio. It was once a booming steel, oil and coal town — until the steel mills in the area started closing down, Ashland Oil moved its headquarters to the Cincinnati region, and the coal mines began to shutter. 
Today, Boyd County suffers from a declining

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Fixing Section 232

June 1, 2018

After what had become a monthly ritual of delaying the Section 232 steel/aluminum “national security” tariffs for some countries, the Trump administration went ahead and imposed them on Canada, Mexico and the EU as of today. (Retaliation by these countries will follow soon.) There is also now an investigation into whether tariffs should be applied to automobile imports on the same basis. You may wonder, how can the term “national security” be stretched so far beyond issues related to actual national security? Commerce Secretary Wilbur Ross explains why:
Ross … cited an “elaborate definition” laid out in the Section 232 statute and said the tool “isn’t by any means confined strictly to military applications.”
“So, while the label is national security you need to look at the legislation

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Free Trade Is Good for Both Americans and Non-Americans

May 24, 2018

Trade headlines are getting more and more absurd. The Commerce Department apparently will investigate whether car imports impair national security and thus require a 25% tariff, which one trade lawyer said would prompt “pant-wetting laughter — followed by retaliation” among U.S. trading partners. Although maybe, as the linked article suggests, this is all just to put pressure on Mexico during the NAFTA talks, so who knows if it means anything. It’s very hard to say what is going on or where any of this is going. Perhaps, then, this would be a good time to take a break from the headlines and consider some more general trade issues.
I was reading a recent New Yorker article entitled “Is Capitalism a Threat to Democracy?” and, not surprisingly, I came across a lot of points that

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The Canadian Supreme Court Turns Down a Chance To Establish Free Trade Within Canada

April 20, 2018

I previously blogged about a Canadian constitutional challenge to a New Brunswick restriction on purchasing beer from other provinces and bringing it back to New Brunswick. The Canadian Supreme Court ruled on the case yesterday, and, unfortunately, declined its opportunity to establish a broad principle of free trade within Canada.
The constitutional provision at issue, Section 121, states:
All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.
On its face, that sounds pretty broad. But the court came up with a narrow interpretation of the scope of provincial measures that are prohibited:
[114]   In summary, two things are required for s. 121  to be violated. The law must

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How To Deal with China’s Trade Practices

April 9, 2018

In a recent Washington Post op-ed on China’s trade practices, Fareed Zakaria concludes by saying: “Getting tough on China is a case where I am willing to give Trump’s unconventional methods a try. Nothing else has worked.” In my view, he gets a number of things wrong in this piece, but he does raise some important issues, and it’s a good jumping off point for a discussion of how China actually behaves in its trade policy, and what the possible responses are.
Zakaria’s main claim is that, “on one big, fundamental point, President Trump is right: China is a trade cheat.” Many people say this, or some variation of it. But what exactly does it mean to be a “trade cheat”?
What Zakaria seems to have in mind is that China is breaking some World Trade Organization (WTO) rules or taking

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Sorting Out All These Tariffs: Are We Having a Trade War Yet?

March 23, 2018

Tariffs are making headlines just about every day now, but it’s often not clear which stories are about threats of tariffs, and which are about actual tariffs that will be applied. Back on March 8, President Trump announced that he would impose tariffs on imports of steel (25%) and aluminum (10%), but also noted that Canada and Mexico would be exempt and there was going to be a 15 day period to talk about exemptions for other countries (as well as specific product exclusions). Other countries complained that the purported justification for the tariffs, national security, had no basis, and the EU threatened retaliatory tariffs.
That 15 days was up today, but before we get to that, yesterday President Trump was threatening more tariffs, this time only against China, for various

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