[CTC] Ahead of major decision, Trump is struggling to deliver on his trade promises

[Arthur Stamoulis]

https://www.washingtonpost.com/news/wonk/wp/2017/04/11/ahead-of-major-decision-trump-is-struggling-to-deliver-on-his-trade-promises/?utm_term=.edd5bbacef54 <https://www.washingtonpost.com/news/wonk/wp/2017/04/11/ahead-of-major-decision-trump-is-struggling-to-deliver-on-his-trade-promises/?utm_term=.edd5bbacef54>
Ahead of major decision, Trump is struggling to deliver on his trade promises

By Damian Paletta <https://www.washingtonpost.com/people/damian-paletta> and Ana Swanson <https://www.washingtonpost.com/people/ana-swanson/> April 11 at 10:09 AM
 <>President Trump, who made opposition to free trade with China and other countries a centerpiece of his campaign and has continued with tough talk since entering office, is struggling to enact policies that match his trade rhetoric. 

Within days Trump will decide whether to follow through on his campaign pledge to declare China a "currency manipulator," a designation that could lead to new U.S. tariffs if China doesn't change its practices.

And while Trump has called China "grand champions" of currency manipulation as recently as February, three people familiar with the discussions say it did not appear likely that the Treasury Department would officially designate China in its semiannual foreign currency report due April 15. The people, who spoke on condition of anonymity because the discussions are still underway, stressed no final decision has been made.

Trump had promised to label China a "currency manipulator" on his first day in office, but his administration has moved slowly to follow through on many of his trade-related threats. On Tuesday morning, Trump suggested he would now tie trade discussions with China to whether it works harder to contain North Korea — appearing to add another a new national security element to a negotiation that had previously been based only on economics.

In a tweet, he said he told Chinese President Xi Jinping in a meeting at Mar-a-lago last week that "a trade deal with the U.S. will be far better for them if they solve the North Korean problem!"

Ahead of that meeting, Trump had warned of a "very difficult" discussion "in which we can no longer have massive trade deficits and job losses." Yet the meeting ended with the White House announcing a "100-day plan" to review the U.S. trade relationship with China. Senior administration officials stressed that the White House is working toward building a more constructive relationship with Beijing, not creating a more adversarial one.

“Last week, President Trump, Secretary Mnuchin and members of the economic team held substantive talks with President Xi and his team,” a Treasury Department spokesman said. “While the Treasury is in the process of assessing China’s currency practices along with other major trading partners, the Trump administration will continue to have a productive dialogue with China on a wide range of issues.”

The less-confrontational approach drew harsh criticism from Senate Minority Leader Charles Schumer, who had urged a more aggressive stance in a call with Trump during the Xi summit.

“The ‘100-day plan’ seems typical of what they do: a lot of talk, no action,” he said in an interview.

Beyond China, the White House has also missed an internal mid-March deadline to begin renegotiating the North American Free Trade Agreement with Mexico and China, as a draft letter that would begin the process has not been formally signed.

It also announced a mix of other relatively minor or technical measures to strengthen U.S. trade protections, but experts say those won't do much to benefit U.S. industry unless they're followed by far more substantial action.

“I’m someone who is still optimistic that the administration is going to act on trade reform,” said Scott Paul, president of the Alliance for American Manufacturing, which represents the United Steelworkers as well as leading American manufacturers. “But if it turns out to be the case that we’re in July, the executive orders are simply reports that are piling up and there hasn’t been significant action, I think that will be a real challenge for the administration.”

As with many other issues, there are differing camps within the White House over how to approach trade. White House National Trade Council Director Peter Navarro has urged a much more confrontational approach with China, and Trump's nominee to be U.S. Trade Representative, Robert Lighthizer, has also been critical of their trade and currency practices in the past. But other senior officials have urged more patience in working with China and Mexico, and Trump's tweet on Tuesday morning reflects - for the first time - an acknowledgment that trade discussions can become subsumed into broader diplomatic negotiations.

“I think what they have come to realize is that actual trade policy is a lot more complicated than the rhetoric you can utilize while campaigning,” said Chad Bown, senior fellow at the Peterson Institute for International Economics.

The U.S. is the largest economy in the world, and U.S. companies export goods and services across the globe. American consumers also buy products and services imported from around the world, and these trade relationships can be both beneficial and contentious. Trump has long argued that other countries take advantage of the U.S.’s free trade position and use subsidies, low tax rates, and other practices to gain an advantage, undercutting U.S. firms on pricing and hurting American workers.

A key allegation in his argument is that China has manipulated its currency to gain an unfair advantage over U.S. manufacturers. If China’s currency is distorted in a way that makes it cheaper than it should be, this would make its exports more attractive. But analysts believe China moved away from this practice several years ago. Instead, they believe China is now essentially inflating the value of its currency by selling its vast reserves of U.S. dollars and buying its own currency.

By the measures the Treasury Department has traditionally used to gauge whether a country manipulates their currency, China does not appear to meet the threshold. In the October 2016 report <https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2016-10-14%20%28Fall%202016%20FX%20Report%29%20FINAL.PDF>, the Treasury Department said China fulfilled only one of the three main criteria – maintaining a large bilateral trade surplus with the United States, by exporting more than it imports. Japan, Korea and Germany each met two of the requirements, the Obama administration’s Treasury Department said at the time.

This dynamic makes it much more difficult for Treasury officials to prove Trump’s long-held allegation that China is a "currency manipulator," and Schumer – a longtime critic of China’s currency practices – said in the interview that “they are not manipulating their currency now.” The U.S. last labeled China a currency manipulator in 1994.

During the campaign, Trump promised to crack down on immigration and trade, but he has taken a much different approach to both issues during his first three months in office.

On immigration, he signed an executive order that put in place a temporary ban on travel for people from certain majority Muslim countries. The ban was challenged and overturned in federal court. Trump has also sought several billion dollars to begin the creation of a wall along the border with Mexico.

On trade, the White House has launched numerous reviews but so far done little to change policy.

On Jan. 23, Trump signed an executive action officially withdrawing from the Trans Pacific Partnership, a 12-nation trade deal that President Obama negotiated but had languished with little congressional support.

On March 31, Trump signed two more executive orders that would direct reviews of trade practices but could eventually lead to action or inaction, depending on how they are executed. For example, they direct the Attorney General to create prosecution practices for trade offenses and the creation of a report on trade practices.

White House officials defended Trump’s steps on trade enforcement so far.

Despite Trump's promise to challenge Xi on trade during the Mar-a-Lago meeting, they said the gathering was intended to serve as just the beginning of negotiations and allow the leaders to get to know each other. And they are considering more executive orders that could prod China on its trade practices, such as one that would launch an investigation into the use of subsidies to unfairly distort trade practices.

And they are hopeful the White House's trade strategy could begin firming up at the end of this month, as lawmakers are hoping to confirm Lighthizer into his role.

White House officials have said there are a number of things it could do to challenge China on its trade practices, regardless of whether it formally identifies Beijing as a currency manipulator. The White House could try to impose new trade enforcement cases against China for flooding global markets with cheap steel and aluminum, for example. And it could also seek to use a 2016 law that allows it to block U.S.-backed financing for projects in China if it finds Beijing has not done enough to change trade practices.

“Meaningful steps towards fulfilling the President’s promise have already been taken, and there are more to come,” a White House spokeswoman said.


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