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Breakbulk July 2018

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20 The Journal of Commerce | July 2018 Breakbulk & Project Cargo IT'S DIFFICULT TO imagine precisely what Washington's end game might be with the recent imposition of tariffs on Canadian, Mexican, and European steel and aluminum imports. When the US administration ini- tially floated the idea in spring 2017, it did so on the grounds that the dearth of manufacturing in the United States posed a threat to national security in- terests. At the time, few observers be- lieved national security interests were really at play, with most speculating it was simply a populist administra- tion attempting to find a convenient, legal loophole to push through a "Buy American" agenda. By the time the tariffs were formally announced in March 2018, along with exemptions for countries that represent the bulk of US steel imports, speculation had shifted to the US-China trade rift, with many believing President Donald Trump and Commerce Secretary Wilbur Ross were sending a message to China that the United States means business when it comes to ethical trade practices. Others speculated the tariffs were a timely means of forcing the hands of Canadian and Mexican North American Free Trade Agree- ment (NAFTA) delegations to wrap up trade talks so that the current Congress would have the opportuni- ty to approve the revised trade deal before the completion of its term in December. Still others speculated it was Washington showing it would take a carrot-and-stick approach to trade What's particularly troublesome about the now tense relationship with the European Union is that the multilateral entity would have served as a critical US ally in the fight against Chinese overproduc- tion and dumping of metals on international markets, putting other metal-producing countries at an unfair disadvantage. That alliance is looking increasingly unlikely in the aftermath of Washington's decision. If not for trade negotiation, why then might the US administration have chosen to impose these tariffs? It must be to protect the US steel industry and the jobs of US steel workers. If that's the case, it's not working out so well for Trump. Unit- ed Steelworkers, the largest union representing industrial workers in the United States, immediately responded to the White House announcement with a statement denouncing the decision. "This decision is unacceptable and calls into serious question the design and direction of the administration's trade policy," the statement read. Perhaps the tariffs were imposed because the US administration wanted to help correct a trade imbal- ance between the United States and Canada? Then again, the commerce secretary himself noted to a Senate hearing that steel trade in aggregate between the United States and its partners remained relatively balanced. So, if the tariffs will not improve the United States' trade negotiating position, will not curry favor with steel workers, will not correct a trade imbalance, will not deflate China's hegemony in the international steel market, and will not address alleged national security concerns, what then will the outcome be? Anyone? l Daniel J. McHugh is chief executive officer at customs brokerage, freight forwarding, and trade consulting firm Livingston International. Contact him at talks with the European Union. All these hypotheses may still be valid, but achieving these goals seems far less likely today than it did before the exemptions were lifted on May 31. Far from hastening the conclu- sion of the NAFTA talks, the steel tariffs will serve only to create greater tension at the negotiating table and to leave Canadian and Mexican delegations with a sense that their trade partner isn't nego- tiating in good faith. Both countries have already publicly stated they will be putting in place retaliatory tariffs, and Canada doesn't appear to be softening its rejection of the so- called Sunset Clause proposed by the United States, which would see the terms of NAFTA revisited every five years with the option for parties to withdraw from the agreement. The European Union, which had attempted to find a means of working with the United States on improving trade relations without success, is likely to further dig in its heels. In response to the White House's announcement, EU Trade Commissioner Cecilia Malmstrom stated the following about US-EU trade talks: "Throughout these talks, the US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU. This is not the way we do business, and certainly not between long-standing partners, friends, and allies." The European Union stated it would file a dispute settlement case with the World Trade Organization and impose retaliatory tariffs on US imports. Daniel J. McHugh What's the end game? Far from hastening the conclusion of the NAFTA talks, the steel tariffs will serve only to create greater tension at the negotiating table and to leave Canadian and Mexican delegations with a sense that their trade partner isn't negotiating in good faith.

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