Trade policy in 2018 requires a scalpel, not a hammer, Mr. President

President Donald Trump believes that his tough stand against free trade agreements was key in his path to the White House. In fact, a large share of U.S. voters believe that shuttered plants across America’s industrial landscape are caused by unfair trade agreements.

For the first time, more Republicans than Democrats say that free trade has cost the U.S. more jobs than it has created, a role reversal that spiked during the 2016 campaign. Trump tapped into these views to gain a political advantage.

Even the hardiest free-trade advocates recognize that opening markets indeed creates losers in the U.S.; but they create far more winners:

{mosads}Consumers can purchase cheaper imported goods. U.S. companies import the inputs they include in products they sell at home and abroad. U.S. government data shows that at least 50 percent of all U.S. imports are used as inputs into goods made by American workers, including those in good-paying export jobs.

Trade rules certainly must be enforced and updated to reflect changing global realities. Nonetheless, the president’s unilateralist approach is the wrong response and will cost jobs, not preserve them.

For the first time in decades, a president believes that the U.S. consistently loses from U.S.-led free trade agreements; that U.S. trade deficits mean that we “lost” and were out-negotiated; and that imports kill American jobs.

But we have an overall trade deficit because as a country we spend more than we produce at home, with a need for goods produced all over the world.

President Trump sees the World Trade Organization (WTO), which the U.S. championed to insure a rules-based system to adjudicate trade disputes, as inherently biased against us and that only by unilateral action can America reverse the ruinous impacts of foreign-made goods.

In his first year in office, President Trump has readied a broad array of trade weapons. If deployed injudiciously, they will reverse a decades-long bipartisan consensus that has made the U.S. the world’s largest, most open and highly competitive economy. It could backfire with America’s trading partners and badly hurt the very regions and voters that propelled Trump to victory.

The “America First” trade weapons that may be fired in 2018 draw from the arsenal of authorities that Congress gave presidents to combat trade practices that disadvantage American companies and/or damage U.S. interests.

But in recent decades, presidents from both parties have used these authorities sparingly and surgically because of their negative ramifications. President Trump, however, is drawing upon rarely used provisions like Section 232 of the 1962 Trade Expansion Act based upon ill-defined “national security” grounds.

“Safeguard” actions under Section 201 of the 1974 Trade Act, not used since 2001, are being threatened against damage alleged to have been caused to U.S. solar and washing machine producers, which could unleash a torrent of additional requests for relief.

Actions against China are moving ahead under Section 301 of the 1974 Trade Act, which can be used against discriminatory trade actions that burden U.S. commerce.

Beginning with Trump’s inauguration through Dec. 11, the Department of Commerce (DOC) initiated 79 antidumping (AD) and countervailing duty (CVD) investigations against imports allegedly sold below the cost of production — up over 50 percent from 2016 levels. For the first time in over 25 years, the DOC self-initiated AD and CVD investigations of aluminum from China.

Since 2008, the use of protectionist, trade-distorting policies and regulations has indeed increased worldwide. China, in particular, has doubled down on its state-capitalist model with a withering variety of trade and investment restraints, and it is not alone.

Global Trade Alert recently found that most G20 countries, including Germany and Japan, have put in place substantial new non-tariff barriers, despite the G20’s commitments to reduce trade barriers.

But these challenges must be handled with great care, i.e., with a scalpel not a hammer. There are great economic and geopolitical dangers to an indiscriminate deployment of these trade weapons. First, the global economy is in a sweet spot not seen for decades, with synchronous, if fragile, growth in all major markets.

As the International Monetary Fund (IMF) has warned, an uptick in protectionism remains a major threat to global growth. This is no time to risk throwing a trade-war monkey wrench into the global and U.S. economies, especially given the pressures from rising U.S. debt associated with recent U.S. tax cuts.

Restrictions on imported inputs would disrupt essential supply chains, make our exports more expensive and less competitive in world markets and increase prices for American consumers, with the greatest burden on poor and middle classes.

Second, other countries will not take the administration’s unilateral trade actions laying down. The European Union is already threatening to deploy its own trade instruments against U.S. products, and it is in talks on new trade agreements with others.

Canada has just filed a massive case against the U.S. at the WTO for a variety of U.S. trade practices, which other countries may join. China, the largest holder of U.S. government debt, is threatening to cut its bond holdings and retaliate against U.S. investors.

If the U.S., the progenitor of the liberal trade order, sharply reverses course, our trading partners will take “me-too” restrictive actions. A global wave of tit-for-tat restrictions would hardly benefit U.S. companies and working Americans.

Third, the “America First” trade agenda is already having real geopolitical impacts. President Trump became the first president in American history to ditch a completed, U.S.-led multilateral trade deal when he withdrew from the 12-nation Trans-Pacific Partnership (TPP) in early 2017.

This was a political and economic gift to China. TPP would have opened Asian markets to U.S. products, raised intellectual property and environmental protections and served as a critical counter to China’s influence in Asia.

The remaining 11 TPP countries have moved on without us, and countries in the region, even long-time allies, are moving closer to China’s trade orbit, making it harder for the U.S. to counter China’s destabilizing actions in the South China Sea.

Facing a real threat that the U.S. will withdraw from the North American Free Trade Agreement (NAFTA), Canada and Mexico are looking elsewhere for markets and suppliers. Our threat bolsters the Mexican presidential election prospects of anti-American populist Andres Manuel Lopez Obrador.

Harsh action against Chinese imports and investment will not improve their disposition on sanctions against North Korea. It is critical to firmly manage, but not escalate, trade tensions with China and others to avoid working against our broad geopolitical interests.

The administration has made trade the boogeyman for all the legitimate angst and anger of American workers. The challenge for those who believe free trade is a net positive for the American people and our nation’s influence in the world is to fight protectionism.

In addition, we must make our economy work better for all citizens by helping communities left behind by rapid technological change through investments in new infrastructures, new industries and new ideas. We must continue to project America’s best values abroad, rather than resorting to walling off our markets.

Ambassador Stuart E. Eizenstat is the former chief White House domestic policy adviser to President Carter (1977-1981); U.S. ambassador to the European Union, under secretary of commerce for international trade, under secretary of State for economic, business & agricultural affairs; and deputy secretary of the Treasury. His book, “President Carter: The White House Years,” will be published in the spring.  

Anne Pence, Ph.D., is a former State Department international economist.