Pat Toomey, we miss you already

In his last substantive speech to the Senate (he gave a moving Senate farewell some days later), retiring Sen. Pat Toomey (R-Pa.) lambasted the use of security rationales to cover economic protectionism, arguing that the tactic would “haunt us like a protectionist Frankenstein unless Congress reins in executive abuse of the law.” Specifically, Toomey was referring to Section 232 of the Trade Expansion Act of 1962, which provides a security exception that allows the executive branch to take defensive trade action if U.S. security is threatened.

President Donald Trump had invoked Section 232 when he placed high tariffs on steel and aluminum products imported from China and even U.S. allies. The Biden administration has largely continued the policy under the same rationale. Zeroing in on steel, the senator pointed out that numerous economic studies have demonstrated the flawed cost/benefit claims of both the Trump and Biden administrations. Although steel tariffs benefit 140,000 domestic steel workers, it’s at the cost of harming tens of millions of workers in steel-using industries affected by increased import costs. And he pointed to a study that demonstrated every steel job saved cost the U.S. some $640,000. 

Regarding the security rationale for steel, Toomey indicated the Defense Department had advised President Trump against the action, noting that defense needs were satisfied by only 3 percent of U.S. domestic production and that U.S. allies — not China — supplied much of steel imports.

Toomey’s ultimate goal was to have Congress reassert its constitutionally-based authority to reclaim control and force congressional approval before the executive branch launched investigations and tariffs under Section 232.

The “Frankenstein” that Toomey feared stems from a recent proposal (still in its formative stages) by the U.S. Trade Representative to European leaders to establish an international consortium, led by the U.S. and European Union, that would establish and enforce decarbonization levels, initially for steel and other metals but potentially expanded to other trade goods. Under the proposal, nations that join the consortium would have to agree to common rules on carbon content (measured by a system not yet determined) and agree to strict enforcement through countermeasures. Nations within the consortium would be subject to zero or lower tariffs than those outside the club.

The Biden administration has yet to advance a legal foundation for its proposal, but some members of Congress and progressive think tanks such as the Roosevelt Institute are strongly urging invocation of Section 232, not least because Trump and Biden have both alleged sweeping executive power and leeway under the authority. Toomey is certain that ultimately the Biden administration will attempt to expand the national security rationale to include environmental restrictions.

World Trade Organization (WTO) panels repeatedly have ruled against the U.S. on its position regarding Section 232, denying the claim that the national security exception was “self-judging” and beyond the authority of multilateral trading rules. Despite their loud public assertions of adherence to WTO rules in contrast to the Trump administration, the response of Biden trade officials has echoed Trump’s Section 232 defiance with rhetoric that questions the legitimacy of the judicial process itself. U.S. Trade Representative Katherine Tai railed against “unelected, not really accountable, decision-makers in Geneva” challenging a “legitimate national security decision.” The WTO, she warned, “is getting itself on very, very thin ice.”

It’s complicated. Clearly, Toomey performed a public service in identifying the national security/protectionist subterfuge and potential plans to utilize Section 232 to undergird future green protectionism.

But beneath the political cynicism of the U.S. position, there is a deeper substantive issue. WTO rules, as presently written, are incapable of dealing with Chinese state capitalism, with its myriad of anti-competitive actions; the invisible lines between state and private actions; and the open and hidden national, provincial, and local subsidies.

Multilateral trading rules on state actions and subsidies need to be updated, but prospects for new rules and judicial reform are not good in the immediate future. Still, the U.S. advocacy for change would be more credible if it heeded Toomey’s call for a more deliberate Section 232 invocation process, reinforced by congressional oversight and approval. It’s time to end the executive branch’s unilateral “anything under the sun” security assertion.

Claude Barfield is a senior fellow with the American Enterprise Institute. A  former consultant to the Office of the U.S. Trade Representative, he researches international trade policy, the World Trade Organization, intellectual property, and science and technology policy.