National Security and International Trade
Using an almost 60-year-old Cold War era law President Trump ordered steel and aluminum tariffs levied against friends and foes alike in the name of national security. But what does national security mean when it comes to international trade? Like much of what the government does, it isn’t as straightforward as you might think. So, let’s go exploring, beginning with a pop quiz. Write down what you think national security means within the context of international trade. Don’t look beyond the photo below until you have a definition. You don’t have to share your definition with anyone, but I implore you to write it down. This will give you a firm starting point for our exploration.
Definition of National Security Within the Context of International Trade
Have you taken the pop quiz? If not, please go back to the beginning of the article. Your final grade for this article hangs in the balance.
Now that you have your pop quiz answer in front of you let’s get to the bottom of what trade-related national security really means. In seeking out an authoritative answer let’s begin with a source you probably overlooked unless you are a real trade policy geek — the World Trade Organization. After all it is the international organization charged with overseeing trade rules. Then again if you are a trade policy geek, you probably already know that the WTO authorizes member nations to take measures that protect their “essential security interests.” Unfortunately, no guidance is given as to what constitutes an essential security interest. Here member nations are on the honor system to not abuse this gaping loophole in the WTO’s rules-based trading system.
Of course, the most obvious place you might expect a definition of national security is in Cold War law itself, and here we have some limited luck. A Congressional Research Service report lays out the basics:
“While there is no specific definition of national security in the statute, it states that the investigation must consider certain factors: domestic production needed for projected national defense requirements; domestic capacity; the availability of human resources and supplies essential to the national defense; and potential unemployment, loss of skills or investment, or decline in government revenues resulting from displacement of any domestic products by excessive imports.”
Congratulations if your definition highlighted national defense. It clearly plays a key role in the law’s intent. Unfortunately, according to Department of Defense Secretary Mattis it didn’t come into play for the steel and aluminum tariffs Trump imposed. In a memo to the Commerce Secretary Mattis wrote that the Department of Defense (DOD) “does not believe that the findings in the reports (for steel and aluminum) impact the ability of DoD programs to acquire the steel or aluminum necessary to meet national defense requirements.” (File has been moved or removed from Commerce Department site. As of 11/11/18 it was available as an archived file.)
So where are we regarding the definition President Trump used? We’re certainly not there yet, but there is a definition. Before we get into the mess that is a definition a reworking of an old accounting joke is in order. It seems that a New York real estate developer-turned-President was in need of a trade policy analyst. Three applicants applied. In each interview the developer-turned-President asked a straightforward trade policy question. The first two applicants provided the equally straightforward answer. Before answering the third applicant searched the Oval Office for listening devices and once satisfied there were none asked what answer the developer-turned-President would like. Guess which applicant was hired. In fairness, this joke can be adapted to apply to numerous past presidents.
Given Congress and the WTO didn’t supply a definition the obvious answer is for the Administration to supply it’s own. In pursuit of this the Trump Administration adopted the definition used by the George W. Bush Administration in a 2001 investigation of the national security implications of international iron ore and semi-finished steel trade. The Bush report states:
“It is clear that, at a minimum, an assessment of the United States’ ‘national security’ requirements must include a military or ‘national defense’ component.
In addition to the satisfaction of national defense requirements, the term ‘national security’ can be interpreted more broadly to include the general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements, that are critical to the minimum operations of the economy and government (‘critical industries’). To be sure, a definition of national security that includes critical industries is not dictated by statute.”
Unfortunately, allowing the Administration to define national security is analogous to letting the fox guard the hen house. If an Administration cannot find a breach of national security when it’s allowed to define the term, it’s either not trying or doesn’t want to find a breach. In 2001 George W. Bush’s Commerce Department, using the above definition, was “…unable to conclude that imports of iron ore and semi-finished steel threaten to impair the national security of the United States…”. In this case two Democrats in the House of Representatives pressured the Bush Administration into doing the investigation, but given the findings, it is obvious that Bush’s heart wasn’t in it.
However, using the same definition President Trump’s Commerce Department was able to find a breach of national security for both steel and aluminum. Given President Trump’s 30 odd year disdain of international trade, this finding is not a surprise, but to make sure no stone was left unturned the Administration added another benchmark for finding a national security breach — the requirement that domestic steel and aluminum mills operate at 80 percent of their production capacity. This sealed the deal.
At President Trump’s behest the Commerce Department is investigating automobile imports for possible national security issues. Additionally, two uranium mining companies petitioned the Trump Administration to pursue a national security investigation of uranium imports. Both investigations are underway. I wonder what the outcomes will be.