The Trump administration has crafted a draft bill — ordered by the president — that would declare America’s abandonment of World Trade Organization rules, according to Axios, which said over the weekend that it obtained a leaked copy of the proposal.
The bill essentially provides President Donald Trump — who has argued for a better position for the U.S. in big trade pacts — a license to raise U.S. tariffs at will, without congressional consent and largely outside of the international rules governed by the WTO.
The bill, titled the “United States Fair and Reciprocal Tariff Act,” would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country. The first is the “most favored nation” (MFN) principle that stipulates countries can’t set different tariff rates for different countries outside of free trade agreements. The second pertains to “bound tariff rates,” which are the tariff ceilings that each WTO country has already agreed to in previous negotiations, according to the Axios report.
“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” said a source familiar with the bill, according to the report. “The good news is Congress would never give this authority to the president,” the source added, describing the bill as “insane.”
Most officials involved in the bill’s drafting — with the notable exception of trade adviser Peter Navarro — think the bill is unrealistic or unworkable. The U.S. Trade Representative, the Commerce Department and the White House huddled on the effort, according to the report.
White House spokeswoman Lindsay Walters told Axios: “It is no secret that POTUS has had frustrations with the unfair imbalance of tariffs that put the U.S. at a disadvantage. He has asked his team to develop ideas to remedy this situation and create incentives for countries to lower their tariffs. The current system gives the U.S. no leverage and other countries no incentive.”
Whether the draft has legs, its existence was adding to general uncertainty around trade issues.
“The threat and other actions against trade will feed global uncertainty, which will eventually undermine growth abroad and leave geopolitical voids,” said Diane Swonk, chief economist at Grant Thornton, in a tweet.
Trade uncertainty was pressuring U.S. stock markets DJIA, +0.23% again Monday. The EU has threatened tariffs of nearly $300 billion against the U.S. if Trump carries out auto tariff threats, according to the Financial Times, which saw a letter sent Friday to the U.S. Department of Commerce.
And Canada reportedly began imposing tariffs Sunday on $12.6 billion worth of U.S. goods, such as ketchup and iron, in a retaliatory back-and-forth after Trump slapped fines on steel and aluminum imported into the U.S.
As for the WTO-focused Fair And Reciprocal Tariff act, its quickly shortened “FART” acronym earned notoriety on Twitter over the weekend:
BREAKING: Wind. #FartAct
— The Gaf (@thegaf) July 2, 2018
