Section 201 Investigation

The Congressional Research Service (CRS), a nonpartisan staff to congressional committees and Members of Congress, has released an overview report, International Trade and Finance: Overview and Issues for the 116th Congress, in which it offers a brief review of President Donald Trump’s first two years in office and policy issues that the new 116th Congress may address. The policy issues include: the impact of trade and trade agreements on the U.S. economy; the causes and consequences of the U.S. trade deficit; the implications of technological developments for U.S. trade policy; and the intersection of economics and national security.

The report acknowledges that the president has focused his trade policy on “reevaluating many U.S. international trade and economic policies and relationships.” The report also notes that members of Congress “exert significant influence over U.S. economic and trade policy and its implementation through their legislative, appropriations, and oversight roles” and that “[g]iven current debates, fundamental questions about the future direction of trade and international economic issues may be key areas of interest for the 116th Congress.” Some of the trade issues discussed in the report are:

  • Tariff Actions Undertaken by the Trump Administration – summarizing imposed and/or increased tariffs under: (1) Section 201 of the Trade Act of 1974 on U.S. imports of washing machines and solar products; (2) Section 232 of the Trade Expansion Act of 1962 on U.S. imports of steel and aluminum, and potentially autos, auto parts and uranium; and (3) Section 301 of the Trade Act of 1974 on U.S. imports from China; and retaliatory tariffs implemented by other countries.
  • U.S.-China Trade and Key Issues – summarizing China’s economic rise and increasing U.S. tensions over various economic and trade issues “stemming largely from China’s incomplete transition to an open-market economy,” including: (1) China’s industrial policies and Made in China 2025 initiative; (2) China’s policies on technology, innovation, and intellectual property and its economic espionage; and (3) China’s Belt and Road Initiative.
  • U.S. Bilateral and Regional Trade Agreements and Negotiations – summarizing a number of trade actions and negotiations the Trump administration has undertaken concerning free trade agreements, including: (1) the U.S.-Mexico-Canada Agreement (USMCA); (2) modifications to the U.S.-South Korea (KORUS) free trade agreement; (3) ongoing U.S.-European Union trade negotiations; (4) U.S.-Japan trade negotiations; and (5) the call for launching U.S.-United Kingdom free trade agreement negotiations.
  • The World Trade Organization – summarizing the state of affairs and growing challenges facing the World Trade Organization (WTO) and calls for reforms of its functions, including: (1) the lack of any modernization of its rules since 1995 despite numerous multilateral and plurilateral negotiations; (2) the entrenched differences in priorities among leading emerging market economies, developing countries and advanced economies; and (3) skepticism over the WTO’s dispute settlement system.

In addition to these high-profile trade matters, the CRS report also provides details on more general trade issues such as intellectual property rights, labor and environmental conditions in trade agreements, and select U.S. import policies. It concludes with an overview of foreign direct investment in the United States and a review of international financial institutions and markets relied upon to discuss and coordinate economic policies.

International trade matters, at times, dominated the 2018 political landscape. Those of us at Trump and Trade expect 2019 to be no different. While the CRS report offers a broad overview of the policy debates that remain, we recommend a quick review of it. The report itself concludes that these issues “provide the backdrop for a potential robust and complex debate in the 116th Congress over a range of trade and finance issues.”

As expected, the European Union, China, South Korea and Taiwan have formally requested WTO consultations with the United States over the Trump administration’s Section 201 global safeguard measures on imports of certain solar cells and washing machines. The countries requested consultations under Article 12.3 of the WTO Agreement on Safeguards, which entitles affected countries who are exporters with a “substantial interest” in the products concerned to have an “adequate” opportunity for prior consultations before application of the safeguard measure can be imposed by the United States.

While requests for consultation are not formal challenges and do not initiate the WTO’s dispute settlement procedures, such consultations are often the precursor to a further action. WTO rules allow for safeguard measures such as temporary restrictions on imports; however, they also require the country imposing such measures and import restrictions to maintain balanced trade with those countries affected. It is possible that if consultation fails to resolve concerns, these countries could eventually retaliate by imposing their own trade restrictions.

Examples of these requests are provided here: China; South Korea.

Under Section 201 of the Trade Act of 1974, President Donald Trump has imposed new tariffs on imported large residential washing machines and imported solar cells and modules, marking the first time the United States has imposed global safeguard restrictions since 2002. These new tariffs were based on recommendations by the U.S. International Trade Commission.

In the Section 201 washing machines case that domestic producer Whirlpool requested last summer, the president instituted a 20 percent tariff rate on the first 1.2 million imports, which will decrease by 2 percent annually the next two years. For imports beyond the first 1.2 million units, the president imposed a 50 percent tariff rate, which will decrease by 5 percent annually the next two years. For additional information on this tariff, the covered washers, and other adjustments, please see the Presidential Proclamation to Facilitate Positive Adjustment to Competition from Imports of Large Residential Washers. The U.S. Trade Representative has also released a Fact Sheet that sets forth details on the Tariff-Rate Quotas being applied.

In the Section 201 solar cell and module case that domestic producers Suniva and SolarWorld requested last year, the president imposed a 30 percent tariff rate the first year, which will decrease by 5 percent annually the next three years. Under this plan, the first 2.5 gigawatts of imported cells will be excluded from the additional tariff. For additional information on this tariff, the covered crystalline silicon photovoltaic (CSPV) cells, and other adjustments, please see the Presidential Proclamation to Facilitate Positive Adjustment to Competition from Imports of Certain Crystalline Silicon Photovoltaic Cells. The U.S. Trade Representative has also released a Fact Sheet that sets forth details on the additional duties being applied.

In announcing these Section 201 actions, President Trump stated that his administration “is committed to defending American companies, and they’ve been very badly hurt from harmful import surges that threaten the livelihood of their workers, of jobs, actually, all over this country — many different industries.” With regard to washing machines and solar cells, he stated that these trade actions “uphold the principle of fair trade and demonstrate to the world that the United States will not be taken advantage of anymore.”