Congress's efforts to block Trump on tariffs, China's ZTE fizzle

Monday , July 02, 2018 - 10:45 AM

Erik Wasson and Jenny Leonard

(c) 2018, Bloomberg.

U.S. exporters want Congress to rein in President Donald Trump on tariffs, and national security hawks want Congress to force him to put Chinese telecom gear-maker ZTE Corp. out of business.

Good luck with that, trade experts and lobbyists say: Congress is unlikely to stop deferring to Trump anytime soon.

Trump has announced wide-ranging tariffs on steel and aluminum imports on grounds of protecting national security. He’s also threatening to use the national security language in Section 232 of the 1962 Trade Expansion Act to impose an as much as 25 percent tariff on auto imports.

The Senate showed the first signs of trying to take on Trump on trade in June, but those attempts at defiance have fizzled.

Free-trade Republican Sens. Bob Corker of Tennessee and Pat Toomey of Pennsylvania proposed requiring Trump to get congressional approval for tariffs based on national security -- but they never got a vote on attaching the measure to defense and farm policy bills.

The Senate Finance Committee says it will work on the issue, but unless the provision is combined with other must-pass legislation, it would be easy for Trump to veto. And it would take a two-thirds vote in the House and Senate to overturn a Trump veto.

The Senate’s attempt to steer Trump’s approach to ZTE, China’s second-largest telecommunications equipment maker, also faces an uphill battle. National security hawks in both parties have balked at Trump’s deal with Chinese President Xi Jinping to go easier on ZTE.

The company got into trouble in 2016 for violating U.S. laws restricting the sale of American technology to Iran and North Korea. It agreed to pay a big fine and penalize the workers involved. But the Commerce Department said in April that ZTE violated the agreement, and imposed a seven-year ban on U.S. exports to the company -- a penalty ZTE said would force it to shut down.

The defense policy bill would reimpose a ban on U.S. exports to the company unless Trump certifies it hasn’t violated the law for a year. The language is likely to be removed from the bill or watered down to the point of being toothless.

“There will be a lot of moaning and whining but no real action,” said trade expert Bill Reinsch of the Center for Strategic and International Studies. “For Republicans, their base is his base. He is very popular with his base.”

Reinsch, who served on congressional staffs for Democrats and Republicans, said that while the Senate Finance Committee may have hearings on trade, any attempt to vote on a bill is a long way off.

Congress lost even more leverage when it let an extension of executive trade powers take effect this week without a fight.

On July 1, Trump’s ability to negotiate trade agreements under Trade Promotion Authority was automatically extended into 2021 after no lawmakers sought to block it. The Constitution gives power over trade to Congress, but the legislature has ceded much of that power using TPA, which grants any trade deal a quick up-or-down vote. Earlier in the year, free-trade proponents had discussed using the expiration of TPA as leverage to influence Trump.

“Any scenario where Congress is able to unravel Trump’s use of Section 232 is pretty far-fetched,” said Scott Paul, president of the Alliance of American Manufacturing, a coalition of domestic industry and the United Steelworkers. He said most Republicans are willing to see if the president’s negotiating strategy yields results before challenging it.

In some cases, Congress may be more willing to push back on the Trump trade agenda. Lawmakers would revolt if Trump goes through with auto tariffs or withdraws from the North American Free Trade Agreement or the World Trade Organization, said Reinsch.

Reinsch said auto dealers are an especially influential constituency for members of Congress because they’re located throughout the country. On Nafta, the agreement holds particular importance for swing elections in the Dakotas, Montana, Texas, Arizona and Missouri.

“Short of auto tariffs or Nafta withdrawal, it will just be a lot of speeches and table pounding,” he said.

NAFTA withdrawal probably wouldn’t come until after the November election at the earliest, while auto tariffs aren’t seen as imminent, despite Trump’s statement on Friday that they could be imposed in a matter of weeks. Auto tariffs could come only after the Commerce Department investigates the national security risks of those imports, and that could run into early next year.

House Ways and Means Committee Chairman Kevin Brady of Texas, whose committee is in charge of trade policy, responded, “yes,” when asked on Friday whether Congress would act to oppose Trump should he impose tariffs on imported autos and auto parts.

Still, Brady added that overall, “We support the president’s challenge to China and others on unfair trade practices” and will work to “make sure that fairly traded products and goods can continue to flow.”

U.S. tariffs on $34 billion of Chinese goods is set to take effect on Friday, and Trump is targeting another $16 billion. China plans to retaliate on the same value of U.S. goods.

That behind-the-scenes approach has been met with limited success so far, as the president has targeted allies including Canada, Japan and the European Union for tariffs.

“Members of Congress attack President Trump for beating up on friends and allies with Section 232 instead of focusing on China,” Derek Scissors, China analyst at the American Enterprise Institute said. “But Congress has the authority both to protect our friends and force the administration to confront the Chinese, and it’s done almost nothing.”

Once Congress returns from recess the week of July 9, negotiations over restrictions on ZTE are expected to pick up in a House-Senate conference on the annual defense policy bill. Lawmakers want to send the defense bill to Trump for his signature by the end of the month.

The Senate-passed bill would reimpose the ban on exports to ZTE unless Trump can certify that the company is cooperating with the U.S. and hasn’t violated the law in the last year. The House bill would block only government procurement of ZTE products. The early signs are the the Senate will drop its provision.

“A compromise on ZTE is being worked on as we speak. It will be something that reforms ZTE and looks forward and not backward,” said Senator Lindsey Graham, a South Carolina Republican and staunch Trump ally.

There are also questions about how effective the Senate language would be. By some accounts ZTE last violated the law on July 20, 2017, and any legislation passed more than one year after that would be ineffective. A Congressional Research Service report on the dispute maintains ZTE was in violation of the law into this spring.

Dan Price, who served as a trade policy assistant in the George W. Bush White House, expressed frustration at Congress’s reluctance to oppose Trump on trade.

“Its unwillingness to exercise clear constitutional prerogatives simply enables the president to inflict real harm on their constituents, fray alliances and dim the U.S. economic outlook,” Price said. “At a certain point, one must conclude that Congress is either supine or complicit.”

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Bloomberg’s Jennifer Jacobs contributed.

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