THE KAPLAN HEARING AND THE TOUGH-TALK CONUNDRUM 

"So far in this administration, there's been a lot of tough talk on trade enforcement, but there hasn't been much in the way of action. And there is a real cost to all of the overhyped rhetoric when the follow-through isn't there."

Sen. Ron Wyden

August 3, 2016

Senator Ron Wyden of Oregon is the most senior Democrat, the Ranking Member, on the Senate Finance Committee. Last Thursday, August 3, the Committee held hearings on three nominees for positions in two quite different departments, namely, the Department of Commerce and the Department of Health and Human Services. Today's featured quote is from Senator Wyden's opening statement at that hearing.

Here is a longer excerpt from the same statement:

We have highlighted the statement about Mr. Kaplan's background, not because it was the most important thing Senator Wyden said last Thursday, but because it underscores our impression that the hearing was not about whether Gilbert Kaplan should be confirmed as Under Secretary of Commerce for International Trade. He seems to enjoy broad support on the Committee, and there is little doubt but that he will be the Under Secretary. We will deal with the question of when below.

Rather than a yes-or-no on the nominees, the Committee's August 3 hearing was about other things. One was observing the necessary formalities for positions requiring Senate approval, i.e., "Advice and Consent." The other was providing opportunities for Members of the Committee to obtain certain commitments from the nominees and to send messages to the Administration and their constituents on the issues they care about.

For the record, those other nominees are Matthew Bassett, who has been nominated to serve as Assistant Secretary for Legislation at the Department of Health and Human Services and Robert Charrow, who is in line to become the next General Counsel at HHS. Disparate as their respective areas of expertise and responsibility might seem, some of the discussion surrounding the HHS issues -- starting with the implementation of the Affordable Care Act -- more than held our interest. Beyond that, Mr. Charrow's opening statement was a profound and profoundly useful discussion of the role of a general counsel in a U.S. Government agency and the interplay between law and regulation in the American system. We expect to come back to it sooner rather than later.

Steel and National Security. For this brief entry, however, we will confine ourselves to two of the trade issues raised by Senator Wyden. One is the challenge of steel imports, especially imports from China, and the fact that in April the Commerce Department opened an investigation into the question of whether such imports are a threat to America's national security. This was under Section 232 of the Trade Expansion Act of 1962. Senator Wyden is quite correct that the Administration had earlier led the world to believe that a decision -- and potential action -- was imminent, only to then, in effect, slow the process down. To date no report has been issued and no action taken.

Against that background, it did not surprise us to learn that some steel shipments to the United States had been accelerated, almost certainly to avoid new restrictions.

Those who care about this trade will judge from their own perspectives whether these are positive or negative developments. We would simply point out that there are other considerations. Yes, the increased likelihood of U.S. trade restrictions on a product will often accelerate the pace of foreign shipments. Exporters will want to get in under the wire if they can. But there are other effects. For example, the increased likelihood of a trade action will, more often than not, make buyers of imported commodities reluctant to commit to long term contracts. They don't want to be left holding the bag of unaffordable or unattainable products. For that reason, the 232 threat may, by itself already have worked to the advantage of some American producers.

Then, there is the wider question of determining what in fact is good public policy. Surely, the fact that investigations like the current 232 investigation on steel raise the hopes of some and the fears of others does not mean such investigations should never be undertaken. Those uncertainties are a necessary cost of asking difficult questions. And the question of whether the United States should use Section 232 in the current instance is a difficult one, especially since whatever is done in steel will have repercussions for other sectors. We do not have a view as to how the Administration should come out on this, but if they have decided that they need a little more time on this one, they should take it.

Softwood Lumber. All that pine, it's been an irritant in the U.S.-Canada trade relationship for a very long time, but a manageable one. The problem is that the most recent iteration of the U.S.-Canada Softwood Lumber Agreement (SLA), the principal management tool, expired in October 2015. And so America cranked up the trade defenses against softwood lumber imports from Canada, both antidumping and countervailing duty (anti-subsidy cases). Those cases are now coming to a head. Preliminary dumping and subsidy margins have been announced, and the plan is to consolidate them in a final ruling. This was explained in a Federal Register notice issued by the Commerce Department on April 28, which stated that:

There are lots of reasons to get it done sooner rather than later. The NAFTA negotiations are set to begin next week. It would be nice to have softwood lumber settled before it wormed its way into the NAFTA talks. Then there are the looming final decisions on antidumping and countervailing duties. Those can only complicate the situation further.

But Senator Wyden and his colleagues on the Finance Committee don't want things to go too fast. Specifically, they don't want things to move so quickly that they leave the Finance Committee out of the picture. On July 24, Senator Wyden, Senator Mike Crapo, a Republican from Idaho, and five others Committee Members wrote to USTR Robert Lighthizer and Commerce Secretary Wilbur Ross forcefully, making just that point. They wrote: