POTUS Rules the Trade Wars. Thank You, Congress.
Until Trump, lawmakers could rely on the White House to take the heat for unpopular agreements.
Once upon a time, Congress had the lead role in trade policy. Think back to the “tariff of abominations” of the 19th century or Smoot-Hawley of the 20th in your high school history class. So how did the presidency come to take charge of trade to the extent that it’s news when a bipartisan group in the Senate and some House Republicans move to reclaim that power? And why is that objective probably unachievable, as Senate Majority Leader Mitch McConnell suggests?
Jennifer Delton, at Made by History, describes how trade-supporting liberals, beginning in 1934, increasingly delegated authority over trade from Congress to the president. The assumption was that the executive would be more inclined to favor “free” trade than Congress and more capable of achieving national trade goals. There are several reasons for that.
The president is the only politician elected to care about the whole nation. Most economists would agree that foreign trade is good for the nation but can be bad for some sectors of the economy. Free trade works because specialization is beneficial to all trading partners, as Adam Smith demonstrated long ago. For example, if the U.S. is relatively better at building planes than making shoes then it should make more planes and buy shoes. 1 But specialization can also mean that some jobs disappear, even as the overall number of jobs increases, benefiting all of us as consumers. Unfortunately, that creates a situation in which most people are indifferent to or mildly supportive of trade, and they (or their representatives) face off against impassioned minorities that are harmed by it. That kind of situation produces gridlock in Congress. The solution is to let the president handle the policy, because he or she is the only politician who truly cares about overall majorities. 2
The modern trading system involves international negotiations and that’s the president’s area. In the old days, the key issues simply involved adjustments to U.S. policy: Would tariffs be high or low? Which products would be affected? The postwar trade system, however, required bilateral and multilateral treaties and other international commitments, including the World Trade Organization, the North American Free Trade Agreement or even the hypothetical agreements President Donald Trump claims to be interested in negotiating. Formal treaties, of course, need to be ratified by Congress, but negotiating them falls to the executive branch and to the president. 3
Modern trade agreements are complicated, and Congress isn’t up to the task. Congress still was able to legislate trade through the 1980s. But the 1988 Omnibus Trade and Competitiveness Act was referred to six House committees and had contributions from five others. Bills associated with NAFTA and GATT in 1993 were each referred to six committees as well. The conference committee for the 1988 bill included almost half of the entire Congress, with nine Senate and 14 House committees represented (for more detail, see Barbara Sinclair’s “Unorthodox Lawmaking”). But that was before Newt Gingrich’s speakership sparked a long-term erosion of congressional capacity. Congress now is hard-pressed to write legislation on that level, even if lawmakers wanted to.
Party dynamics work against a congressional role. In the old days, powerful committee (or even subcommittee) chairs sought to use their influence to control a slice of public policy. In today’s Congress, especially in the House and among Republicans -- but to some extent in both chambers and for both parties -- chairs have surrendered that clout to their party leaders. And although McConnell and House Speaker Paul Ryan can ignore an infrastructure bill or funding for a border wall that the Republican president wants, they aren’t able to write and pass legislation that breaks with that White House. Such a bill could only become law by overriding the president’s veto, which would require overwhelming bipartisan support and that isn’t something either Ryan or McConnell has much experience in putting together. Otherwise, if the measure is doomed by a veto, it only amounts to messaging. And how many Republicans during an election year would be comfortable with that kind of anti-Trump messaging?
This doesn’t mean a trade bill is unattainable, just that it would be a very steep climb. The U.S. trade policy-making process is predicated on the idea that everyone, especially members of Congress, can be as protectionist as their threatened constituents want them to be because the president will be reliably in favor of keeping barriers low. But the system isn’t set up for a president who has managed to convince himself that “trade wars are good, and easy to win.”
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Warning: I am not an economist, so if I didn't word this quite correctly I apologize. But the core idea that the nation as a whole will be richer through foreign trade is something virtually all economists support.
Or, to put it in more technicalterms: Trade policy creates a political collective action problem, and the president is the solution.
Presidents have tried to strengthen their negotiating hand in recent decades by asking Congress in advance to surrender their ability to propose amendments to negotiated deals, and Congress has often gone along because (among other reasons) they don't want to give bargaining advantages to leaders of other nations with more unified government structures.
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Max Berley at email@example.com