Bloomberg Law
June 10, 2019, 8:01 AM

INSIGHT: Can Congress Compromise on Trump Trade Sanction Overreach?

Seth Taube
Seth Taube
Baker Botts LLP
Jason Wilcox
Jason Wilcox
Baker Botts LLP
Sara Probber
Sara Probber
Baker Botts LLP

There is bipartisan agreement that President Donald Trump has exceeded the limits of his power under Section 232 of the Trade Expansion Act of 1962 in imposing steel and aluminum tariffs and in seeking to impose automobile tariffs.

Although Congress chose through this Cold War era law to delegate its constitutional authority to regulate trade with foreign nations to the president when there is a national security purpose, both Republicans and Democrats are concerned that the president’s use of his Section 232 authority threatens the decades-old free trade regime, which has historically been a boon to both the American economy and global economic development.

To reassert congressional authority over tariffs and international trade, Sen. Charles Grassley (R-Iowa) currently is developing a compromise bill based on the proposed Bicameral Congressional Trade Authority Act of 2019 (Bicameral Bill) and Trade Security Act of 2019 (Security Bill), both of which aim to limit the president’s authority under Section 232. (See Senate Bicameral Bill; House Bicameral Bill; Senate Security Bill; House Security Bill)

Security Bill, Bicameral Bill Comparisons

But whereas the Security Bill focuses on ensuring that economic welfare is not the primary justification for national security tariffs, the Bicameral Bill offers greater procedural protections.

The Bicameral Bill limits import controls to covered articles, which include military equipment, energy resources, or infrastructure critical to national security and defense. It specifically excludes general welfare as a consideration for national security.

It also requires the administration to consider whether imports are the “substantial cause” of a threat to national security. In other trade legislation, the legal term “substantial cause” creates a requirement that the specified imports be the most significant cause of a harm.

Meanwhile, the Security Bill aims to restrict the president’s ability to consider economic welfare as a factor in imposing national security tariffs under Section 232 (which hearkens back to the Cold War origins of the bill and does not account for a globalized economy). The bill limits consideration of economic welfare to instances where “production is needed for national defense requirements and critical infrastructure.”

Advocating for the Security Bill, Sen. Rob Portman (R-Ohio) quoted President Nixon’s Secretary of Labor, who stated, “No determination under Section 232 or its predecessors have ever been made on the ground of economic impact alone.”

While the Security Bill provides some protection, it does not specify the meaning of national security permitting a broader interpretation. Similarly, the Bicameral Bill does not account for the role that economic considerations can play in national security.

Grassley’s compromise bill should better capture the intent of Congress by considering economic welfare so long as it is not the predominant factor. This could be achieved by eliminating Section 232’s consideration of economic welfare generally and incorporating the “covered article” definition from the Bicameral Bill.

Further, it could define “national security” to mean:

  • “the protection of the United States from foreign aggression;” as suggested by the Bicameral Bill, and
  • the economic “welfare of individual domestic industries the production of which is needed for national defense requirements and critical infrastructure in the United States,” as discussed in the Trade Security Bill provided economic welfare is not the predominant factor.

This considers economic welfare, as recommended by the Security Bill, but limits its role to specific industries and goods.

Better Oversight

Additionally, both bills strive to provide better oversight by Congress and the Secretary of Defense. The Security Bill requires the initial Section 232 investigative report be made by the Secretary of Defense with advice from the Secretary of Commerce and permits Congress to disapprove of all remedies that are based on controlling imports in the interest of national security.

The Bicameral Bill requires a joint report by the Secretaries of Defense and Commerce; Congressional approval; a public hearing period; recommendations from the Secretary of Commerce; and additional consultation with Officers of the United States.

A compromise bill should consider the inherent urgency in an action undertaken for national security. It could create nimble legislation by having the Secretary of Defense launch an investigation of the imports’ effect on national security. However, it could still permit greater consideration of both security and economic factors by permitting both the Secretaries of Defense and Commerce to recommend remedies based on the outcome of the investigation.

Similarly, congressional oversight could consider the temporal requirements of national security measures by creating a tiered approval process. Congress could disapprove of remedial measures immediately after their implementation. Then, within a specified time after implementation, Congress could be required to provide affirmative approval to keep the tariffs in effect. This would provide an opportunity to address national security needs quickly while ensuring Congress retains its ability to control international commerce in the long-term.

In short, a compromise bill must ensure that the national security provisions of Section 232 are efficient, but not susceptible to executive overreach.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Seth Taube is a partner with Baker Botts and a former federal prosecutor and SEC official with over 40 years of trial experience. He handles international trade disputes, securities and commercial litigation, SEC and state attorney general defense, corporate governance and white collar criminal defense matters in federal and state courts, and has also handled bankruptcy litigation and energy disputes.

Jason Wilcox is special counsel with Baker Botts and his practice focuses on assisting clients with understanding and complying with complex legal regimes governing the international trade of goods, services, software and technology and cross-border investment.

Sara Probber is an associate with Baker Botts and integrates her passion for legal research, foreign language skills, and global experience into her work. She is developing a practice focused on commercial litigation, white collar and FCPA litigation, and international arbitration.

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