UPDATE: Trump tariffs may lead to re-run of 1980s-era 'voluntary' trade deals
By Greg Robb, MarketWatch
In Reagan era, U.S essentially forced allies to limit their car, steel exports
President Donald Trump's plans to impose steel and aluminum imports with "great flexibility" seems like a throwback to U.S. trade policy of the 1980s.
Thirty years ago, faced with increased competition from Japan, the Reagan administration set out a plan for "voluntary" export restraints. Japan and other countries had to come and sit down with U.S. officials and "volunteer" limits on the cars and steel they shipped to the U.S. Left unsaid were penalties for those who didn't volunteer.
Michael Gadbaw, a former attorney of the U.S. Trade Representative and General Electric who is now a law professor at Georgetown University, said he thought that is where Trump was headed with his steel tariffs.
"My sense is that [the Trump plan] will absolutely lead to some kind of negotiations," Gadbaw told reporters on a conference call sponsored by the Atlantic Council this week.
"Every country that has a trade interest is going to come in and try to make a deal," he said.
Also read:Trump tariffs may really be a backdoor way to get out of the WTO (http://www.marketwatch.com/story/trump-tariffs-may-really-be-a-backdoor-way-to-get-out-of-the-wto-2018-03-06)
Trump announced 25% tariffs on steel and 10% tariffs on aluminum, setting off fear of a trade war.
Canada and Mexico are excluded for now, as the U.S. discusses the North American Free Trade Agreement with both countries.
Tariffs could be modified for other countries, such as Australia.
Read: Here are the details on Trump's tariffs on steel and aluminum (http://www.marketwatch.com/story/here-are-the-details-on-trumps-tariffs-on-steel-and-aluminum-2018-03-08)
This sort of flexibility mirrors the 1980s.
Experts noted that U.S. Trade Representative Robert Lighthizer worked at the USTR during the Reagan years. His official biography says he "negotiated over two dozen bilateral international agreements" during his tenure at the trade office.
Lighthizer "sees that as a successful approach to deal with trade concerns," said Chad Bown, a fellow at the pro-free-trade Peterson Institute for International Economics.
Bown agreed there are "parallels" to the 1980s but said voluntary deals "might not work" three decades later.
In the 1980s, a lot of the problems were with Japan, which depended on the U.S. military for security, he noted.
"When push came to shove, you could hold it over their heads. China is less likely to take marching orders from the U.S.," he said.
The U.S. is calling for a $100 billion reduction in the U.S.-China trade deficit, the Wall Street Journal reported (http://www.marketwatch.com/story/us-is-calling-for-100-billion-reduction-in-bilateral-trade-gap-with-china-wsj-2018-03-08).
And the problem now is not so much Chinese imports of steel and aluminum into the U.S., but their imports to the rest of the world. This is lowering world prices and giving other countries the incentive to sell to the U.S. at a lower price, Bown said.
"This is a more complicated exercise than was going on in the 1980s," Bown added.
In the end, the U.S. had a "morass" of voluntary agreements that trading partners really didn't like.
It gave added incentive to countries to set up the World Trade Organization, which set out to limit such bilateral agreements.
Still, countries might go around the WTO and agree to such new deals with the Trump administration, he said.
The 1980s "could be raising its ugly head," Bown said.
-Greg Robb; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
03-08-18 1628ETCopyright (c) 2018 Dow Jones & Company, Inc.