Drawing a Line in the Sand: Assessing the Trump Administration's Interpretation of Both Congressional Trade Legislation and Judicial Trade Precedent.

• Author: Tolic, Alexander

"The President is limited to 'action ... to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.' 'Moreover, the leeway that the statute gives the President in deciding what action to take in the event the preconditions are fulfilled is far from unbounded.' ... Plaintiffs ... argue that the Section [232] Steel Tariff is being used in trade negotiations to draw concessions from other countries unrelated to steel imports." (1)

1. INTRODUCTION

   The United States has engaged in intermittent periods of free trade and protectionism throughout its existence, dating back to its independence from Britain after the American Revolution. (2) The President of the United States has control over treaty negotiations with foreign nations, as delineated in Article II, Section 2 of the United States Constitution, which states the President "shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur." (3) Article I, Section 8 of the Constitution similarly entitles Congress "to regulate Commerce with foreign Nations" under what is known as the Commerce Clause. (4) At first glance, it is evident that the President has less than absolute power over international affairs. (5) Nevertheless, these clauses indicate that the separation of powers, a bedrock principle of the Constitution, is implicated when setting U.S. foreign policy. (6)

   Instead of becoming absorbed with the political rhetoric of the times, the debate over the constitutional role of each branch within trade policy and complex judicial responses to this persistent conflict better suits an analysis of whether the executive branch overstepped its bounds. (7) Examining the Trump Administration's actions at the domestic level is best done through the lens of the Trade Expansion Act of 1962 and the Trade Act of 1974. (8) At the international level, the lawfulness of the President's unilateral denial of tariff concessions agreed to under multilateral conventions, such as the World Trade Organization (WTO) and the North American Free Trade Agreement/United States-Mexico-Canada Agreement (NAFTA/USMCA), is determined by analyzing the rules of international customary and treaty law. (9)

   At the heart of the domestic analysis are cases such as Federal Energy Administration v. Algonquin SNG, Inc., (10) Silfab Solar, Inc. v. United States, (11) and Severstal Export GMBH v. United States, (12) which have addressed whether the President has properly exercised the grants of power under the Trade Expansion Act of 1962 and the Trade Act of 1974. (13) These federal decisions all ruled in favor of the President at the time, indicating that he properly imposed monetary exactions in the form of a license fee system, as well as steel tariffs under section 232 of the Trade Expansion Act of 1962 (Section 232) and solar panel tariffs under section 201 of the Trade Act of 1974 (Section 201). (14) In addition, these rulings indicated that the trade statutes constitutionally delegate authority from Congress to the President. (15) The courts, however, did not consider whether President Trump, by using his executive power to independently enact tariffs, denied Congress the authority "to regulate Commerce with foreign Nations" under Article I, Section 8 of the Constitution. (16) Another question these cases implicate is whether President Trump has purposefully misconstrued the definition of a threat to national security in order to accomplish his agenda for the economy and gain control over the NAFTA/USMCA and the WTO. (17) Nevertheless, it is difficult to analyze President Trump's actions, because there is very little judicial analysis that takes place with respect to the inner workings of presidential decision- making, as it is widely held that such topics are not within the realm of the courts. (18)

   This Note addresses the influx of legal challenges from foreign corporations to President Trump's tariffs against imported goods, despite many U.S. federal courts affirming the constitutionality of the President's powers under the Trade Expansion Act of 1962 and the Trade Act of 1974. (19) Part II provides a brief overview of trade relations, legislation, and treaties that have arisen over the course of U.S. history. (20) Next, this Note explores the recent challenges to presidential exercises of the tariff-setting power, and concludes it is unlikely the judiciary will diverge from its practice of deferring to the executive branch's decisions under the notion that the President is delegated that power. (21) Finally, this Note contemplates whether the WTo may become a more popular forum for challenges to tariffs enacted under a President's claim that such tariffs are justified by national security concerns. (22)

2. HISTORY

   1. Survey of U.S. Tariffs from 1789 to the Present

      The power-sharing dilemma that ignited systemic backlash against the Trump tariffs derives from a lack of specificity, or rather a certain ambiguity, in the Constitution. (23) As with most of the original pieces of law upon which the United States was founded, the raison d'etre behind those congressional acts lies in the political and economic separation from Britain. (24) During the period between 1776 and 1781, the years constituting the American Revolution, trade with Britain was nonexistent due to the British blockade on the newly-created nation. (25) As a result, there were no functioning tariff laws in any of the states, other than in the Commonwealth of Virginia, and the effect on the United States losing its largest trading partner was highly detrimental to its young economy. (26)

      During the Confederation Period from 1783 to 1789, the states controlled the tariffs levied on Britain, which, given the indebtedness of the states, needed to be heavily protectionist. (27) Those tariffs were ultimately quite unsuccessful and federal legislators closely studied their failure, including future President James Madison, who sought to counteract the crippling piece of legislation from the British Privy Council with a federal tariff singlehandedly protecting all of the states. (28) Due to the nature of the Articles of Confederation, the Continental Congress was unable to initiate a nationwide protectionist measure against Britain until 1789, nearly two years after the states began ratifying the current Constitution to adopt the modern, bicameral Congress. (29) With this first national tariff, Congress placed duties ranging from 5% on most imports to 50% on goods such as "steel, ships, cordage, tobacco, salt, indigo, [and] cloth." (30)

      Historians debate whether the Tariff Act of 1789 was truly a protectionist measure at heart or more of a revenue-generating tariff, and for those who choose the latter, the Tariff of 1816 (Dallas Tariff) is the original, purely protectionist tariff. (31) Congress enacted the Dallas Tariff based on Alexander Dallas's report of manufacturing, modeled after its 1789 predecessor that had been based on a similar report from Alexander Hamilton. (32) At this point in the young nation's existence, after its second major military conflict against Britain in the War of 1812, its geographical regions began to solidify their industrial capacities. (33) Regardless of whether the region was primarily industrial or agricultural, there was great support for the Dallas Tariff in both the North and the South because of the desire to raise revenue after the War of 1812, and to protect against continued British market flooding despite the fact that warfare had ended. (34) Nevertheless, it was largely understood that the Dallas Tariff would only remain for a few years, until 1819, when authorities believed the danger of a possible resumption of armed conflict with the British would have subsided. (35)

      As a whole, the Dallas Tariff had less of an effect on reducing hostilities with Britain than it did on creating Southern contempt for a protectionist policy by 1820. (36) When the nation's first large-scale financial crisis known as the Panic of 1819 hit, manufacturing in the North was unaffected due to that industry's ability to perform robustly, despite the low prices, unlike the South, which was harmed by the increase in levies on imports of wool, cotton, and iron. (37)

      Southern animosity towards tariffs reached its apex after the Tariff of 1828, also known as the "Tariff of Abominations," due to the fear that highly-levied manufactured goods would become too expensive. (38) As a result, the Nullification Crisis ensued in 1833, in which South Carolina declared the Tariffs of 1828 and 1832 unconstitutional, and thus void under the theory that states had the power to reject federal laws beyond the federal government's constitutional powers. (39) In Congress that same year, Henry Clay and John C. Calhoun proposed the Tariff of 1833, or the "Compromise Tariff," which dropped the uniform tariff rate to 20% of the cost of goods purchased. (40) For nine years, the tariff rate stagnated at 20%, until 1842 when the Whig Party broke away from President John Tyler and reinstated increased protectionist duties at an average of 33%. (41)

      When Congress passed the "Walker Tariff' in 1846, it ended the short reign of Whig protectionism and ushered in the United States' largest period of free trade up until that point, which would last until the beginning of the Civil War. (42) With the start of the Civil War coming in the wake of the Panic of 1857, protectionism spiked once again under the Morrill Act of 1861, which served the purpose of generating revenue for the War. (43) The custom of strong protectionism remained during the Reconstruction Era and lasted all the way through the Roaring Twenties, even during the creation of the federal income tax under the Revenue Act of 1913. (44) This additional stream of revenue made it possible to reduce tariffs, resulting in revenue further...