Trade Review Act of 2025

— 802 — Mandate for Leadership: The Conservative Promise response to four rounds of tariffs plus an attempted Phase One agreement. The Biden Administration has left the tariffs in place and is expanding them to pursue progressive policy goals. The first order of business for a new Administration that is focused on American workers and consumers is to repeal all tariffs enacted under Section 232 of the Trade Expansion Act of 196251 and Sections 201 and 301 of the Trade Act of 1974.52 The President can do this unilaterally, and Congress can do it through legislation. The second order of business requires Congress to pass legislation repealing Sections 232, 201, and 301. The U.S. Constitution places all taxing authority with Congress53 and none with the President. Congress used those provisions of law to delegate some of its taxing authority to the President because it was having trouble passing “clean” tariff legislation in the 1960s and 1970s. Unless and until this constitutional question about delegation is addressed, important reforms are available to the next Congress and the next President. Congress faced a problem of collective action in the 1960s and 1970s. As a whole, Members generally wanted to lower tariffs, but few individual Members were will- ing to remove tariffs that benefited special interests in their districts. Trade bills were invariably watered down through amendments and logrolling. The thinking was that the President, whose constituency is the entire nation, would be less prone to special-interest pleading than Members of Congress would be, so Congress del- egated some of its tariff-making authority to the President in 1962 and 1974 trade legislation. Delegating tariff-making might have worked in the short run, but in the long run, it was both constitutionally dubious and ripe for abuse. That came to pass in 2018. The Section 232 steel and aluminum tariffs, invoked in 2018 against Canada, Europe, and other allies on national security grounds, raised car prices by an aver- age of $250 per vehicle and gave America the world’s highest steel prices. They also harmed the construction, canned food and beverage, and other metal-us- ing industries. While this may have benefited the steel industry itself, each steel job saved cost an average of $650,000 per year that had been taken from elsewhere in the econo- my.54 That is no way to strengthen American manufacturing. The New York Federal Reserve estimated in 2019 that the Section 301 China tariffs cost the average house- hold $831 per year,55 a figure that has likely increased with inflation. The new tariffs have a clear record of failure—as conservative economists almost unanimously warned would be the case. Job number one for the next Administration is to return to sensible trade policies and eliminate the destruc- tive Trump–Biden tariffs. Strengthening American Manufacturing. The decline of American manu- facturing is a common political trope in both parties, typically invoked before a call for more government intervention. This narrative has several problems. One is that — 803 — Trade American manufacturing output is currently at an all-time high. The record was not set during World War II and not during the 1950s boom. Output did not peak when manufacturing employment peaked in 1979 or during the Reagan economic revival in the 1980s. It is actually higher now than it has ever been. American manufacturing is buoyant because each manufacturing worker’s pro- ductivity is also at an all-time high. The key to prosperity is doing more with less. The next President should ignore special interests and populist ideologues who want government to do the opposite through industrial policy, trade protectionism, and other failed progressive policies. It takes surprisingly few people to achieve America’s record-high manufac- turing output—currently about 13 million people out of a workforce of more than 160 million, compared to the 1979 peak of 19.5 million people out of a workforce of 104 million.56 Productivity growth has freed the time and talents of millions of people for other, additional uses. The belief that manufacturing has to shrink for services to grow is the zero- sum fallacy against which sensible economists often warn. It is anathema to the optimism, hope, and confidence that are the natural birthright of conservatives. Growing productivity enables more output of both manufacturing and services. That is why America continues to have sustained booms and record-setting real GDP despite the long-run decline in manufacturing employment. Economists distinguish between two types of growth: extensive and intensive. Extensive growth is the Soviet and Chinese model for manufacturing: If you have more people use more resources, they will create more output. Extensive growth is doing more with more; intensive growth is doing more with less. That is where America’s superpower lies. The story of American manufacturing is one of intensive growth dating back to our agricultural origins. Conservative leaders should draw on this history to position America for continued success. With intensive growth, it is not manufacturing or services; it is manufacturing and services. Retaliatory Tariffs. Raising tariffs on another country almost always invites retaliatory tariffs against the U.S. The latter tend to be directed at politically sen- sitive American exports. Retaliatory tariffs by both China and American allies in response to the 2018 steel tariffs were targeted primarily at American agriculture. According to the U.S. Department of Agriculture, those tariffs cost farmers $27 billion with losses concentrated particularly in heartland states.57 Retaliatory tariffs also targeted U.S. industries that were not protected by tar- iffs. Many imports become inputs into U.S. manufacturing. The motorcycle maker Harley-Davidson was already facing higher production costs as domestic steel producers raised their prices to accommodate the new steel tariff. A retaliatory tariff on its motorcycles imposed by the European Union further raised its prices and hurt its export business. Harm to such innocent bystanders was another unin- tended (though foreseen) consequence.

— 811 — Trade contains the Sections 201 and 301 tariff delegations. TPA, then called fast-track, has aided several trade agreements, including NAFTA and the USMCA, which took effect in 2020. TPA has lapsed before during slow periods in trade policy, most recently in July 2021, and remains lapsed today. The President should work with Congress to renew TPA to rationalize negoti- ations for upcoming trade agreements with the United Kingdom, the European Union, and others. Both supporters and critics have questions regarding TPA’s implications for the constitutional separation of powers, and policymakers should take those questions seriously. As things currently stand, Congress has some oversight powers over the President’s negotiations under TPA, but they are limited. Congress can increase its oversight by passing new legislation superseding relevant provisions of the 1974 Trade Act. However, that is a double-edged sword. A Congress that largely favors free trade could exercise oversight to keep the President on the straight and narrow in trade negotiations. A progressive Congress would instead insist that the President negotiate for as many trade-unrelated provisions as possible to benefit labor and green constituencies while pushing progressive policies on the U.S. and its trading partners. On balance, a single voice at the negotiating table that is subject to congressional oversight is the best posture for American workers and consumers. A fractious Congress has yet to demonstrate the capacity to negotiate with other nations, but it can help to hold the Administration accountable. Trade Agreements with the United Kingdom, European Union, and Others. Even with a renewed TPA, trade agreement negotiations will likely take years. The Trump and Biden Administrations were not inclined to start the process, so that job may well fall to the next Administration. In that sense, the delays may end up being worth it. If there is one lodestar to follow, it is to restrict these agreements to trade issues only. Ever since NAFTA, trade-unrelated provisions have taken on a greater role in trade agreements. These create sticking points and are routinely hijacked by rent-seeking special interests and progressive ideologues who demand subsidies, carve-outs, and economically distorting labor and environmental standards that have nothing to do with trade. If governments are to negotiate these issues, they should do so in separate agreements so they do not torpedo efforts to liberalize and engage with allies. Trade agreements should lighten burdens, not create new ones by attempting to address non-trade issues. Policy leaders in the United States and the United Kingdom, including experts from The Heritage Foundation and the Competitive Enterprise Insti- tute, have prepared a model trade agreement along these lines.73 Along with TPA renewal, this would greatly reduce negotiating costs. This template is also readily adaptable for agreements with Europe and any other allies that are willing to — 812 — Mandate for Leadership: The Conservative Promise liberalize their economies and build a stronger alliance with America. The draft U.S.–U.K. agreement includes an accession chapter to allow others to join on the same terms. Restoring or Replacing the WTO Dispute Resolution Process. The World Trade Organization as we know it may be mortally wounded. This deprives the U.S. of the WTO’s dispute resolution process, under which the U.S. it won 85 percent of the cases it brought. The WTO’s slow death began under the Obama Administra- tion, which refused to allow appointees to the WTO’s appellate board, which as a consequence is now nonfunctional. Both the Trump and Biden Administrations have continued the Obama Administration’s approach. That means that every case in the dispute resolution process will sputter to a halt as parties file appeals that cannot be heard. If the WTO is no longer fit for that purpose, it may be better to look in a different direction. More than 20 years ago, a Heritage Foundation senior fellow proposed that America and other free economies should form a Global Free Trade Alliance that is open to all countries that adhere to a truly free market system with appropriate safeguards such as property rights, lack of corruption, and enforcement of contracts.74 Alongside a general agreement on low to zero tariffs, the alliance would move to reduce the effect of nontariff barriers (such as the previously noted baby formula ingredient and labeling barriers) by basing trade around the principle of mutual recognition. Such an alliance could be started by a trade agreement between the United States and, for example, the United Kingdom with an accession chapter allowing others to join if they meet the criteria. It would be essential for a Global Free Trade Alliance to avoid the WTO’s most serious problem: the exemptions from its rules that are granted to developing countries. When China joined the WTO in 2001, it was granted developing-na- tion status, which it continues to use to dodge rules that should apply to it. Other countries have used that status to delay needed reforms. Rule exemptions give some countries a perverse incentive to remain poor and autocratic. A Global Free Trade Alliance would allow the U.S. to enjoy the benefits of a rules- based international trading system without the WTO’s shortcomings. Negotiation costs would be lower because the countries would already be allied on many issues. In addition, there would be no separate tiers with different rules, and this would give developing countries an incentive to liberalize. In addition to being good for its own sake, liberalization would give them entry into a prestigious club that tilted toward America’s orbit and away from China’s. Closing the Export–Import Bank. The Export–Import Bank (EXIM) is an unusually clear example of how vulnerable trade protectionism is to being hijacked by special interests.75 In most years, about half of EXIM’s business benefits a single company, Boeing. Their relationship is so cozy that EXIM’s nickname around Washington is “the Bank of Boeing.”

— 796 — Mandate for Leadership: The Conservative Promise THE CASE FOR FREE TRADE Kent Lassman Trade policy is about more than goods and services: It is a statement of Amer- ican identity. Our trade policy choices reveal America’s values and where we put our trust. Do we place our trust in Washington elites to revive a declining coun- try, or do we trust in America’s tradition of entrepreneurs and everyday people blazing new trails? Do we follow China by copying its strong-arm trade policies, or do we lead China and the rest of the world by forging our own path? Our trade policy decisions will tell you what we Americans really think of ourselves. A CONSERVATIVE VISION FOR TRADE The policy recommendations in this chapter reflect a belief in the strength of America’s founding institutions, its economy, and its people. They are based on data showing decades of American progress with all that this implies. They also reflect a realistic understanding of the fact that trade policy has limited capabilities and is vulnerable to mission creep and regulatory capture. Policymakers should be modest about what they can accomplish through trade policy and need to exercise constant vigilance against abuses. For example: l Trade can lower consumer prices for ordinary Americans and open new markets for American businesses and their goods. l Trade can help American workers and businesses to specialize in what they do best—which is how they outcompete the rest of the world in technology, manufacturing, agriculture, and other areas. l In foreign policy, trade can help to preserve and strengthen alliances. At the same time, sound trade policy requires humility. It is not a panacea for every policy problem. Trade policy cannot favor one sector over another without causing tradeoffs that outweigh the benefits.41 Neither free trade nor protectionism will create jobs. Trade affects the types of jobs people have, but it has no long-run effect on the number of jobs. Labor force size is tied to population size more than anything else. The American people are smart and sophisticated enough to hear these truths. It is not just conservatives who overestimate the power of trade policy. Recent progressive attempts to use trade policy to advance whole-of-government initia- tives on climate, equity, and other issues will fail for the same reason that a hammer cannot turn a screw: It is the wrong tool for the job. Conservatives should be sim- ilarly skeptical of recent attempts on the Right to use progressive trade policy to punish political opponents, remake manufacturing, or accomplish other objectives — 797 — Trade for which it is not suited. The next Administration needs to end the mission creep that has all but taken over trade policy in recent years. Trade policy works best when it sticks to trade and treats separate issues separately. Trade agreements since the North American Free Trade Agreement (NAFTA) have been increasingly burdened by trade-unrelated provisions involving labor, environmental, intellectual property, and other regulations. Where these were a side agreement to NAFTA in the 1990s, they were integrated into the main text of the United States–Mexico–Canada Agreement (USMCA) in 2019. The Indo-Pacific Economic Framework for Prosperity (IPEF) that the Biden Admin- istration is currently pursuing consists entirely of trade-unrelated provisions: Negotiations are steering clear of trade altogether. Trade-unrelated provisions are routinely hijacked by progressives and rent-seek- ers and dilute otherwise worthwhile trade agreements. They also create additional points of contention that make agreements unnecessarily difficult to pass. A con- servative trade policy should limit trade-unrelated provisions in trade agreements. This does not mean that conservatives should ignore international negotiations on labor, environment, intellectual property, and other non-trade issues. It means they are more likely to succeed by treating each of them separately rather than letting them die in committee with each providing an additional sticking point for delaying the others. A conservative trade policy must also take seriously the reality that in a democ- racy, the other side holds power about half of the time, but progressives run most agencies almost all of the time. A cardinal rule in public policy is not to give yourself powers you wouldn’t want your opponents to have. That means building institu- tion-level safeguards against mission creep to limit abuses. Foreign policy considerations are not as separate from trade as are labor or environmental standards. China deserves special consideration, as does the World Trade Organization (WTO) along with its possible successors or alternatives. While trade is not the star of American foreign policy, it does play a supporting role. It should be used to strengthen alliances to help counter China, Russia, and other threats while making economic and cultural inroads inside them. The next Amer- ican President should use this aspect of trade to the nation’s advantage. Drawing from America’s Roots. In 1776, nearly 90 percent of Americans were farmers. For 10 people to eat, nine had to farm. That meant fewer people could be factory workers, doctors, or teachers, or even live in cities, because they were needed on the farm. Accordingly, life expectancy was around 40 years, and literacy was 13 percent.42 Today, fewer than 1 percent of Americans work on farms, yet America is a net exporter of food. People have infinite wants, so as rising productivity pushed some people off of farms, there were countless other jobs they could do. In true American fashion, many of these jobs were in brand new industries.