David R. Henderson  

Trump's Toothless Pipeline Protectionism

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Tom DiChristopher of CNBC called me yesterday to get my take on Donald Trump's attempt to make builders of the Keystone pipeline use American-made pipe. The result is this excellent report by him, in which he quotes me accurately and also quotes Cato Institute trade scholar Dan Ikenson.

Dan and I both pointed out that Trump had given himself an out. Here's the relevant section of Tom DiChristopher's news article:

Henderson and others point out a key phrase in the memorandum: that pipeline builders use U.S. products "to the maximum extent possible and to the extent permitted by law."

Trade treaties have force of law under the Constitution, and so by including that phrase, there is no contradiction with the law, Henderson said. But it also means the executive action is toothless.


In explaining this to Tom, I asked him how long he had been covering these issues, because I wanted to tell him a story from the Reagan administration. He said that he was born when I was in the Reagan administration.

I told him that Trump's strategy here reminds me of how Reagan dealt with the pro-life people during his administration. Reagan kept them on board in two ways: (1) by, entirely properly, insisting that taxpayers not be forced to pay for abortions, and (2) by giving pro-life speeches and statements but not pushing very hard to overturn Roe v. Wade. That led to the following paragraph in Tom's article:

"My guess is he's making it toothless on purpose so he looks good to his constituents without doing so much harm," he said.

As Dan Ikenson pointed out in the article, very few people will look at the fine print. Few Trump supporters will look at the fine print. Good.

I might be giving Trump too much credit here. Okay. Then we need to give credit to whoever in his Administration had the sense to insert "to the maximum extent possible and to the extent permitted by law."

None of this means that I'm optimistic about Trump on trade. I'm particularly concerned abut his dealings with Mexico and how that could lead to a terrible populist left-wing president in Mexico when they hold their elections next year. My worry is informed by a trade economist, Kansas State University's Peri da Silva, whom I had breakfast with this morning. More on that in a future post.


Comments and Sharing






COMMENTS (7 to date)
AlanG writes:

Isn't most of the Keystone pipeline being funded by Trans-Canada? If so, don't they have a say in some of the cost factors. What if they source steel pipe from a cheaper foreign source (or even Canadian) that is equal in quality? Of course as a Nucore shareholder I hope it's my company's product that is used everywhere!

I think the language you cite is pretty much boilerplate stuff that goes into these kinds of documents and I attribute it only to that and not any great intelligence on the part of our President.

Jon Murphy writes:

Sorry, I must be especially dull today, because I don't think I understand why this is "toothless".

Am I right to understand that the executive order, to use US made steel, has no real authority because the law currently does not allow the President to dictate where private companies source their material from?

David R. Henderson writes:

@Jon Murphy,
Am I right to understand that the executive order, to use US made steel, has no real authority because the law currently does not allow the President to dictate where private companies source their material from?
The WTO is a treaty. Under the Constitution, therefore, it is part of U.S. law. So by saying “to the extent permitted by law,” he is saying that it’s not permitted.

Jon Murphy writes:

@Prof Henderson

Thanks!

EB writes:

David, thanks for sharing your views on the issue of how far Trump may go in imposing costs to others for his own personal benefit (that is, for increasing the probability of being re-elected). As long as he takes seriously that same position in all his executive orders ("to the maximum extent possible and to the extent permitted by law"), I will applaud him even in cases in which I don't like his orders. In some cases, that limit to his power may imply that the executive action is toothless. I think, however, that in most (perhaps all) cases he may have enough power to make a difference (my view is based on the discretionary power of the judiciary and the administration in enforcing law and on the discretion of administrative agencies to apply the power entrusted to them by statutory law).

You refer to Reagan as "not pushing very hard to overturn Roe v. Wade". That would have required to change the law, that is, legislative action. You may remember those years much better than I, but my recollection is that Reagan didn't have enough leverage to make a deal for that particular legislative action. Will Trump be able to work with the 115th Congress to change several laws that limit what he wants to do? Well, soon we will know the answer, but today I'd bet for significant changes only in less than five laws.

Thaomas writes:

If we could assume that President Trump was "toothless" because he will be constrained by the law, many people would be a lot less worried.

David R. Henderson writes:

@Thaomas,
If we could assume that President Trump was "toothless" because he will be constrained by the law, many people would be a lot less worried.
True. But of course I’m not saying he’s toothless. I’m saying that particular action was toothless. And the reason is that his own wording admits the legal constraint.

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