Make America Freight Again — Donald Trump: Santa or Grinch For Trade & Transportation?
Details about specific policies have yet to be released, but the President-elect’s nominations to various government agencies have industry experts taking a “wait and see” approach. Here’s what we know so far about the President-elect’s plans for the industry, and what industry experts have to say about them.
The North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) came under fire during the campaign from several of the U.S. presidential candidates. The anti-trade rhetoric may have worried some, but most experts agree, importers and exporters won’t be seeing major changes in the immediate future.
For one, NAFTA, which President-elect Trump notably called “the worst trade deal the U.S. ever signed,” cannot be changed without Congressional approval. Congress is more open to free trade than the President-elect, as two law professors point out in an op-ed for the LA Times, and can filibuster any attempts to end or renegotiate the trade agreement. “This constitutional balance of power effectively means that NAFTA … [is] here to stay,” authors Julian Ku and John Yoo write.
However, making improvements to NAFTA might be in order, writes Alan Wm. Wolff, chairman of the National Foreign Trade Council, in Fortune. “Updating [NAFTA]. which covers the U.S., Canada and Mexico, makes sense, given that this agreement with the countries to America’s northern and southern borders is 20 years old,” Wolff says. “The U.S. has common interests with these two countries that are regional and these have evolved in a world where digital commerce has changed the nature of trade and deeper economic integration can be attempted.”
Unlike NAFTA, the United States can withdraw from TPP, as Congress has yet to approve the agreement. TPP aims to slash tariffs and promote trade between 12 countries that make up 40 percent of the world market, but for it to go into effect, every nation needs to ratify the agreement. With Trump vowing to withdraw from it, it’s hard to say what TPP’s fate will be; supporters, however, see a cause for hope.
Many of the President-elect’s cabinet nominations have expressed support for TPP, including Rex Tillerson, Exxon Mobil CEO and the nominee for Secretary of State. The President-elect’s pick for ambassador to China, Governor Terry Branstad of Iowa, is also a supporter; retired Marine General James Mattis, who is the nominee for the Department of Defense, is pro-TPP as well. He signed a letter to Congress in May 2015 that said, “TPP would help the U.S. maintain a geopolitical advantage in Asia,” the Wall Street Journal reports.
Instead of withdrawing from TPP, some in Congress have suggested fixing it instead, Wolff writes. This may just happen, as Politico recently reported that Wilbur Ross, who is the nominee for Commerce secretary, would work to make the trade deal align more with Trump’s vision.
In the area of infrastructure, the President-elect has proposed $1-trillion in spending to fix America’s roads, bridges, tunnels and more. This has been met with open arms by many in the industry. The American Association of Port Authorities wrote a letter to the President-elect’s transition team, recommending “landside investments, modernized navigation channels and [improved] border security,” the Journal of Commerce reports. The trucking industry is also looking forward to improved roads and infrastructure for domestic freight.
Where infrastructure spending might run into problems is in Congress. While Democrats have expressed a willingness to work with the President-elect on an infrastructure bill, Republicans are wary of the price tag. Senator Mitch McConnell recently told reporters, “It will be interesting to see how this is put together. I hope we avoid a trillion-dollar stimulus.”
There has also been pushback on the specifics of the President-elect’s infrastructure plan, which will encourage private companies to take on infrastructure projects. Some feel that the private market has no real incentive in taking on the projects that would improve the United State’s infrastructure overall. Democrats in Congress have also been against privatization of United States’ infrastructure.
While Republicans and Democrats might be at odds about the specifics of infrastructure spending, the stimulus plan isn’t necessarily dead in the water. Former Obama Transportation Secretary Ray LaHood has proposed that tax reform can pay for infrastructure spending, The Hill reports. Other lawmakers have suggested paying for infrastructure using repatriations; i.e., taxing corporate earnings stored abroad when they come back into the United States.
“I like the idea of using at least a part of repatriation to pay for infrastructure,” Mississippi Senator Roger Wicker told The Hill. “I think there has been a debate in the government about to what extent to use repatriation to pave the way for tax reform. I tend to believe there’s enough revenue out there to do both.”
Experts also see hope in the form of the nominee for Department of Transportation, former Labor Secretary Elaine Chao. Chao is the wife of Senator McConnell, and many believe she’ll be the bridge between the President-elect’s administration and Congress in creating a bill both sides can agree on.
“Chao has an opportunity to play a large role in living up to the commitments made by President-elect Trump that he would rebuild the middle class,” Edward Wytkind, president of the Transportation Trades Department at the AFL-CIO, told the Journal of Commerce. “Advancing massive federal investment in new transportation projects is one of the best policy strategies for improving our economy, boosting American competitiveness and putting millions to work.”
The shipping industry and pro-business groups have reason to be excited about the upcoming administration, thanks to the President elect’s pick of Chao for Department of Transportation. Not only does she have a history of rolling back regulations, as the Journal of Commerce reports, she also has roots in the shipping industry. Her father, James S.C. Chao, is the founder and chairman of the Foremost Group, a shipping and trading enterprise. Her experience gives her “a full appreciation of the vital role freight and passenger rail play,” Edward R. Hamberger, president and CEO of the Association of American Railroads, told the Journal of Commerce.
The trucking industry believes Chao may roll back regulations on mandatory electronic logging devices and speed limiters, things that “hinder small-business truckers and undermine overall transportation efficiency,” said Todd Spencer, executive vice president of Owner-Operator Independent Drivers Association, when speaking to Trucks.com.
While the pro-business world is happy with the President-elect’s choice, unions may have reasons to be wary. As the former Labor Secretary under the recent Bush Administration, Chao has her union critics, especially regarding the minimum wage as well as labor law enforcement and worker safety.
The President-elect’s choice of Andrew Puzder, the CEO of CKE Restaurants, parent company of Carl’s Jr and Hardee’s, also raises union concerns. Labor unions have called the nomination “cruel and baffling,” due to Puzder’s ties to anti-union groups and his stance against a minimum wage increase. Under his direction, Puzder may have the Labor Department increase oversight on union finances.
Many questions remain on how the new administration and Congress will specifically affect trade and transportation, but most experts don’t expect major industry changes immediately. For the long-term, experts recommend keeping up-to-date by following industry insiders and organizations, reading journals and speaking to companies you work with who monitor policy changes.
If you have any questions about how recent changes may affect your importing and exporting, contact the freight forwarding experts at Dedola.