Lewis Leibowitz on Section 232, investment-for-access deals and a WTO that can’t bite: interview

Fastmarkets spoke with Washington-based trade attorney Lewis Leibowitz in early December about Section 232 tariffs and whether their recent use in trade negotiations could expose the statute to legal challenges.

For example, on November 24, US Secretary of Commerce Howard Lutnick told a media outlet that if the EU resolved its outstanding legal cases against Amazon.com, Microsoft and Alphabet Inc’s Google, the US would “come up with a cool steel and aluminium deal.”

That same month, the administration agreed to ease Section 232 tariffs on certain South Korean products after the country committed to investing $350 billion in strategic US industries.

If investment deals and cross-industry concessions become more common, the legal boundaries of Section 232 may be tested. Fastmarkets asked Leibowitz whether these changes could mean for the statute moving forward.

Could the shift in the application of Section 232 tariffs, and in some cases, using them as a bargaining chip with other nations, expose the statute to legal challenges on the basis that it is no longer serving its original national security purpose?

It could. think the court’s historic reluctance to second guess the president in terms of what national security is, [is going to be] the break on that. [Even the] judiciary has points of no return. If the national security language is being abused, judges can say [the administration] can’t [have it both ways.] I think we’re pretty close to that line in many cases.

The idea of putting the steel industry [tariffs] on the chopping block in exchange for concessions by other countries in other industries and markets, could lead the steel industry to go in and say [the administration] cannot do that economically. They need certainty. They keep talking about that. And how can you be certain about anything if the tariffs on steel are put on the bargaining table in exchange for unrelated industries? It’s at least being talked about.

Could linking tariff relief to international investment deals in the US cause problems under international trade rules? Could countries potentially challenge this approach at the World Trade Organization [WTO]?

Well, they could. And there could be some dispute settlement cases under [the United States, Mexico, Canada trade agreement] as a result of these bargaining decisions.

On the WTO front, though, the WTO literally doesn’t work anymore. There are no negotiations. There’s no dispute settlement because the appellate body has been rendered inoperable by Trump in his first term.

[Context note: In December 2019 the WTO’s dispute settlement mechanism, was effectively crippled when the Trump administration refused to approve new Appellate Body judges. Without enough members to form a quorum, appeals stalled, leaving trade disputes unresolved and stripping the WTO of its ability to enforce rules.]

I don’t think the Trump administration is particularly worried about countries going to the WTO. They may go to the WTO, and they may win their cases at the panel stage, which is the first stage of a WTO dispute settlement. But at the second stage, there’s nothing happening. The appellate body can’t consider cases because there’s no members of the appellate body that are currently authorized to make decisions. So, I don’t think the Trump administration is particularly worried about that.

What we have now is the OK Corral. It’s the law of the jungle, kind of like we had in the 1930s. Look how that worked out.

Responses have been lightly edited for clarity and length.

Need to know more about the steel industry? Download a sample of the Fastmarkets steelmaking short-term forecast.