There is no shortage on second-guessing what moves Donald Trump will make next regarding his US presidential administration. Business associations throughout Washington are anxious to interpret and influence directions his policies may take. Most take a conciliatory tone, hoping to grease the skids and promote their own agendas.
Edward R. Hamberger, president and CEO of the Association of American Railroads (AAR), for example, praised Trump and his executive order aimed at reducing regulation by eliminating two prior regulations for every one issued. It’s a policy Trump has in place for all federal agencies and one that industry hopes will ease the burden (and cost) they have felt in meeting regulations.
“We believe that a more nimble regulatory structure will foster greater economic growth and we are excited to partake in this important effort to improve the regulatory system,” Hamberger said in a statement.
The US freight rail industry is capital-intensive and must spend large sums of money to maintain infrastructure and equipment. AAR emphasized that railroads are specifically calling on the Surface Transportation Board (STB), an independent adjudicatory body within the US Department of Transportation, to assess the cumulative impact of proposed regulations and promote only those rules that enhance job growth and development.
But not all is rosy. The issue of funding infrastructure maintenance and improvement may lead to divisions within the transportation industry. For example, AAR calls for the government to end its practice of transferring money from the general fund of the federal government to the Highway Trust Fund, which receives money from a federal tax of US$0.184 per gallon on gasoline and US$0.244 per gallon of diesel fuel and related excise taxes.
A statement released by AAR states that policies should require highway users to pay their fair share for use of infrastructure. For one, the gas tax has remained unchanged since 1993 and isn’t tied to the price of gasoline or inflation. According to AAR, the tax “is no longer sustainable.” AAR advocates for the freight rail industry pushing for a more viable funding source, such as a weight-distance fee, which provides for aggressive investment in public infrastructure.
The American Association of Port Authorities (AAPA) holds fast to its position on infrastructure improvements, particularly those that will benefit seaports throughout the United States. Upon Trump’s inauguration, Kurt Nagle, AAPA president and CEO, sent a wish list to Trump to encourage him to hold to hisambitious goal of investing up to US$1 trillion to rebuild US infrastructure. The list includes a request to relieve traffic bottlenecks by providing additional investments to the Fixing America’s Surface Transportation (FAST) Act that was signed by former President Barack Obama; make spending on the harbour maintenance tax (HMT) a priority while ensuring equity and fairness of HMT distributions; and increase spending on port security.
“Coupled with President Trump’s stated intention to make major improvements in America’s infrastructure, we’re optimistic that long-overdue infrastructure investments will be made,” said Nagle.
The Trump Administration has not indicated yet how it will pay for its infrastructure projects and upgrades. Trump has indicated that he is proposing an investment tax credit that would cost US$137 billion and stimulate, he says, about US$1 trillion of private investment.
Trump also is proposing other tax schemes that impact trade and commerce – part of his Make America Great Again pledge. He has suggested a new 20% tax on imports from Mexico to finance the construction of a border wall between the US and its southern neighbour, Trump’s answer to curbing illegal immigrants from entering the US from Mexico.
He also proposes a 45% tax on Chinese imports and tariffs on goods that specific American companies produce in foreign countries.
Meanwhile, the Republican arm of the US Congress is floating a “border adjustment tax” that, if made law, would tax imported goods flowing into the US at the existing corporate income tax rate and exempt exports flowing out from the US.
Brandon Fried, executive director of the Airforwarders Association, warns that such tax changes could have a major impact on trade patterns, and thus the cargo business. He stresses that a border adjustment tax, in particular, would impose a tax on imports with none of the costs being deductible against profitability of the goods sold.
“We are watching this closely as the proposal could have an adverse impact of trade in the United States,” he said.
Industry groups such as the American Apparel & Footwear Association (AAFA) are caught in the cross hairs of Trump’s proposals. On one hand, AAFA supports the Trump administration’s focus on increased enforcement of trade obligations, and calls for renewal of the Generalized System of Preferences (GSP) trade programme and finalization of the new Miscellaneous Tariff Bill that would reduce or eliminate tariffs on imported inputs that are not available domestically.
Nate Herman, AAFA senior vice president of supply chain, added that the footwear and apparel association is concerned that some of Trump’s proposed trade policies could adversely impact the industry’s complex supply chains and 4 million US-based workers.
“We are committed to communicating with the new administration and the new Congress to ensure they are aware of the negative impacts that could be caused by such things as border taxes, and making changes to North American Free Trade Agreement (NAFTA) that could adversely impact the apparel and footwear industry,” he said.
Rufus Yerxa, president of the National Foreign Trade Council (NFTC) and former WTO deputy director general, told attendees at a press conference that his organization is prepared to work with Trump to improve conditions for US exporters. He added, however, that the international economy and the national economy are inextricably linked, and that no set of policies set forth by the incoming administration and new Congress can ever succeed without addressing this reality.
Yerxa stressed that trade policy should be structured to maintain and expand US leadership in creating a more open and rules-based global economy through the use of a “muscular but strategic” negotiating and enforcement effort.
“It should be aimed at addressing unfair trade while strengthening global norms that reflect our principles of open markets and non-discriminatory treatment,” he said. “This means both regional and multilateral engagement in building stronger trade rules, disciplining unfair practices and protecting the investments our companies have made in innovation and technology.”
NFTC, which represents more than 300 US-based companies across a broad range of industries, was a big supporter of the Trans-Pacific Partnership. Yerxa observed that Trump plans to renegotiate trade deals such as NAFTA and the abandoned TPP on a country-by-country basis with the goal to make single trade agreements with nations rather than bulk agreements.
“There’s pressure from Japan not to renegotiate the TPP,” Yerxa asserted, adding: “It seems a tremendous waste of time to renegotiate TPP individually with each nation.”
By Karen E. Thuermer
Correspondent | Washington
