Jul 1, 2018

Axios Sneak Peek

Welcome to Sneak Peek, our weekly lookahead for both ends of Pennsylvania Avenue, plus my best scoops. I'd love your tips and feedback: jonathan@axios.com. And please urge your friends and colleagues to join the conversation by signing up for Sneak Peek.

1 big thing: Exclusive — Leaked Trump bill to blow up the WTO ​

Illustration: Lazaro Gamio/Axios

Axios has obtained a leaked draft of a Trump administration bill — ordered by the president himself — that would declare America’s abandonment of fundamental World Trade Organization rules.

  • The draft legislation is stunning. The bill essentially provides Trump a license to raise U.S. tariffs at will, without congressional consent and international rules be damned.
  • We've included the full draft text on our site. Axios retyped the leaked document to protect our source.

The details: The bill, titled the "United States Fair and Reciprocal Tariff Act," would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country:

  1. The "Most Favored Nation" (MFN) principle that countries can't set different tariff rates for different countries outside of free trade agreements;
  2. "Bound tariff rates" — the tariff ceilings that each WTO country has already agreed to in previous negotiations.

"It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal," said a source familiar with the bill.

  • "The good news is Congress would never give this authority to the president," the source added, describing the bill as "insane."
  • "It's not implementable at the border," given it would create potentially tens of thousands of new tariff rates on products. "And it would completely remove us from the set of global trade rules."

Behind the scenes: Trump was briefed on this draft in late May, according to sources familiar with the situation. Most officials involved in the bill's drafting — with the notable exception of hardline trade adviser Peter Navarro — think the bill is unrealistic or unworkable. USTR, Commerce and the White House are involved.

  • In a White House meeting to discuss the bill earlier this year, Legislative Affairs Director Marc Short bluntly told Navarro the bill was "dead on arrival" and would receive zero support on Capitol Hill, according to sources familiar with the exchange.
  • Navarro replied to Short that he thought the bill would get plenty of support, particularly from Democrats, but Short told Navarro he didn't think Democrats were in much of a mood to hand over more authority to Trump.

White House response: Spokeswoman Lindsay Walters said, "It is no secret that POTUS has had frustrations with the unfair imbalance of tariffs that put the U.S. at a disadvantage. He has asked his team to develop ideas to remedy this situation and create incentives for countries to lower their tariffs. The current system gives the U.S. no leverage and other countries no incentive."

  • But Walters signaled that we shouldn't take this bill as anything like a done deal. "The only way this would be news is if this were actual legislation that the administration was preparing to rollout, but it’s not," she said. "Principals have not even met to review any text of legislation on reciprocal trade."
  • Between the lines: Note the specificity of Walters' quote above. Trump directly requested this legislation and was verbally briefed on it in May. But he hasn't met with the principals to review the text. 

Be smart: Congress is already concerned with how Trump has been using his trade authorities — just look at recent efforts by Republican Sens. Bob Corker and Pat Toomey and Democratic Sen. Michael Bennet to roll back the president's steel and aluminum tariffs.

  • The bottom line: As a smart trade watcher told me: "The Trump administration should be more worried about not having their current authority restricted rather than expanding authority as this bill would do."
2. The big picture: Trump's war on globalism

Photo: Saul Loeb/AFP/Getty Images

This leaked bill is part of a much larger story: Trump's war on multilateral, global institutions and agreements. Some of these, like the World Trade Organization, form the core of the post-World War Two international order.

Trump has expressed skepticism, and in some cases outright hostility towards NATO, the European Union, the United Nations, the World Trade Organization, and the Group of Seven (G7). He's already withdrawn the U.S. from the Trans-Pacific Partnership, the Iran deal, and the Paris climate accord, and has seriously contemplated terminating NAFTA.

  • On Friday, we broke the news that Trump has been repeatedly telling his advisers that he wants to withdraw the U.S. from the WTO. His advisers have taken this as him "venting" and haven't put in place a policy process to deal with the suggestion, but Trump keeps returning to it.
  • Trump denied the Axios story, but he has told aides so many times privately that he thinks the WTO is terribly unfair and wants to withdraw the U.S. from the organization, that a phone call to anyone involved in the White House trade conversations over the past year would confirm our reporting.

Between the lines: Michael Wessel, a China hawk who's worked on trade for more than 30 years, channels the Trump-Navarro thinking behind getting aggressive with the WTO, such as through the legislation we reported in item 1.

  • "These trade problems are growing in scope and impact, with no resolution in sight," Wessel told me.
  • "What they’ve [the Trump administration] been doing isn’t pretty, it’s aggressive, but nothing else has gotten the attention of our trading partners who have largely refused to respond to U.S. complaints for years."

Go deeper:

3. Kavanaugh's photo bomb

The Washington Post spread from Saturday.

Top Supreme Court contender Brett Kavanaugh received the worst imaginable treatment in The Washington Post on Saturday: a giant photograph of him taking the oath beside George W. Bush coupled with a photo of him hugging Karl Rove.

  • Given Trump's hatred of all things Bush, Kavanaugh would almost be better off if WaPo had doctored up pictures of him leading the Women's March, wearing a Planned Parenthood t-shirt, and waving an "Abolish ICE" sign.

But, but, but: If Trump reads the article accompanying the pictures, he'll find a lot to like. The opening paragraph points out that Kavanaugh "has argued that presidents should not be distracted by civil lawsuits, criminal investigations or even questions from a prosecutor or defense attorney while in office." (Catch that, Robert Mueller?)

What's next? Trump will spend much of the next week interviewing candidates to replace Supreme Court Justice Anthony Kennedy, according to a senior administration official.

  • Trump has said publicly he plans to announce his pick on July 9.
  • He's also said that two women are on his shortlist. A source close to Trump told me he's considering Amy Coney Barrett, a judge on the U.S. Court of Appeals for the Seventh Circuit.

What we're hearing: Despite Ted Cruz pitching hard for him, sources close to Trump tell me Utah Sen. Mike Lee has approximately a zero percent chance of being picked as Trump's next Supreme Court justice.

4. Inside the Democratic strategy to oppose Trump's judge

Photo: Aaron P. Bernstein/Getty Images

Democrats plan to make health care the central issue in their fight to oppose whomever Trump picks to replace Anthony Kennedy on the Supreme Court.

  • Here's Democratic leader Chuck Schumer framing the strategy on the Senate floor Wednesday: "This is the most important Supreme Court vacancy for this country in at least a generation. Nothing less than the fate of our health care system...[is] at stake."

Democrats plan to keep hammering two arguments:

  1. That Kennedy's replacement will tip the court into deep social conservatism and will ultimately lead to abortion becoming illegal in America.
  2. That Kennedy's replacement will ultimately vote to overturn the Affordable Care Act, removing protections for people with pre-existing conditions.

Why this matters: Democrats believe these arguments will resonate with voters whom polls show are already worried about their health care under Republican leadership. Democrats also think they'll resonate with the swing vote senators needed to confirm Kennedy's replacement — many of whom support abortion rights and voted against Trump's efforts to repeal the Affordable Care Act.

  • "Republicans had hoped they put a band aid on the self-inflicted wounds that came from health care repeal and gutting protections for people with pre-existing conditions," Democratic strategist Jesse Ferguson told me.
  • "Then, Donald Trump ripped the band-aide off with his lawsuit to overturn those protections and now the fight over his Supreme Court Justice will pick the scab."  

Go deeper: Read Axios' Sam Baker on the Trump Justice Department's decision to not defend the Affordable Care Act in court, including "the provision of the law that forces insurance companies to cover people with pre-existing conditions."

5. A tale of two conversations

In today's Fox News interview between Maria Bartiromo and President Trump:

  • Bartiromo: "Are you going to mention the meddling when you meet with Russian President Vladimir Putin?"
  • Trump: "I’d like to see some answers as to why we didn’t take the server, why the FBI didn’t take the server from the DNC. I want to see that…"

In today's CBS interview between "Face the Nation" host Margaret Brennan and national security adviser John Bolton:

  • Bolton: "...[W]hat President Putin said, through a translator of course, but what he said was there was no meddling in 2016 by the Russian state."
  • Brennan: "Very little happens without Vladimir Putin's OK."
  • Bolton: "Well I think that's — that's an interesting statement. I think it's worth pursuing. I'm sure the president will want to pursue it."
6. Pet phrases in Trumpworld

Photo: Yuri Kadobnov/AFP/Getty Images

Those who speak in public on behalf of Donald J. Trump have all developed their own phrases to try to tread that tightrope between maintaining integrity and not angering or defying the boss. Sean Spicer's catchphrase was "the tweet speaks for itself." Sarah Sanders is understandably a big fan of "I'd refer you back to the president’s outside counsel."

Now, it looks like John Bolton is developing a good one: "That's not the position of the United States."

From today's CBS interview between "Face the Nation" host Margaret Brennan and Trump's national security adviser:

  • Brennan: "On Air Force One this week, President Trump when he was speaking to reporters seemed to leave the door open to recognizing Russia's annexation of Crimea, saying we'll have to see what happens when the issue comes up in the meeting. Is the U.S. endorsing the idea that international borders can be redrawn by force? Is this actually a topic?"
  • Bolton: "No that's not the position of the United States. But I think —"
  • Brennan: "This is why it was newsworthy when he said it."
  • Bolton: "Well I don't know that that's what he said. ... I think the president often says 'we'll see' to show that he's willing to talk to foreign leaders about a range of issues and hear their perspective. President Putin was pretty clear with me about it and my response was, 'We're going to have to agree to disagree on Ukraine.'"
  • Brennan: "But that's not up for negotiation."
  • Bolton: "That's not the position of the United States."
  • Brennan: "Right. But saying 'we'll see' suggests it might be."
  • Bolton: "Well, we'll see."

Flashback: Axios, June 28 — In his private meeting with G7 heads of state, Trump told the leaders "NATO is as bad as NAFTA" after saying earlier in the conversation that Crimea probably should belong to Russia because everyone there speaks Russian.

7. Sneak Peek diary

Congress is out for the July 4th holiday.

President Trump's schedule, per a White House official:

  • Monday: Trump will host the prime minister of the Netherlands and meet with Secretary of State Pompeo.
  • Tuesday: Trump will have lunch with Defense Secretary Mattis, then fly to West Virginia to speak at the Salute to Service dinner. 
  • Wednesday: Trump will attend a picnic of military families. At night, he'll watch the July 4th fireworks from the White House.
  • Thursday: Trump will fly to Montana for a campaign rally.
8. 1 fun thing: Peak Trump in the Oval

Illustration: Lazaro Gamio/Axios

During his year and a bit as Trump's chief economic adviser, Gary Cohn tried many different tactics to persuade the president why some of his most hardwired instincts on trade were, in Cohn's view, misguided.

In one memorable Oval Office meeting, Cohn told a fictional story about Trump's Scottish golf course to explain why Trump shouldn't try to remove a key protection in international trade deals, according to three sources familiar with the meeting.

Cohn said to Trump: "Mr. President, think about your golf course at Turnberry. If a bunch of birds started nesting in the bunker on the 18th hole and they were an endangered species, what if the town of Turnberry decided to close down the 18th hole to protect the endangered species?

  • "Without ISDS," Cohn continued, "that case would be heard in the local court in Turnberry," and the local court would decide whether Trump was owed compensation.
  • The killshot — or so Cohn apparently thought: "Mr. President, which would prefer? Having the local court in Turnberry hear the case where they'd probably shut down the hole forever and take it from you [without compensation]? Or go to ISDS, which is an arbitration panel where you choose on arbitrator, Turnberry chooses one, and the two of you mutually agree upon a third?"

What happened next: Trump's trade negotiator Robert Lighthizer interjected and said Cohn's golf course example was "ridiculous." Then Trump agreed it was ridiculous and went off on a tangent about what a magnificent property Turnberry was, how it was "one of the greatest places in the world," and mentioned all the things he'd done for Scotland, meaning this imaginary situation would "never happen."

Why this matters: The fight over whether to keep the investor-state dispute settlement (or ISDS) is a major sticking point in the Trump administration's NAFTA negotiations with Canada and Mexico.

  • Cohn vehemently opposed Trump's and Lighthizer's desire to rid NAFTA of ISDS — a provision, commonly negotiated in trade deals, that allows U.S. investors to sue foreign countries before international tribunals for alleged expropriations or discriminatory practices.
  • Trump and Lighthizer believe ISDS undermines American sovereignty because it allows foreign companies to sue the U.S. government. And they believe the legal certainty it provides incentivizes American investments overseas.

Ya can't make it up: The Trump Panama Hotel is in a commercial dispute involving the Panamanian government. The Trump Organization's lawyers are invoking rights under the countries' investment treaty and threatening to bring a claim for damages.

  • In other words: Trump's lawyers are invoking, in Panama, the very provision Cohn tried to talk Trump out of removing from NAFTA.