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Tags: Trump | Trade | China | Mexico | WTO

Trump's Trade 'Hammer' Aims to Pound China, Mexico and the WTO

Trump's Trade 'Hammer' Aims to Pound China, Mexico and the WTO

Monday, 13 March 2017 07:21 AM EDT

The trade talks on steel imports were dragging on, and Robert Lighthizer didn't care for the Japanese offer. So he folded it into a paper airplane and launched it across his desk at Japan's lead negotiator.

Within days, the Japanese agreed to cut their nation's share of the U.S. steel market, a key piece of then-President Ronald Reagan's plan to curb foreign steel imports. The 1985 deal capped weeks of negotiations in which Lighthizer, then the deputy U.S. Trade Representative, shocked his Japanese counterparts with rough-hewn jokes and wore them out with his disdain for their proposals, former colleagues recalled. During one Japanese presentation, he devoted his attention to playfully disassembling his microphone.

Now, Lighthizer, 69, has been handed a megaphone. He's preparing to take over as top trade negotiator for a president who argues that the true roots of Republicanism lie in the protectionist bent of such early leaders as Abraham Lincoln. Donald Trump has promised a tough new approach to trade that will shield American workers and companies, even if that means slapping tariffs on foreign goods and ignoring decisions made by the World Trade Organization.

"He'll be the hammer," said Bill Perry, a partner at law firm Harris Bricken who was hired by Lighthizer at the USTR office in the 1980s. "He'll be an extremely tough negotiator. And for free traders, he'll be their best hope, because he understands the limits of the law."

NAFTA and China

At the top of Lighthizer's agenda will be renegotiating the North American Free Trade Agreement. The original talks for that 1993 pact took two years; the Trump administration wants a new deal in half that time.

Regarding China, which accounts for more than half of America's $500-billion trade deficit, Lighthizer has urged a harder-nosed approach and more trade complaints from the U.S. More fundamentally, he'll be tasked with overhauling the way the U.S. manages its trade with the world, based on Trump's assertion that while free trade is good, the current system hasn't delivered it.

Matthew Nolan, an attorney with Arent Fox LLP, calls Lighthizer "an aggressive lawyer" who may believe Trump's election gives him fresh license for taking tough positions. "I don't think he will feel constrained by any current or past limitations," said Nolan, who has represented the governments of Canada and Mexico in trade disputes. "I think everything's going to be on the table."

Some economists worry about the potential results. "Consumers buy a lot of things from China, and the immediate impact of a higher tariff on Chinese goods would be increased prices," said Chad Bown, senior fellow at Peterson Institute for International Economics.

Aggressive U.S. policies risk igniting international trade wars, Bown said. "China will retaliate," he said. "And if you're a worker or a farmer whose livelihood is tied up in your ability to sell your product to China, you're also going to be hurt."

Foreign Clients

Lighthizer's Senate confirmation, now scheduled for a hearing on Tuesday, has been delayed in part by an issue related to his previous work ... for China. In 1991, he represented the China Chamber of Commerce for Machinery and Electronics, in a dispute with U.S. manufacturers of electric fans.

That, along with his representation of the Brazilian government in a 1985 ethanol-imports case, may trigger a federal law that prevents people who've represented foreign governments from becoming the USTR.

Democrats say he'll need both the House and Senate to waive that law; Trump's White House disagrees. Senator Orrin Hatch, the Utah Republican who chairs the Senate Finance Committee, is examining the question, a spokesman said. Lighthizer, through an assistant, declined to comment.

Others have stepped into the void, including Commerce Secretary Wilbur Ross and Peter Navarro, head of the White House National Trade Council. Trump's inner circle is brimming with advisers who hold provocative views on trade, including chief strategist Steve Bannon, who calls himself an economic nationalist.

But none of them know the law like Lighthizer, a Georgetown-educated lawyer who has sifted through the minutia of trade cases for more than three decades. Nor do many of Trump's trade hawks understand how to steer deals through Congress like Lighthizer, who worked as both chief minority counsel and chief counsel to the Senate Finance Committee under Bob Dole from 1978 to 1983.

'Fortress Japan'

Foreshadowing America's current trade imbalance with China, Dole complained in 1979 about what he called "Fortress Japan" — with which the U.S. had a $12 billion trade deficit at the time. After he became the deputy USTR under Reagan in 1983, Lighthizer negotiated voluntary agreements to limit Japanese steel imports and a grain deal with the Soviet Union that expanded American exports.

While Reagan is often seen as a free-market icon, Lighthizer has written that the former president took aggressive steps to protect American industry, insulating Harley-Davidson from Japanese competition and slapping quotas on imported steel. Like Trump, he believes protectionist policies have always had a home within the Republican Party.

"We as a nation were busily managing trade" in those years, said Paula Stern, who served as chairwoman of the U.S. International Trade Commission from 1978 to 1987.

Lighthizer left USTR in 1985, joining Skadden Arps Slate Meagher & Flom. His practice in recent years has focused mostly on representing domestic firms, most prominently U.S. Steel Corp.

Union Ally

In a polarized Washington, Lighthizer has support from one traditional Democratic constituency. "All my years dealing with him, he's been on our side of the issues," said Leo W. Gerard, international president of the United Steelworkers. The union has made frequent use of unfair competition provisions in U.S. trade laws to protect its members, often on the same side as U.S. Steel and Lighthizer.

Gerard hopes the U.S. government will be willing to initiate trade cases on its own, rather than waiting for companies. "We've had those discussions over the years where I think Bob, and Wilbur Ross as well, believe there should be more self-initiation," Gerard said.

The Trump administration has signaled that, when it comes to defending America's trade interests, it's open to all options — even ignoring decisions of the World Trade Organization, which enforces international trade agreements.

Lighthizer has argued that the Geneva-based trade body frequently overreaches its authority, often to the detriment of the U.S. He has excoriated former President Bill Clinton and others for backing China's 2001 entry into the WTO, saying the move caused America's trade deficit to balloon and hastened the decline of its manufacturing sector.

"He's very well-versed in all the tools that our so-called trading partners use to cheat and game the system," said former steel-industry executive Dan DiMicco, who advised Trump on trade policy during the election and recommended Lighthizer be appointed as USTR.

And, as the 1984 negotiations with Japan demonstrated, he can bring a bruising style to his job.

"I've never met anyone as sharp and focused," said Charles Blum, who worked with Lighthizer on the steel negotiations. "He's not always polite. He would just torture them until they did it our way."

© Copyright 2023 Bloomberg News. All rights reserved.

The trade talks on steel imports were dragging on, and Robert Lighthizer didn't care for the Japanese offer.
Trump, Trade, China, Mexico, WTO
Monday, 13 March 2017 07:21 AM
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