The Office of the United States Trade Representative (USTR) has, since its creation in 1962, been at the vanguard of trade liberalization in the U.S., and therefore in the world. The agency is traditionally full of free traders, who work tirelessly to advance the interests of domestic industry, from cattle ranchers to automotive manufacturers.
But Donald TrumpDonald TrumpSocial media users troll GOP, Trump over ObamaCare repeal The Memo: Winners and losers from the battle over health care Trump angry Kushner, Ivanka went skiing during health debate: report MORE’s announcement of Robert Lighthizer as his United States Trade Representative heralds the beginning of a new era for international trade, and it isn’t one that free traders are going to like. Lighthizer has called for more “practicality, nuance, or flexibility” in Republican trade orthodoxy. He has warned of a “race to the bottom” when the U.S. does deals with countries that have weaker labor or environmental standards.
In this regard, he has more in common with the protesters who took to the streets smashing the windows of Starbucks during the 1999 World Trade Organization (WTO) protests than he does with the jetsetting world of international trade negotiators. But what makes Lighthizer dangerous to ideological free traders is that, unlike other members of the Trump trade team, he has walked the walk.
As deputy United States Trade Representative in the Reagan administration, Lighthizer was charged with negotiating voluntary quotas on steel imports, parlaying that experience into a long career as a trade attorney representing the interests of U.S. steel manufacturers at a white shoe Washington law firm.
Lighthizer wasn’t just a fierce advocate for his clients in the courtroom. He was an outspoken opponent of the Doha free trade discussions launched by President Clinton, and for a long time has shared the opinion of U.S. labor leaders that trade deals with foreign countries should have enforceable labor and environmental standards, comparing free traders’ ideological commitment to open borders with the repeal of the Clean Air Act or the minimum wage.
Lighthizer’s fiercest critiques have been leveled at America’s second largest trading partner—the People’s Republic of China. In a blistering 35-page report submitted to the U.S.-China Security Economic and Security Review Commission in 2010, Lighthizer systematically dismantles the arguments made by proponents of China’s accession to the WTO, and points to evidence of China’s mercantilism that has come at the expense of the United States. He goes on to make the case that the U.S. needs to be significantly tougher on Chinese violations of international trade norms if the global trading system is to work for American workers and firms.
In particular, Lighthizer advocates that “WTO commitments are not religious obligations, [and] do not (and should not be construed to) impinge upon national sovereignty,” arguing that the U.S. has been far too weak in its acquiesce to WTO obligations when crafting domestic law. Among his most radical suggestions is that the U.S. treat currency manipulation as an illegal export subsidy for purposes of countervailing duties, and that the U.S. should bring a case against China for their manipulation.
Beyond this he seems to suggest that, due to significant interference in their own economy and the very structure of their export subsidies, the balance of power with the Chinese strays so far from the ideals of the WTO system that the U.S. should consider “derogation from WTO stipulations,” meaning going above and beyond what is allowed by WTO standards to retaliate against the Chinese.
The Chinese leadership will be watching the early actions of the Trump administration carefully, and will respond in kind to any aggressive attempts to disrupt the bilateral relationship. The fear of free traders is that the U.S. and China push each other to escalate trade tensions, where U.S. moves to block counterfeit goods coming from China results in Chinese moves to block American entertainment properties from showing there, to name one example.
This kind of trade war hasn’t been seen in our modern era of globalization, and with half a trillion dollars’ worth of Chinese goods being brought into America every year, the stakes are high for the U.S. economy. The Trump team is making a bet that the gains in employment from reshoring production lost to China will outweigh any inflationary pressures or lost market access that come from their Chinese gambit, but that is far from a sure bet. The Trump team believes the U.S. has leverage against the Chinese that it does not use, and by challenging the Chinese directly with aggressive trade enforcement and retaliation, they are calling the Chinese bluff.
The free traders who typically staff the USTR are going to have to learn to live with this high-stakes game, as Lighthizer is not your typical trade representative.
Jonathan Lieber is director of the U.S. practice at the Eurasia Group, a global political risk consulting firm. He served as associate director of the White House National Economic Council during the George W. Bush administration and later served as principal advisor to Senate Majority Leader Mitch McConnellMitch McConnellThe Memo: Winners and losers from the battle over health care GOP senators pitch alternatives after House pulls ObamaCare repeal bill Under pressure, Dems hold back Gorsuch support MORE on economic policy.
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