Facing off against trade chaos

Facing off against trade chaos
© Greg Nash

Rufus Yerxa is putting four decades of trade expertise to the test as global tensions escalate under President TrumpDonald John TrumpGingrich: Trump ‘mishandled’ Rosenstein memo on Comey Trump to gift Macron framed upholstery: report Former presidents, first ladies come together to honor Barbara Bush MORE.

The head of the National Foreign Trade Council (NFTC) is trying to steer his members through the minefield of Trump’s threats, which include hefty tariffs on China and a possible withdrawal from the North American Free Trade Agreement (NAFTA).

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Luckily, Yerxa — whose experience ranges from Capitol Hill to the Office of the U.S. Trade Representative and from private law practice in Brussels to the World Trade Organization (WTO) in Geneva — comes to the job ready to tackle the rising set of challenges.

“The biggest frustration among our big companies is how it doesn’t seem to matter how adverse the impact is on them on some policy issues,” Yerxa said during an interview last week in his K Street office.

In response to Trump’s March announcement that he would impose steep tariffs on steel and aluminum imports, the NFTC’s members quickly rallied and formed the Alliance for Competitive Steel and Aluminum Trade to ensure their voices were heard.

“There is a strong sense of frustration that we have some shared objectives with the administration but we can’t really be more involved in shaping the strategy,” he said.

China is Trump’s biggest target, and Yerxa, who watched Beijing’s gradual economic rise over the past 40 years, said the United States must figure out a how to stay ahead in the game of global competitiveness.

“I think there are two elements. Yes, drive a hard bargain on trade, but also the U.S. as a country has to come to grips with what policy changes do we need to make in our domestic industrial economic policies to run faster than the Chinese,” he said.

Yerxa, who has worked for both Republicans and Democrats on trade during his career, has a few ideas.

Trump’s plan to deal with the Chinese with “pure brute force” is a difficult path to take, he said.

“I think the problem is that you have to more clearly outline for China what we expect of them and where they’re out of sync with the rest of the world,” he said. 

“And then you need to say we’ll negotiate with you to adopt changes to your system that would address those problems,” he said.

The enduring question for him is how to get the Chinese to change policies that the U.S. and its allies complain give Beijing a global advantage.

“The Chinese are doing a lot of things that we need to put pressure on them to change,” Yerxa said.

“Our preferred way of having that happen would have been for the U.S. to build this international consensus that China was out of step with the trading system,” he said.

But Trump has abandoned the Trans-Pacific Partnership (TPP) and a trade deal with the 28-member European Union that were part of the process under the Obama administration of doing exactly that.

“That’s not a great way to build a coalition against China,” Yerxa said.

Now Trump is threatening at least $50 billion in tariffs on more than 1,300 Chinese products over what the White House says is persistent intellectual property theft.

China has promised to retaliate.

“We won’t get the Chinese to move as far as we would’ve if we’d pursued this more coordinated agenda, if you built the pressure through our becoming the leader of the stronger free-trade network,” Yerxa said. 

“I think we would’ve had much more credibility to force [Chinese President] Xi Jinping into reconsidering where he’s headed.”

Trump also has made repeated threats to leave NAFTA while even promising tariffs on longtime U.S. trading partners, putting the U.S. on shaky ground with allies that must question whether Washington will back out of deals they’ve made, Yerxa said.

“I think almost everything that has happened since then has actually reduced the chances of getting consensual global pressure,” Yerxa said.

“In fact, my biggest fear now is that a lot of these countries will say, ‘Hey, the U.S. is having a fight with China, let’s go whisper in the ear of the Chinese and say if you keep them out of your market we will be happy to come in.’  ”

“What’s starting to happen is there is this network of free trade among all these other players with only two major components missing — the U.S. and China,” Yerxa said.

After nearly 25 years, Yerxa is experiencing a little déjà vu on NAFTA.

From his post in Geneva, as a deputy trade representative with the U.S. trade office, he watched President George H.W. Bush sign the agreement just before leaving office,  in late 1992.

Much to his surprise, he got a call from President Clinton’s top trade official, Mickey Kantor, who wanted him back in Washington to apply the final touches on both NAFTA and an agreement that would create the modern WTO.

In the first six months of the Clinton administration, Yerxa headed up the trade representative’s efforts to add two-side agreements on labor and the environment to the NAFTA deal.

Congress finally ratified the agreement in November 1993.

Now, Trump is pushing for an updated three-nation agreement that further helps U.S. businesses.

“We don’t want to see it go backward,” Yerxa said.

A new NAFTA must open up trade, not create more impediments for U.S. businesses, he said.

“We’re still far from a deal, or at least far from a deal we’ll be enthusiastic about,” he said.

“If the Trump administration wants the support of business, any new deal can’t be more trade-restricting than current law,” he said.

Yerxa, who got his bachelor’s degree at the University of Washington in 1973, law degree at the Seattle University School of Law and a post-graduate degree at the University of Cambridge, always saw himself as part of the trade discussion.

“I knew I wanted to be in the international law space,” he said.

That simple goal has defined his career.

When Yerxa took the helm of the NFTC in May 2016, the strategy seemed straightforward — figure out how to convince then-Democratic presidential nominee Hillary ClintonHillary Diane Rodham ClintonFormer presidents, first ladies come together to honor Barbara Bush Romney: Parts of Comey book read 'too much like a novel’ Collins: Comey should have waited to release his memoir MORE to support global trade deals like the TPP.

The working plan was that Clinton could eventually be convinced to support the sweeping Pacific Rim deal, despite her opposition during the campaign, like her husband had reconciled NAFTA.

“The expectation was we’d be dealing with that kind of set of circumstances, so this will be an interesting job,” Yerxa said.

Then came Election Day, a surprise Trump win, a wholesale revamp of that agenda and what has become nearly nonstop adjustments to Trump’s chaotic trade policy.

Still, regardless of who won the election, the expectation was that U.S.–China trade relations would become increasingly difficult.

Now, major U.S. trading partners are forging ahead with new trade deals while the U.S. and China are in a tit-for-tat trade battle.

“If the real problem is China, then we can’t rally the rest of the world to support that if we’re going to behave just like the Chinese. That’s the problem,” Yerxa said.

“We need to show the rest of the world that we actually have a better vision than that,” he said.

“We want to see an open world and we want to try to force the Chinese to play fairly in that open world, and that’s the real challenge. I don’t think they’re there yet.”