WASHINGTON — Enforcement, not expansion.
That’s likely to be the focus of the next U.S. trade representative as President-elect Donald Trump moves to fulfill his campaign promise to get tough on trade and punish those countries — and companies — that engage in unfair practices at the expense of American jobs. Trump’s primary focus seems to be on growing U.S. manufacturing rather than on negotiating new trade deals.
While retail and brand executives are on edge about the emerging paradigm shift in trade policy and the implications for their trade-reliant businesses, the U.S. textile sector is encouraged by Trump’s pledge to revitalize domestic production and hopeful it will lead to more favorable rules that help the industry expand.
But even as Trump moved Tuesday to fill out his trade team by naming attorney Robert Lighthizer as USTR, there continues to be confusion over whether the president-elect will go through with his oft-stated, and even more often tweeted, vows on trade — and who actually will be leading the effort.
While the role of USTR will be that of a principal negotiator on trade deals, according to Trump’s chief spokesman, the president-elect also plans to rely on a wider circle of advisers to craft his overall trade agenda and policy, according to Sean Spicer, incoming White House press secretary. Many of these people could end up with more authority to set administration policy than the USTR.
For example, Trump already has indicated that Commerce Secretary-designate Wilbur Ross would have the lead in crafting broader trade policy, along with Peter Navarro, head of the newly created White House National Trade Council and a China hawk. The two men will “develop and implement trade policies that shrink our trade deficit, expand economic growth, strengthen our manufacturing base and help stop the exodus of jobs from our shores,” Trump’s communications office said.
That raises the question as to what Lighthizer’s role will be, given that in past administrations the point person on all trade-related issues was usually the USTR.
Already Trump has vowed to withdraw the U.S. from the 12-nation Trans-Pacific Partnership on his first day in office and renegotiate the North American Free Trade Agreement with Mexico and Canada. He has also threatened to impose tariffs of up to 45 percent on Chinese imports and 35 percent on Mexican imports and separately impose a 35 percent tariff on imports from companies that move offshore. The first two proposals would severely impact the fashion and retail industries, which get most of their products manufactured in China or elsewhere in Asia. Closer to home, many firms have sourcing agreements with companies based in Mexico.
As a result of Trump’s stated plans, uncertainty abounds over what his new agenda will mean for market-opening trade deals.
Right off the bat, as he revealed his USTR choice, Trump showed he will take a tough approach on outsourcing, sending out a tweet criticizing General Motors for producing its Chevy Cruz model car in Mexico and warning: “Make in USA or pay big border tax.”
It is unclear whether his previous warnings on outsourcing had any influence on Ford Motor Co., but the big auto manufacturer said Tuesday it plans to scrap a $1.6 billion factory in Mexico and invest in a Michigan factory for that production.
“We’re really excited we’ve got a team of top trade experts who are going to work together to bring American jobs home, which is what frankly the president-elect campaigned on — standing up to foreign cheating and standing up for American manufacturing,” Spicer said on a call with reporters.
As for the tweet warning GM, Spicer said Trump has “generally made clear, whether it is Carrier [which recently decided not to move jobs to Mexico in exchange for significant tax breaks] or other companies, he wants to bring American jobs home. He doesn’t want companies in the United States to be able to go leave this country and sell back to the U.S., leaving American workers behind.”
For U.S. importers that produce the majority of clothing abroad and imported more than $110 billion to the U.S. last year, the antitrade rhetoric of Trump raises concerns about his team’s approach, but many welcomed news about Lighthizer.
An attorney specializing in international trade and a former deputy USTR in President Reagan’s administration, Lighthizer, who will have to be confirmed by the Senate, was praised by many for bringing political knowledge and government experience on trade to the table.
He played a key role in developing trade policy in the Reagan administration and negotiated two dozen bilateral international agreements, ranging from steel to grain, that were “uniformly tough and frequently resulted in significant reductions in the shipment of unfairly traded imports into the United States,” according to Trump’s transition team.
“He understands how the process works, unlike some of the folks on the team who have never been in government,” said Julia Hughes, president at the U.S. Fashion Industry Association. “He does bring to it an understanding of what USTR can do and cannot do. From that perspective, we are not dealing with an unknown entity.”
Hughes said there are still questions and concerns “as we look at the rhetoric from a lot of the team that has been pretty totally negative on what our relationship with China is, what our relationship with NAFTA is and the tweet today [about GM]. All of that obviously raises concern, but we are still waiting for the opportunity to talk with the team and share some of our views.”
Hun Quach, vice president for international trade at the Retail Industry Leaders Association, said of Lighthizer: “Obviously he is someone who is familiar with USTR, with the building, employees and the mission, having served as deputy USTR. There is great comfort in knowing he is skilled and knowledgeable on trade policy issues.”
But Quach noted that retailers are watching closely how he will work with Trump’s trade team to implement the trade agenda. “We’ve heard everything from increased tariffs on Chinese and Mexican goods” to a border adjustability tax that has been proposed by House Republicans, she said.
For the U.S. textile industry, Trump’s new trade team and pledge to bring jobs back to the U.S. are encouraging, said Augustine Tantillo, president and ceo of the National Council of Textile Organizations.
Tantillo said he has known Lighthizer for 30 years.
“He has dedicated his career to furthering the interests of U.S. producers and U.S. companies, and shown a commitment to manufacturing here in the U.S.,” he said. “Bob is an expert on unfair trade practices. He has represented the domestic side of [unfair trade petitions] throughout his career. So we are excited about his nomination….He understands international trade law.”
Tantillo said he does not believe Lighthizer will have a “diminished” role at USTR, even if the Trump administration is not launching new bilateral trade negotiations out of the gate.
“I see all of this activity as actually an upgrading of trade policy within the broader mix of issues for first time in 30 years,” Tantillo said. “[Trump] is bringing Commerce back into a prominent role on trade policy.…Lighthizer will be one of three major players in that team. It will be well-defined and well-structured, which is again an unprecedented approach to this. Who can name the last Secretary of Commerce who actually played a prominent role in trade?”
He added that the template for what is considered a “good” trade agreement is what will be different in the new administration. “The dynamic has changed. The shift is toward a new set of policy objective goals, but certainly not a lower level of activity,” Tantillo said.
Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said Lighthizer’s views are consistent with those of Ross and Navarro.
“The overall view is that the U.S. has had bad deals on trade agreements, especially with NAFTA,” Hufbauer said. “The emphasis is not on new agreements, which involve mutual opening of markets. That has been the parable in past trade agreements since the end of the Second World War. Reciprocal opening has been the flavor of trade policy. This [Trump’s trade policy] flavor is quite different, because the flavor is other countries should open their markets, and if they don’t the U.S. should close its markets. That’s a very different approach.”
In addition to his role as deputy USTR under Reagan, Lighthizer served as chief of staff of the Senate Finance Committee that passed Reagan’s tax and spending cut proposals and helped in the passage of legislation that implemented the Tokyo round of trade negotiations.
He has also represented the U.S. at meetings of the Organization for Economic Cooperation and Development, as well as at meeting at the General Agreement on Tariffs and Trade, which preceded the World Trade Organization.
Lighthizer has been in charge of the international trade law practice at Skadden, Arps Slate, Meagher and Flom for more than three decades. While there, he represented U.S. manufacturers in significant trade cases during the last 25 years, including the key steel safeguard case in the early 2000s under then-President George W. Bush.