Trade Chief Lighthizer Urges Biden to Keep Tariffs on China

Date: Wednesday, January 13, 2021
Source: Wall Street Journal

WASHINGTON—In his nearly four years in office, U.S. Trade Representative Robert Lighthizer helped move protectionism from the fringes of American policy-making to the core. His advice to the Biden administration: Stay the course.

Keep tariffs on China—all of them—even if that raises prices for U.S. businesses and consumers, he said. Weaken the World Trade Organization so that it can’t overrule U.S. policies, and make it harder for American companies to move overseas despite the cost to their competitiveness.

In an interview, Mr. Lighthizer credited the Trump administration with taking a tough approach toward Chinese trade practices that benefited U.S. workers—ending years of accommodation by previous administrations fearful of angering Beijing.

“We changed the way people think about China,” Mr. Lighthizer said. “We want a China policy that thinks about the geopolitical competition between the United States and an adversary—an economic adversary.”

The 73-year-old Mr. Lighthizer—tall, gravelly voiced and pugnacious—was the engineer who helped steer the Trump administration’s economic confrontation with China. He turned President Trump’s anger at Beijing into a two-year trade war where he deployed tariffs on a scale not seen since the 1930s.

Facing annual tariffs on $370 billion in trade, China signed a deal a year ago to increase its purchases of U.S. goods and services by $200 billion over two years, open its financial markets and ease pressure on U.S. firms to hand over technology.

The battle had its costs—it rattled global markets, soured Americans’ views toward China and pushed the two economies apart, a cleavage that has deepened as a virus that surfaced in China spread across the U.S., killing more than 370,000. Still the tariffs didn’t lead to the economic disaster that some economists had predicted, although they did increase prices that Americans had to pay for many imported goods.

“We transformed the way people think about trade, and we transformed the way the models are,” Mr. Lighthizer said in an interview. “My hope is that that will continue.”

Mr. Lighthizer’s free-trade critics acknowledge his influence. “He is the most consequential trade representative” since President Kennedy created the position in 1963, said Gary Hufbauer, a Peterson Institute for International Economics senior fellow. “He reversed the disposition toward globalization.”

Mr. Lighthizer’s influence on U.S. economic policy was hardly a given. The U.S. Trade Representative’s office has just 200 employees, compared with the Treasury’s 100,000, and operates essentially as the president’s trade law firm. The trade representative’s power stems directly from his or her relationship with the president.

Mr. Trump made trade a priority and Mr. Lighthizer worked hard to cement his ties to his boss. He hitched rides back to Florida on Air Force One, where he has a home not far from Mr. Trump’s Mar-a-Lago resort and struck up a close relationship with the president’s son-in-law Jared Kushner.

Most important, say Trump officials, Mr. Lighthizer was a persuasive advocate in White House debates and avoided the limelight. He learned the role of discreet staffer from his work decades earlier for Kansas Sen. Robert Dole, who was then the top Republican on the Senate Finance Committee.

“I stay in the trade lane and out of the press,” Mr. Lighthizer remarked at one signing ceremony.

His Senate background, he said, made it especially painful to watch the recent storming of the Capitol by a pro-Trump mob. While he didn’t criticize the president’s role, he said, “For the rest of his administration and for the many months after that [Mr. Trump] has to be an agent of healing.”

President-elect Joe Biden’s economic team shares Mr. Lighthizer’s view of China. But Mr. Biden’s advisers point out that the Trump administration failed to get Beijing to adopt the longer-term reforms it sought, including reducing government support of industry and protecting trade secrets of U.S. companies, in part because it picked fights with U.S. allies at the same time.

In the year since the trade pact was signed, China has fallen far behind on its purchase commitments to the Phase One trade agreement and has doubled down on its statist economic policies.

Mr. Biden plans to shuck unilateral action and sign up allies for what he calls a “united front” against Beijing. That includes leaving the decision on tariffs until consultations with European and Asian partners.

Mr. Lighthizer views the Biden plan with alarm, saying it could let other nations slow or veto U.S. actions and tie up the U.S. in endless, pointless discussions with China. The U.S. and China “started dialogues in the ’90s,” he said. “That did nothing. All of them were just a waste of time.”

Chinese officials argue that they have vastly liberalized their economy, helping U.S. firms and consumers. They also say that their state-led economic model is responsible for turning China into the world’s second-largest economy.

Since the Phase One deal was signed in January 2020, the lead on China policy has shifted to national security officials. Secretary of State Mike Pompeo has looked to deepen relations with Taiwan, which China regards as a renegade province, including starting talks for a bilateral trade deal.

But Mr. Lighthizer blocked that initiative, leading to criticism that he was coddling China in hopes of saving his trade deal. That isn’t the case, he said. There wasn’t enough time to go through the many legal hoops to get a trade agreement, he said. Besides, trade relations with Taiwan are fraught.

“We have a large and growing trade deficit with Taiwan,” he said, which totaled $26.9 billion through November 2020. “We clearly have trade disputes with Taiwan [and] they haven’t been resolved.”

As a longtime steel-industry lawyer, Mr. Lighthizer often sued for tariffs. In office, he initially targeted $50 billion of Chinese goods for levies. That was supposed to equal the annual loss to U.S. companies from technology purloined by China.

Additional tariffs were meant to pressure China and would be largely rolled back when the U.S. was convinced China was carrying terms of the trade deal, Trump officials said.

Although Mr. Lighthizer said Beijing is complying, he still wants the Biden administration to keep tariffs on all $370 billion in Chinese goods—three-quarters of everything China sells to the U.S.

Tariffs get results, he argued, so there is no reason to drop them. The 25% tariffs he slapped on Chinese car imports stopped China from potentially selling millions of vehicles in the U.S., he asserted.

“We’ve protected our automobile industry, our auto parts industry,” Mr. Lighthizer said.

This is all part of what he calls a worker-oriented trade policy. Other parts include stripping the WTO of power to override U.S. trade actions and reworking trade deals so they require more manufacturing in the U.S.

When he renegotiated the North American Free Trade Agreement, for instance, he greatly weakened special arbitration panels American companies use to sue foreign governments over investment disputes.

Those panels should be scrapped, he said, because they make moving factories overseas less risky. “If you’re going to invest in a shaky place, why should the United States basically insure you for free?” Mr. Lighthizer said.

But these protectionist measures also raised the price of imported parts for a swath of American companies, making it more costly to manufacture in the U.S.

“In a globalized world, our companies need to be thinking of selling into other markets,” said Chad Bown, a Peterson Institute trade expert who has closely tracked Mr. Trump’s China policy. Mr. Lighthizer “made it harder.”

His successor as trade representative, House Ways and Means staffer Katherine Tai, has a challenge in shaping policy. Mr. Biden hasn’t put a priority on trade and will be surrounded by aides who have worked with him for decades. In many administrations, China policy is run out of the White House or Treasury with the U.S. Trade Representative playing a secondary role.

Ms. Tai, a Mandarin speaker, headed China enforcement policy at USTR during the Obama administration. A Biden spokesman said “she knows how to make the levers of government work” and she would work closely with the White House on trade, which he called “a key pillar” of Mr. Biden’s economic agenda.

Mr. Lighthizer credits her with helping corral Democratic support for the renegotiated Nafta, called the U.S.-Mexico-Canada Agreement, which passed Congress by a wide margin, unlike nearly all free-trade deals.

“She learned good skills on the Hill,” Mr. Lighthizer said. Those include “how to manage different people who have different objectives and still get things done.”

 

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