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Lighthizer Pledges “New Approaches” and “Action” on Trade Policy

Thursday, September 21, 2017
Sandler, Travis & Rosenberg Trade Report

U.S. Trade Representative Robert Lighthizer told an audience at the Center for Strategic and International Studies Sept. 18 to “expect change, expect new approaches, and expect action” on trade policy from the Trump administration.

Enforcement. Lighthizer indicated he intends to be proactive in working to overcome market distortions and achieve “free and fair competition.” The U.S. has “trade agreements that we don’t think have worked out in our interest,” he said, but “years of talking about these problems has not worked.” Instead, the U.S. “must use all instruments we have to make it expensive to engage in non-economic behavior and to convince our trading partners to treat our workers, farmers, and ranchers fairly.” The Trump administration has “a different philosophy,” he said, “and there will be change.”

Trade Agreements. Lighthizer reiterated his and the president’s position that “trade deficits matter,” though he did not explain why. Instead he argued that the “rules of trade” are a major contributor to U.S. trade deficits, citing in particular the lower tariffs the U.S. imposes on automobiles than other developed countries, border tax adjustments by trading partners, and currency undervaluation. He also said changes in trade deficits will be considered in determining whether the United States’ existing free trade agreements are “working to our benefit” and suggested that the White House will seek to renegotiate those that have resulted in a “disequilibrium.”

On the topic of NAFTA, the one FTA that the administration has already started renegotiating, Lighthizer was uncertain as to whether the talks can be concluded before the end of this year. “We’re running very quickly somewhere,” he said, referencing the scheduling of each negotiating round three weeks apart as well as the fact that the two rounds held so far have not appeared to yield much forward progress.

With respect to possible new trade agreements, Lighthizer affirmed President Trump’s preference for a bilateral approach. “Not only can you negotiate better agreements,” he said, “but you can enforce them more easily,” because enforcement of multilateral or plurilateral agreements involves “disrupting too many things.” However, he gave no indication as to when any such negotiations might begin or which countries might be involved. He noted that “when and if” the U.S. might resume negotiations on the Transatlantic Trade and Investment Partnership with the European Union is “something that we’re looking at right now.”

China. Lighthizer said the “principal challenge we face” is how to deal with China in a global trading system. China is an “unprecedented” threat to that system, he said, because of “the sheer scale of their coordinated efforts to develop their economy, to subsidize, to create national champions, to force technology transfer, and to distort markets in China and throughout the world.” Referring to USTR’s ongoing Section 301 investigation of intellectual property rights practices in China, he said “there’s an awful lot to indicate that there’s a problem” and warned that if existing means are insufficient to address that problem “we’ll try to devise other remedies.”

WTO. Much of Lighthizer’s criticism was focused on the World Trade Organization. He argued that the WTO was “not designed to successfully manage mercantilism” on the scale being practiced by China and that as a result the U.S. “must find other ways to defend … our economic system.” He was also skeptical of the WTO’s ability to achieve “negotiated outcomes” at its ministerial meeting this December, saying “there are a number of areas where we would be willing to engage but there seems to be something blocking it in every case.” He expressed hope that the ministerial would result in agreement on the WTO’s future work but would not say if that work should include ongoing negotiations to liberalize trade in services and other sectors, noting that USTR’s study on which such initiatives the U.S. wants to pursue is expected “hopefully in another month or so.”

Lighthizer was particularly critical of the WTO’s dispute settlement process, which he called “deficient.” Over the years this process “has really diminished what we bargained for or imposed obligations that we do not believe we agreed to,” he said, echoing a complaint raised by policymakers from both sides of the ideological spectrum in recent years. He attributed these difficulties to the fact that the U.S. sees the WTO agreements as a contract giving participants specific rights whereas others “tend to think they’re … evolving kinds of governance.” Given that the dispute settlement process is “a fundamental part of the WTO,” he said, sorting out these differences is “what we have to do.”

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