WALL STREET JOURNAL
The Architect of Trump’s Tough-on-China Policy
U.S. Trade Rep Bob Lighthizer argued that years of negotiation with
Beijing had produced little and now the time had come for a
confrontational approach
By Bob Davis
WASHINGTON—President Donald Trump’s tough policy on China trade took
shape in a White House meeting last August—and at the center was an
often-overlooked man.
Decades of quiet negotiations had gotten nowhere, U.S. Trade
Representative Robert Lighthizer told senior White House advisers and
cabinet officials gathered in the Roosevelt Room.
“China is tap, tap, tapping us along,” he said, meaning it regularly
promised policy changes but didn’t deliver. He punctuated his talk with
charts showing how the trade deficit with Beijing had widened.
U.S. Ambassador to China Terry Branstad, linked by videophone, asked for
a chance to conduct another round of talks based on a rapport he was
developing with the Chinese. He found little support. It was time to
act, starting with a formal investigation of China for unfair trade
practices, Mr. Lighthizer argued.
A few days later, Mr. Trump announced an investigation of alleged
Chinese violations of U.S. intellectual-property rights—headed by Mr.
Lighthizer. It marked the start of the most dramatic and high-risk
effort in decades to force the world’s second largest economy to change
its behavior, which culminated this week in an order threatening to slap
tariffs on $50 billion of Chinese imports, a move that also had Mr.
Lighthizer’s imprint on it.
After China threatened tariffs on an equal amount of imports from the
U.S., Mr. Trump on Thursday called that “unfair retaliation” and said he
might put tariffs on a further $100 billion of Chinese imports, tripling
the amount subject to them. A Chinese Commerce Ministry spokesman said
on Friday Beijing ”is fully prepared to hit back forcefully and without
hesitation.”
Mr. Lighthizer’s role became clear to the
Chinese when the Trump economic team landed in Beijing in November for a
round of discussions. Mr. Trump made sure the U.S. trade representative
met with top Chinese leaders while some others waited outside.
In a session with President Xi Jinping, Mr. Lighthizer laid out how
fruitless the U.S. considered past negotiations and how the president
was concerned the U.S. trade deficit continued to expand. While US
officials saw Mr. Lighthizer’s comments as a lawyerly argument, Chinese
officials described their reaction as shocked.
Today, Mr. Lighthizer is exchanging letters with China’s senior economic
envoy on measures Beijing could take to head off a trade war.
Negotiations are likely to stretch over many months—an ambiguity that
could rattle financial markets and lift prices on goods earmarked for
tariffs.
“Trump and Lighthizer are like-minded,” said William Reinsch, a former
trade official now at the Center for Strategic and International
Studies. “There is a negotiating strategy of
bullying, intimidation, and threats to soften up [the adversary]. Then,
maybe make a deal.”
Mr. Lighthizer’s brother, Jim Lighthizer, a former Democratic
politician, puts it another way. “His approach is direct; he doesn’t
spend a lot of time on nuance.”
Mr. Lighthizer declined requests for comment.
Many U.S. businesses say they are fed up with what they view as unfair
Chinese subsidies to local companies, and strong-arm tactics that make
them hand over technology to Chinese partners. Still, they worry U.S.
threats of tariffs could backfire and leave them vulnerable to
retaliation.
“We want to prod the administration to line up friends and allies” to
press China, said Josh Bolten, head of the Business Roundtable trade
group and a former White House chief of staff for George W. Bush. “If
it’s just the U.S. versus China, negotiations will be confrontational.
The winners may not be the international trading order but our European
and Japanese competitors,” which could increase sales to China.
Early in the Trump administration, Commerce Secretary Wilbur Ross, a
longtime Trump ally who had done business in China, was expected to lead
China economic policy. He privately referred to Mr. Lighthizer, a former
trade attorney, as his lawyer, say business executives, who took it as a
slight. A Commerce official said Mr. Ross meant only that the two had
worked together previously on steel issues.
Mr. Ross’s star dimmed when the president dismissed an early package of
deals the commerce secretary negotiated with Beijing as little more than
a repackaging of past offers, say senior White House officials. “Shut it
down,” Mr. Trump told Mr. Ross in July when he stripped Mr. Ross of his
China role and closed down the talks, according to senior administration
officials.
Mr. Ross continues to work on China issues, including advising Mr.
Lighthizer on which Chinese imports to target for tariffs, a Commerce
official said.
Mr. Lighthizer, by contrast, managed to bridge a sharp divide over trade
among Mr. Trump’s warring factions.
To so-called nationalists like trade aide Peter Navarro, who was itching
to take on China, Mr. Lighthizer was a China
hawk. Mr. Navarro is mainly an idea man, who has seen his role as
making sure the White House carries out the president’s campaign pledge
to stop China from “ripping us left and right.” Mr. Lighthizer runs a
trade agency, plots strategy and carries it out. The two have worked
together to develop on China policy, though they sometimes disagree on
tactics.
To the so-called globalists such as former National Economic Council
Director Gary Cohn, who worried about the impact of trade fights on
markets, Mr. Lighthizer was the skilled attorney and former
congressional aide who understood how Washington worked.
To Mr. Trump, Mr. Lighthizer was a kindred spirit on trade—and one who
shuns the limelight. The two men, who have a
similar chip-on-the-shoulder sense of humor, bonded. Mr.
Lighthizer caught rides to his Florida home on Air Force One. Mr. Trump
summons Mr. Lighthizer regularly to the Oval Office to discuss trade
matters, administration officials say.
“Lighthizer has everyone’s trust, regardless of their views on trade,”
said Kevin Hassett, the White House chief economist.
Mr. Lighthizer is skilled at managing up, said his brother, Jim: “Bob
recognizes there’s one king and he ain’t it.”
As an attorney at Skadden, Arps, Slate, Meagher and Flom LLP, Mr.
Lighthizer represented steel-industry clients who believed they had been
hurt by subsidized imported Chinese goods. In op-ed columns dating back
to 1997, Mr. Lighthizer opposed the entry of China into the World Trade
Organization under the terms being negotiated. Mr. Trump has called the
WTO a “disaster for this country.”
Mr. Lighthizer’s role is a change from recent administrations where
China experts, such as Treasury Secretary Henry Paulson in the George W.
Bush administration, handled the China economic portfolio. In his
previous role as Goldman Sachs Group Inc. chief executive, Mr. Paulson
helped China carry out its earliest privatizations and continues to meet
with Chinese leaders.
Mr. Lighthizer, on the other hand, is a skilled international trade
litigator, more in the mold of former U.S. Trade Representative Charlene
Barshefsky, who negotiated China’s entry into the WTO. The Trump team
thinks China experts have been too quick to back off in negotiations
with Beijing.
By the time he took office in May, the administration was fighting
internally over whether to impose tariffs on steel and aluminum imports
globally. China policy was on the back burner.
While Mr. Lighthizer believed the metal glut was due to Chinese excess
production, say administration officials, he thought a fight at that
point would be self-defeating because the focus would be on U.S.
tariffs, not Chinese trade and investment practices. Assessing tariffs
on all steel exporters, many of which are U.S. allies, would paint the
U.S. as a villain instead of China.
Rather than risk the ire of Mr. Trump, who considered steel tariffs a
campaign promise, Mr. Lighthizer worked quietly with Mr. Cohn and others
to get the issue set aside in favor of other priorities.
U.S. trade representatives often regard themselves as lawyers for U.S.
exporters, trying to open up new markets. Mr. Lighthizer saw things
differently, viewing big U.S. companies as job outsourcers that
sometimes had to be reined in.
At a September meeting with about 100 CEOs organized by the Business
Roundtable, he said he understood they had to maximize profits, which
sometimes meant exporting jobs. “My job is different,” he told the
group, according to participants. “My job is to represent the American
workers. We’re going to disagree.” It was a position some in the
audience found arrogant.
Mr. Lighthizer, 70 years old, grew up in the Lake Erie port city of
Ashtabula, Ohio, which was battered by imports. He sees himself as
blue-collar even though he is a doctor’s son who once raced around West
Virginia in sports cars and has financial assets worth between $10
million and $38 million, according to government filings.
As with his boss, bluntness is his calling card. In the mid-1980s, as a
U.S. Trade Representative official who negotiated with Japan, he once
grew so frustrated he took a Japanese proposal, turned it into a paper
airplane and floated it back at the Japanese negotiators as a joke. In
Japan, he became known as “the missile man.”
In a Senate hearing last month, when Democratic Sen. Maria Cantwell of
Washington said his China plans could hurt U.S. aircraft makers, he
dismissed her concerns as “nonsense.”
As the U.S. moved toward confrontation with China last fall, after the
August Roosevelt Room session, Mr. Lighthizer worked to make sure the
administration was united. Previously, the U.S. had often balked at
confronting China out of fear a fight would tank the global economy and
make China less willing to help on national-security issues.
Defense chief Jim Mattis, though, backed a
tough approach because he was concerned China was illicitly obtaining
U.S. technology and could gain a military edge, say individuals
familiar with his thinking. Others in the national-security agencies
were tired of what they felt were unmet Chinese promises on Korea and
other security issues.
Mr. Cohn, then the economy chief, was as fed up with Beijing as Mr.
Lighthizer, say officials. As a longtime president of Goldman Sachs, Mr.
Cohn had lobbied to do business unimpeded in China and didn’t get the
approvals he sought.
At the end of February, China sent its chief economic envoy,
Liu He, to Washington to try
to restart negotiations. Mr. Liu was ready to pledge that Beijing would
open its financial market.
He found a frosty welcome. The Chinese embassy
had requested 40 visas so Mr. Liu could bring a full entourage. The
State Department granted just a handful.
Mr. Liu couldn’t get any time with President
Trump. Instead, he met with Mr. Lighthizer, Mr. Cohn and Treasury
Secretary Steven Mnuchin. The three delivered a simple message, say
officials familiar with the talks: The U.S. isn’t going to get “tapped
around” like prior administrations.
The U.S. wanted substantial changes in trade practices and barriers,
which Mr. Lighthizer detailed. They included cutting the tariff China
imposes on auto imports from 25% to something closer to the U.S. tariff
of 2.5%. The U.S. also wanted a $100 billion reduction of its $375
billion annual merchandise trade deficit with China. To punctuate those
demands, the administration planned to threaten tariffs.
One more obstacle needed to be cleared away. President Trump, frustrated
that the steel-tariff matter had been indefinitely delayed, was
sympathetic to pitches by Messrs. Navarro and Ross that he should
finally move on the issue. In early March, Mr. Trump said he would
impose 25% tariffs on steel and 10% tariffs on aluminum from any
exporting nation.
The international response threatened to drown out the China initiative
as U.S. allies complained they were unfairly targeted.
On Tuesday evening, March 20, senior officials gathered again in the
Roosevelt Room to decide how to proceed with the tariffs scheduled to go
into effect in three days. Mr. Navarro, the trade adviser, argued
tariffs should be imposed across the board as the president threatened,
say officials. That would increase U.S. leverage with steel-exporting
nations, which could be expected to offer concessions to avoid tariffs,
he argued.
Mr. Lighthizer, aligned this time with Mr. Ross, pressed for an
alternative course. Grant nearly all nations except China temporary
exclusions from the tariffs, they proposed, according to participants,
but then limit their exports through quotas. That would make the U.S.
seem more reasonable in steel negotiations and help form a coalition
against China.
The group produced a memo in which the different views were articulated.
Mr. Trump backed Mr. Lighthizer’s side.
With the steel issue defused, at least temporarily, Mr. Trump announced
on March 22 the U.S. would threaten tariffs on Chinese imports. He
thanked Mr. Lighthizer for his help and invited him to say a few words.
“This is an extremely important action,” Mr. Lighthizer said, “very
significant and very important for the future of the country, really,
across industries.”
Over coming months, the ability of the U.S. to maintain pressure on
China will depend on factors including the reaction of markets,
opposition by U.S. industries and farmers, and retaliation by China
against U.S. companies. Chinese leaders say they are confident they
would prevail in a trade war, say U.S. individuals who have met with
them recently, and chalk up U.S. threats to Mr. Trump’s midterm
congressional electioneering.
Jorge Guajardo, a former Mexican ambassador to China and now a
Washington consultant, has seen up close how Beijing can pressure
companies and wear down governments. “The big question is, ‘Will the
U.S. blink?’” he said. “Or will they stay the course so China is forced
to understand there is a new way of doing business.” |