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To get tough on China, Trump may throw out the trade rulebook

The latest addition to President-elect Donald Trump's circle of trade advisors shows that the new administration is focused on China in a big way — and it could even go beyond what the World Trade Organization allows.

Trump announced Tuesday he intends to nominate lawyer Robert Lighthizer as U.S. trade representative. A proponent of a tough U.S. position on China, Lighthizer has negotiated restrictions on steel imports and was deputy U.S. trade representative in the Reagan administration.

Ideologically, that puts Lighthizer on the same page as Peter Navarro, author of "Death by China" and Trump's appointee to head the newly created National Trade Council. Trump's pick for Commerce secretary, billionaire Wilbur Ross, will also be involved with the trade council.

"I could certainly see this group promoting tariffs that are not WTO-consistent and saying, 'Who gives a damn,'" said Charles Freeman III, managing director at consulting firm Bower Group Asia and former assistant U.S. trade representative for China affairs.

"Lighthizer comes from the days before WTO … and a lot of trade people who come from before that era regularly talk about WTO as unilateral disarmament," Freeman said.

The Trump transition team and Lighthizer did not respond to CNBC requests for comment.


"Is free trade really making global markets more efficient? Is it promoting our values and making America stronger? Or is it simply strengthening our adversaries and creating a world where countries who abuse the system — such as China — are on the road to economic and military dominance?" -Robert Lighthizer, U.S. trade representative pick in a 2011 Op-Ed

The WTO was formed in 1995 and consists of a set of trade agreements negotiated and signed by its members. Those policies support free trade of goods and services across borders and oppose governments attempting to protect national industries with subsidies and taxes on imports.

But critics say countries like China have been unfairly allowed to reap benefits without cutting back on its own protectionist policies, to the harm of other members like the United States.

China was admitted to the WTO in 2001, and millions of U.S. manufacturing jobs fled the country for China in the months and years that followed.

Lighthizer is one of those free trade critics. In the closing paragraph of a 2011 opinion piece in The Washington Times, he wrote:

Given the current financial crisis and the widespread belief that the 21st century will belong to China, is free trade really making global markets more efficient? Is it promoting our values and making America stronger? Or is it simply strengthening our adversaries and creating a world where countries who abuse the system — such as China — are on the road to economic and military dominance? If Mr. Trump's potential campaign does nothing more than force a real debate on those questions, it will have done a service to both the Republican Party and the country.

"I think you're setting up both a philosophical and a practical way in which the U.S. government [is going] to renegotiate trade agreements both with and without WTO," said Gregory Husisian, chair of law firm Foley & Lardner's export controls and national security practice.

"It's going to be a continuation of the steel trade wars and expansion of that to cover more products," he said.

Under the Reagan administration in the 1980s, Lighthizer threatened quotas and punitive tariffs on Japan to help reduce imports into the United States. At the time, the U.S. government also enacted "voluntary export restraint" programs which limited auto imports from Japan and global steel imports in the 1980s.

Lighthizer then spent nearly three decades as a lawyer representing U.S. steelmakers and other companies in anti-dumping and anti-subsidy cases.

"Lighthizer is the only one who has any trade law experience, and his trade law experience is pretty darn deep. Not everyone in the trade community is a fan," Freeman said, also saying that Lighthizer is "a very respected, and frankly feared, trade lawyer in this town."

With Trump yet to take office, it's still unclear how far the new administration will push past existing trade frameworks such as the WTO.

A Chinese magazine with a front page story naming US President-elect Donald Trump as their Person of the Year is seen at a news stand in Beijing on December 29, 2016.
Greg Baker | AFP | Getty Images
A Chinese magazine with a front page story naming US President-elect Donald Trump as their Person of the Year is seen at a news stand in Beijing on December 29, 2016.

Lighthizer "seems to be talking about doing things that are within the existing rules," said Edward Alden, Bernard L. Schwartz senior fellow at the Council on Foreign Relations and author of "Failure to Adjust: How Americans Got Left Behind in the Global Economy."

"He's talking about a range of more aggressive action. He does not talk about tariffs across the board," Alden said.

— Reuters contributed to this report.