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Protectionist Steel Interests Given Keys to Trump’s Trade Policy Kingdom

Tuesday, November 22, 2016 10:12
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(Before It's News)

“Well we’re living here in Allentown
And they’re closing all the factories down
Out in Bethlehem they’re killing time
Filling out forms
Standing in line
Well our fathers fought the Second World War
Spent their weekends on the Jersey Shore
Met our mothers in the USO
Asked them to dance
Danced with them slow
And we’re living here in Allentown.”

– Billy Joel, “Allentown,” 1982

Nearly 35 years after the release of Billy Joel’s wistful lament about the decline of iconic Bethlehem Steel and the selfless virtues of America’s “Greatest Generation” along with it – the U.S. steel industry may be getting the last laugh. Yesterday, former Nucor Steel CEO Dan DiMicco and longtime Washington trade attorney Robert Lighthizer, who has devoted much of his professional career to building walls between foreign steel and the U.S. companies that want to buy it, were appointed heads of President-elect Trump’s “Landing Team” at the Office of the United States Trade Representative.

To those who have been holding out hope that Trump’s anti-trade campaign bluster would moderate before it could be converted to policy, the selection of DiMicco and Lighthizer is pretty devastating news. Neither has met a tariff he didn’t like or a trade agreement he did. To the non-political staff at USTR, the DiMicco/Lighthizer duo must feel like a real poke in the eye. After all, the mission of the agency is “to work toward opening markets throughout the world to create new opportunities and higher living standards.” The staff is generally committed to trade liberalism and good will among nations and their sensibilities are informed by foreign service backgrounds.  DiMicco and Lighthizer bring an enforcement and prosecution ethos to the USTR, which will send a lot of the existing staff to the exits, while ensuring that the agency’s budget is devoted primarily to bringing complaints against our trade partners, rather than negotiating new and better deals.

Of course, Trump mistakenly cites the U.S. trade deficit as evidence that the United States is losing at trade.  We are losing, he bellows, because our trade agreements are disastrous. And, they are disastrous, he reasons, because U.S. negotiators always get outsmarted by their crafty foreign counterparts. What better way not to get outsmarted than to appoint people who would take a wrecking ball to existing agreements instead of crafting new ones?

For reasons unsupported by facts, DiMicco abhors the North American Free Trade Agreement and wants it shredded.  He also wants the United States to withdraw from the Trans-Pacific Partnership – which, yesterday, became one of Trump’s Day One priorities. Trump has been outspoken about his intentions to declare China a currency manipulator and to respond with punitive unilateral measures. To the extent that Trump’s actions are constrained by U.S. treaty commitments under the World Trade Organization, Lighthizer has a long history of challenging the veracity of the WTO dispute settlement system, which he claims embodies an anti-American bias. He has long advocated for closer scrutiny and, if warranted, U.S. withdrawal from the WTO.

Ten years ago, I debated Lighthizer in this week-long back-and-forth hosted by the Council on Foreign Relations. His affinity for wanting to bend the WTO to be more responsive to U.S. demands (i.e., “All animals are equal but some are more equal than others”) was very much on display then.

The U.S. steel industry has been one of America’s most protectionist and litigious industries for more than a century. Its model was never to compete on economics or commercial considerations. It was always to invest in K Street and use the levers of politics to cordon off the U.S. market for domestic steel. As a trade attorney, Lighthizer brought hundreds of antidumping and countervailing duty cases against foreign producers with the aim of raising the cost of foreign steel to downstream, steel-consuming U.S. industries, such as appliance, automobile, and pipe and tube manufacturers. Often testifying in hearings before the U.S. International Trade Commission, where Lighthizer argued for the imposition of tariffs, was Dan DiMicco, in his capacity as Nucor CEO.

It’s not that the steel industry isn’t entitled to its day in court. The problem is that the industry’s interests are so overrepresented in Washington. After all, “primary metal” manufacturing (which is a sector that includes more than just steel-making) accounted for $56 billion of value-added output last year. That’s a lot – until you recall that total value-added in the U.S. economy last year (GDP) was over $18 trillion. In other words, the direction of the administration’s trade policy is being shaped by two men who speak on behalf of interests that account for less than 0.3 percent of the U.S. economy. What about agricultural interests?  What about the tech industry? Pharmaceuticals? Equipment manufacturers? Professional services? Will the interests of the other 99.7 percent of the U.S. economy have a voice in the formulation of trade policy? 

Most of us don’t live in Allentown.

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