President Donald Trump’s ambitious trade agenda has been caught up by what one reformer compared to something out of a movie, complete with a “civil war” type scene between competing factions of his nascent administration.
The early acts of this film proved disappointing to some of his trade allies, even as his administration crossed the 100-day mark by pointing to a withdrawal from the Trans-Pacific Partnership, an increased emphasis on enforcement of trade laws already on the books, and a series of executive orders aimed fulfilling at his campaign promises.
But as NAFTA renegotiation or withdrawal remains at the starting gate, a number of Goldman Sachs executives maintain high-profile positions in the administration, and Trump has softened his stance on China to help deal with North Korea, those aligned with the president’s trade platform are increasingly cautious in their expectations. His opponents are beginning to breathe a sigh of relief.
“I think the end of the movie has not been written for how Trump is going to or not going to enact his promised trade policy changes,” said Lori Wallach, head of Public Citizen’s Global Trade Watch, which supports the trade platform Trump outlined on the campaign trail. “I would say that Act 1 has been extremely disappointing, and Act 2 is some kind of Civil War scene. But we won’t know what Act 3 is for some time.”
The civil war has played out between the two wings of his administration. One, the “New York” wing, contains figures such as National Economic Council Chair Gary Cohn. The more hawkish Trump trade wing of the White House includes National Trade Council Chair Peter Navarro and chief strategist Steve Bannon, the administration’s foremost nationalist.
The latter camp gained an important ally this week when the Senate finally confirmed Robert Lighthizer to be the US trade representative, clearing the way for more centralised approach to the president’s trade ambitions.
But in a recent battle on the the North American Free Trade Agreement, the “globalists” won. Navarro and Bannon drafted a letter that would have announced the US’s intention to withdraw from the free-trade agreement with Canada and Mexico. Trump was reportedly just days from pulling out of the deal.
At what seemed to be the last moment, several administration officials, including Agriculture Secretary Sonny Perdue and Commerce Secretary Wilbur Ross, talked him out of the withdrawal. Calls from Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau moved Trump to the point of agreeing to negotiations on the deal rather than an imminent withdrawal.
“I think there are two things that are going on,” Wallach said. “The sort of conventional wisdom version is, which I think is totally wrong, ‘Ah, there is finally adult supervision’ or, ‘Wow, reality has finally caught up with Trump’s economic policies.'”
She outlined the “Civil War” she sees:
“No, I don’t think that’s it at all. Rather, I think there are two things. One is policy is personnel, and personnel is policy. And there is, in the context of Trump having been an absolute ruler, the sultan of his own company, there is a learning curve about what happens when people who have very different views than yours are given prominent roles. And unlike in your business, they don’t just do what you say as their mission, as their exclusive mission.”
“So that I think is the background for what is an internal battle among two distinct wings of high level staff and the perspectives they bring. Sort of what people think of as the ‘Goldman Sachs’ wing, vs. the Trump trade wing. … [Trump] hired a trade team that represents a change team. When he appointed Navarro and Wilbur Ross and [Robert] Lighthizer, that was the status quo trade world of Washington basically sought alcohol, because they thought ‘oh good god, he’s actually going to do those things.'”
‘Speak loudly and carry a small stick’
The apparent conflict that has trade allies a bit uneasy, to say the least, has Trump’s trade opponents feeling good.
“I think early on, there was a lot of concern,” Lee Branstetter, a Carnegie Mellon University professor who served on President Barack Obama’s Council of Economic Advisers from 2011 through 2012, told Business Insider. “What he was saying in the campaign, what was in the offing once he took office would be a radical departure from the five or six decades of, you know, fairly bipartisan support for open trade and investment policies.”
“This was quite radical rhetoric,” he continued. “But what we’ve encountered so far is, I think aptly, is somewhat satirically characterised as ‘speak loudly and carry a small stick.'”
Still, many trade reformers are encouraged by several of Trump’s steps, even if they are equally dismayed by other actions. And they view Lighthizer’s confirmation as a positive step. Without Lighthizer confirmed, the top 10 politically appointed positions at the USTR’s office that need Senate confirmation remained unfilled as a result.
That, as some experts noted, is the prime reason why a draft NAFTA renegotiation letter delivered to Congress by the administration in late March was less than exciting to many trade reformers. A representative from Democratic Sen. Sherrod Brown’s office told Business Insider that Brown, one of Congress’ top trade hawks, felt it was weak on a number of key areas. Wallach said the letter “did not do any of the things that would be necessary to deliver on his underlying pledge that his trade policy will bring down the trade deficit and create more manufacturing jobs.”
The White House told Business Insider that the slow process surrounding Lighthizer’s confirmation should be blamed on Democratic obstruction. A White House official said that without Lighthizer in place, it would be difficult to start a number of initiatives they have in mind.
The official pushed back that the “civil war” perceived by some allies was stalling the White House’s trade agenda, the saying the evidence doesn’t back up the narrative.
“These strong orders on trade and these significant judgments being rendered from Commerce and significant penalties being assessed,” the official said, making note of Trump’s executive order calling for an investigation into steel imports, as well as the recent tariffs placed on Canadian softwood lumber. “It’s all been action, and it’s going to continue being that way.”
“That’s all stuff the president talked about during the campaign,” the official continued. “So I think, yeah, of course everyone wants to talk about palace intrigue and it works with what the rest of the press is saying about the White House. But I think, especially in terms of trade, if you look at what’s actually happening, it’s a pretty strong case that the president is following through on that promise.”
The administration official repeatedly pointed to the withdrawal from TPP as the administration’s biggest move on trade, when it pulled out of what was President Barack Obama’s landmark foreign-policy legacy item in the Pacific. It was a rallying cry during the campaign, thrilled many trade reform advocates, and infuriated many economists such as Branstetter, who called it a “huge mistake.”
“He followed through,” the official said. “So that’s obviously a big deal.”
The ‘Trumpian trade agenda seems to be evolving’
But early last month, Trump flipped on one of his biggest promises — to label China a currency manipulator on the first day of his presidency.
While the act of labelling China as a currency manipulator would have been far from definitive in and of itself, the idea Trump was leveraging trade relations to get China to help out on North Korea — a sign that Trump was softening his stance toward China overall — was scary to those who want to see Trump carry out his agenda.
From one end of the spectrum to the other, Trump went from promising to label the country a manipulator on his first day in office to telling the press that the country was no longer manipulating its currency.
“The Republicans and Democrats in our organisation that support Trump’s trade policies are growing concerned that the administration could, like the Obama administration, allow China to continue gutting the US middle class so long as they promise to help on certain foreign policy issues,” Michael Stumo, the CEO of Coalition for a Prosperous America, told Business Insider.
“The working-class voters who elected President Trump will not be satisfied with a claim that China is no longer manipulating,” he said.
Branstetter, who said it was surprising that Trump would pivot from the position after making so much noise about it, said it was indicative of the overall Trump platform, as there’s “no policy or person that he seems permanently wedded to.”
“It’s really a microcosm of how the whole Trumpian trade agenda seems to be evolving,” he said.
Wallach called the move “perhaps the most startling” of Trump’s early days in office.
“He admitted he was breaking his promise was the very basis on which he savagely attacked previous presidents, which was as a foreign policy trade off instead of trade outcomes,” she said.
Wallach pointed to another one of Trump’s early trade moves — his “Buy American, Hire American” executive order — as a piece that helps illuminate the administration’s playing-both-sides approach to the trade debate.
While she called the order an “important, useful first step,” her organisation recently published a report that found Trump’s White House is continuing to provide government contracts to companies that continue to offshore jobs. According to the report, that includes United Technologies, the company Trump visited after helping to keep several hundred Carrier jobs in Indiana.
Stumo, who expressed approval and appreciation for many of Trump’s early executive orders, said it’s still too early to make a real determination of Trump’s record on trade. He called it “a mix.”
“I don’t know that it’s violated our expectations or met them,” he said.
But he did not mince words when discussing what has let him down: the presence of Cohn.
“We are disappointed that Trump brought in the Goldman Sachs faction,” he said. “The globalist faction. That’s worrisome on the National Economic Council, including past folks who negotiated the TPP. That’s probably the biggest disappointment. Plants seeds for the same old Clinton, Bush, Obama trade policy if they get their way.”
Branstetter, who sees many of the executive orders and enforcement measures taken by the administration as “nickel and dime stuff,” pointed to what he believes is the shrinking influence of Bannon, countered with Cohn’s growing profile, as “quite reassuring to many” opponents of the Trump campaign trade agenda.
He called Cohn the seemingly “most pro-trade and pro-globalization” member of the administration.
“We thought we were on the brink of something quite apocalyptic,” he said. “And they have taken several steps back now from the precipice.”
While some in the administration have been successful in convincing Trump that the antithesis of his trade agenda is, on occasion, the “winning” side to pick, Wallach offered a plea to see the bigger picture.
“On this, he will personally be a loser if he does not deliver to his voters who brought him to Washington,” she said. “The balance of short-term gratification and long-term winning status is playing out.”
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