By Irwin Stelzer The Weekly Standard · May 22, 2017
There is no lack of drama in the Trump administration when it comes to trade policy. The ingredients are there: interesting players, uncertainty of outcome, the rise to and fall from favor. The principal actor and star, a man who brooks no rival for the spotlight is, of course, President Donald J. Trump—the very man who this week dismissed the head of the FBI because, among other things, “he’s become more famous than me (sic).”
The lines he chooses to speak, or tweet, frighten some in his worldwide audience. He threatens to rip apart the existing system of rules-based international trade and replace it with a protectionist policy that would include a 45 percent tariff on Chinese imports and the cancellation of the North Atlantic Free Trade Agreement—”the worst trade deal in the history of the world” according to Trump the campaigner. There’s more, but you get the idea: The lead character in this policy drama does not plan to follow the script prepared for successive presidents by a coalition of academic economists, business elites, and congressmen. He undoubtedly took to heart John Maynard Keynes’ warning to avoid becoming the slave of “some academic scribbler of a few years back.”
Surrounding the star, who also writes and continuously edits the script are, in order of appearance: Peter Navarro, Wilbur Ross, and Gary Cohn. Entering from stage hard-right is Navarro, a former academic famous for his dyed-in-the-wool protectionism, and the original shouter-in-the-ear of the president. Trump was so enthralled with Navarro’s performance of his China soliloquy—they steal our intellectual property, they subsidize our competitors, they buy only from their hometown industries—that he formed a National Trade Council and named Navarro its director. Trump did, however, cut from the script one of Navarro’s lines—the one in which he accuses China of being a currency manipulator, keeping the yuan low to facilitate its assault on American markets. It seems that during a break in the play Trump had a pleasant dinner with Chinese president Xi Jinping, during which Xi denied manipulating the yuan and added, “Anyhow, we are manipulating it up, not down, to stem the flight of capital from our Communist paradise,” or words to that effect.
Next on stage, entering from center-right was Ross, to play the part of commerce secretary and pragmatic protectionist, and handle the renegotiation of America’s trade deals. A billionaire who made his fortune buying up clapped-out steel companies and reviving them with the help of new stiff tariffs, Ross—always referred to by the financial set as Wilbur, which the president frequently admires as an exercise in branding—proceeds in later acts to shape Navarro’s nostrums into workable policy.
Finally, brought to the cast from the heart of Wall Street, considered by many in the audience the heart of darkness, and entering from center-stage, is Cohn, whose prior credits include a stint as second-in-command to the chief of Goldman Sachs. When his superior officer would neither succumb to an illness nor prove sufficiently incautious to be a candidate for assassination, Cohn decamped to Trump’s Washington as head of the National Economic Council, with the goal of making sure that the system, revised to be sure, survived the new administration. That proved to be fatal to any chances Navarro might have had to influence real-world policy. He shuffles off to the sidelines. Cohn, who became a multimillionaire performing in the economic system that Navarro wants to replace with pervasive protectionism, quickly got the president’s ear. While Trump and Cohn conferred, off-stage came the sounds of Theresa May, Angela Merkel, and Christine Lagarde chanting, “Trouble, trouble, we’ll all be in trouble if Trump goes beyond a few tweaks,” and a congressional chorus demanding a role in the policy drama.
More willing to take advice from billionaires and millionaires than from academics, from winners than from losers, as Trump undoubtedly sees it, the president left Navarro to write policy papers and, if he behaves, participate in some negotiating sessions so that the audience a campaigning Trump beguiled earlier would not make an early exit from the theater.
Enough theatrics. Here’s where we stand. Trump is no longer calling for the end of NAFTA, but is instead negotiating with Congress—the law requires that step—for permission to open talks with Canada and Mexico, both eager to get on with developing adaptations of a 23-year-old agreement. Trump did walk away from the Trans-Pacific Partnership, but Hillary Clinton would have done the same and in any event it would never have received the necessary Senate approval. After promising to avoid future multilateral deals, and negotiate only mano-a-mano with individual trading partners, Trump has authorized his team to open negotiations with the what will be a 27-state European Union after Britain exits.
As for China, the villain of the piece, Trump can reasonably claim that his combination of threats of a retaliatory tariff and openness to a deal is working. On Thursday the two presidents announced a 10-point “early harvest” from their agreement to reset relations. China will open its market to U.S. credit card companies and rating agencies, resume imports of our beef, and send a delegation to meet with potential investors in China, implying a willingness to open markets to them. In return, we will allow imports of cooked poultry meat from China and not take a stand against further Chinese investment in America: Investments by Chinese firms will be treated equally with investments by other foreigners. The U.S. also agreed to provide de facto endorsement of China’s plan to invest billions to revive the ancient silk road to Europe.
Trump sees all of this, and an agreement to spend a year working on other measures to ease trade strains, as a personal endorsement that his “Art of the Deal” works on an international scale. And that dinner at Mar-a-Lago is a testimonial to the value of dinner-table diplomacy. “I’m dealing with a man, I think I like him a lot. I think he likes me a lot,” Trump told an interviewer from the Economist. Whether the deal is all that it seems remains to be seen. Restrictions on beef imports were removed last September but not one ounce of our beef has been imported to China. And the ban on credit card companies has lasted long enough to allow Chinese competitors to become entrenched in the their home market.
Neither this deal nor his softening on NAFTA and other issues means that our president has become an ardent free-trader. Or that if riled by a constituency such as Wisconsin’s dairy farmers or Northwestern lumbermen he won’t react with promises of trade restrictions. Or that he will abandon his efforts to keep his core audience coming back for more when the play reopens in 2020 by doing what he can to make sure that international trade does not result in all the winners residing in the multimillion-dollar high-rise condominiums of New York City and various watering holes around the world, and all the losers in clapped-out factory towns in Pennsylvania and the Midwest.
There remains a worry. Trump is a man of his most recent word, to borrow William F. Buckley Jr.’s description of Lyndon Johnson. Best to remain alert to the latest tweets.