Economy

Why Wilbur Ross could have the toughest job in Trump's cabinet

Trump's pick for commerce secretary, along with a team of likeminded economic advisors, will be putting mainstream economic principles to the test.

Billionaire investor Wilbur Ross talks with reporters in the lobby of Trump Tower in November 2016.
Evan Vucci/AP/File
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Wilbur Ross, the prospective US Secretary of Commerce, delivered testimony before a Senate committee on Wednesday as he sought confirmation for a post that would put 12 bureaus and nearly 47,000 federal employees under his charge as part of the cabinet of President Donald Trump.

Mr. Ross, a billionaire private equity investor who specialized in turning around distressed manufacturing firms – sometimes at the expense of US jobs – has advocated for tariff barriers to undergird the steel and textile industries. And on Wednesday, he cited his endorsement from the United Steelworkers Union as proof of his commitment to protecting manufacturing jobs.

"I am not anti-trade. I am pro-trade," he said in prepared remarks, according to Reuters. "But I am pro-sensible trade, not trade that is detrimental to the American worker and to the domestic manufacturing base."

"I think I've probably had more direct experience than any prior Cabinet nominee has had with unfair trade in the steel business, in the textile business, in the auto parts business and other sectors," said Ross. "I am very well aware of the issues many companies face, and I'm sensitive to both the issues abroad and the issues here at home."

If confirmed, Ross would become a point person on trade policy for the Trump administration, along with economic advisor Peter Navarro and US trade representative nominee Robert Lighthizer, both of whom share Trump’s hawkish views on China and other trade partners.

The trio will be charged with advising Trump in what could be the administration’s single toughest task: piloting the United States away from its main global role as a consumer and toward greater self-reliance in production. And even if the changes sought by the Trump administration end up being far less revolutionary than they sometimes sound, the new trade-policy staff seem to point to a significant departure from Republican free-trade orthodoxy.

As Ross and Mr. Navarro wrote in a September op-ed in the Washington Post, Trump’s government would seek incentives for US corporations to stay in the country, such as lower taxes and fewer regulations, along with disincentives for relocating abroad, like his threat of a “big border tax” of 35 percent.

The first part goes down well with top Republicans. The second part, not so much: House Speaker Paul Ryan (R) of Wisconsin said this month on talk radio that the party is “not going to be raising tariffs,” according to Roll Call, and other GOP leaders have sounded similarly doubtful.

This divergence raises the prospect of an intra-party squabble – though it also could force a tough decision on a Democratic party that is still trying to sort out its post-election identity.

Beyond politics, though, the bigger challenge lies in Trump’s promise to cut away at the trade deficit using tariffs and punitive action against China and other countries that violate trade rules.

It wouldn’t be the first time US governments have taken action of the sort. Dean Baker, co-director of the left-leaning Center for Economic and Policy Research, points out that there are plenty of examples from recent memory of presidents using tariffs to protect industry. 

George W. Bush, for example, instituted tariffs to protect US steelmakers in 2002 after China joined the World Trade Organization, though the WTO deemed them a violation of trade rules. And just this past May, president Obama hit Chinese imports of certain kinds of steel with huge tariffs in response to its “dumping” of those exports on foreign markets due to waning domestic demand.

“I think there can be occasions where some protectionism makes sense, with the precaution that you want it to be limited and of limited duration,” Dr. Baker tells The Christian Science Monitor.

But unlike previous presidents, Trump may be intent on using such measures as ways of tackling the trade deficit, on the assumption that it makes the country poorer. That, as Bloomberg’s Noah Smith wrote in a December column, isn’t what most economists think. Ross and his other colleagues could put that principle to the test.

“If tariffs on Chinese electronics caused companies like Apple Inc. to start making their products in the U.S., without spurring China to block U.S. goods, it really could give the American economy a shot in the arm,” wrote Mr. Smith.

But foreign-made parts, tools, and services are often essential for US manufacturers and other businesses. If “imports are complements to U.S. production, then trade restrictions could backfire severely,” he warned.

At his hearing on Wednesday, Ross told the Commerce Committee that he believed tariffs “play a role both as a negotiating tool and if necessary to punish offenders who don’t play by the rules,” according to the Hill, adding that dumping of steel and aluminum would be a main focus of the new administration.

Countries who don’t stick to the rules, he told the committee, should “get punished, and severely.”

Trump’s own tariff plans, says Baker, would very likely be found to violate World Trade Organization rules. “China would take it there [to the WTO], and presumably win,” he says, leaving the US with a choice of facing sanctions or dropping the tariffs.

“If he does it willy-nilly, they’ll retaliate.” 

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