February 2001: The Yankee Trader

By Greg Rushford
Published in the Rushford Report

Will George W. Bush’s international-trade policy, like Clinton’s, be captured and de-railed by protectionist special interests? Last month, there were mixed signals.

Although personally inexperienced in foreign policy, the Texas governor swiftly put together a Cabinet of experienced adults weeks before he was sworn in as president on January 20: Colin Powell as secretary of state, Donald Rumsfeld at the Pentagon, Condoleezza Rice at the National Security Council. While the key sub-cabinet positions will take time to flesh out, here also the initial signs were encouraging for observers looking for competence.

For example, Steve Hadley, a former Pentagon official who has moved from Shea & Gardner to become Rice’s deputy at the NSC, is very well regarded. So is Kenneth Dam, a former deputy secretary of state who reportedly will move from the University of Chicago law school to become Treasury Secretary Paul O’Neill’s deputy. And reports that Paul Wolfowitz, a most experienced American diplomat, will be deputy defense secretary are also encouraging. Remember eight years ago when Clintonites like Roger Altman, then deputy treasury secretary, boasted that the incoming Clinton administration would put economics ahead of traditional national security considerations? The George W. people are more sophisticated than that.

But hold the applause. By contrast, the Bush international trade transition was surprisingly uncertain and confusing. While Don Evans was tapped as Secretary of Commerce on December 20, it wasn’t until January 11 that Bush announced that he was choosing Robert Zoellick as U.S. Trade Representative. And the way it was done was so awkward.

Zoellick twisted in the wind for 22 days, while Bush apparently seriously considered demoting the USTR to non-Cabinet status. Word leaked out of the presidential transition office that Evans — who raised some $100 million to put his friend George W. in the White House — would be Bush’s top advisor on trade policy from the Commerce Department. A terrible idea.

Commerce secretaries essentially do two opposing, mercantilist things. They promote U.S. exports with one hand, while administering the antidumping laws to keep imports at bay with the other. Political fundraisers (Democrats like Bill Daley under Clinton and Republicans like Robert Mosbacher under George W.’s father) like this kind of work. But the “talents” it takes to oversee the numbers crunchers at Commerce have little to do with mastering the nuances of diplomacy and foreign policy. This is why the first-class minds tend to be attracted to the State or Defense Departments, NSC, Treasury, or the Office of the U.S. Trade Representative. Bluntly put, if a president listens mainly to his Commerce secretary, he will think that international economics turns mainly on antidumping laws and pleasing protectionist domestic constituencies. Clinton did this, looking for support mainly from the steel and textile lobbies — who screwed him anyway on Nafta, fast track, China, etc.

Last month, George W. and his old friend Evans didn’t seem to understand the dangers of turning over economic policy to protectionists who will never be satisfied, no matter how much you do for them.

Bush and Evans each issued strong statements that seemed to place reliance on U.S. antidumping laws as the centerpiece of administration trade policy (employing the same protectionist codewords as had the predecessor Clinton administration). Will America’s international economic leadership continue to be sacrificed on the antidumping sword? People in sophisticated circles wondered what the heck was going on.

What was going on?

Apparently, the lapse between Evans’ and Zoellick’s respective nominations marked the first significant internal fight over the direction of international-trade policy in the George W. administration. The jousting seemed to turn as much on bureaucratic turf as on policy (Evans represents Commerce’s built-in protectionism, while Zoellick is a mainstream free trader with considerable foreign policy experience). Zoellick’s nomination signals that the protectionist side lost this battle. But we don’t know yet which side will win the war.
Watching these affairs from the outside is a bit like driving down the southern California coast when the fog starts to drift in: Suddenly you can’t quite see the ocean, although you know it is still out there.

On the personality side of the fight, the fog was thick. The consensus of uninformed opinion — we outsiders cannot really claim to more than that — was that the NSC’s Condoleezza Rice cast a jealous bureaucratic eye at a strong policy rival like Zoellick, and would not have minded at all if the USTR position was downgraded. Rice may be a brilliant foreign policy analyst, but trade has never been her specialty. Another bit of the same fog had it that Secretary of State Colin Powell, siding with Rice, also wanted a stronger voice on economic affairs for State. If the USTR had been downgraded, a man as strong as Robert Zoellick (who learned politics and diplomacy from a master: James Baker III) would presumably want no part of it.

With Zoellick’s fate uncertain, smoke was blown about town that if USTR would be downgraded and subordinated to the Commerce Department, Richard Fisher would be perfect. Fisher, a Texan who served as Deputy USTR under Charlene Barshefsky, would happily have switched from the Clinton administration to serving George W. Bush. Fisher had some support in business circles like pharmaceuticals and steel for his advocacy on their behalf regarding Japan. Business Roundtable types worried that Zoellick might not share Fisher’s enthusiasm for pestering Japan on behalf of individual companies.

Fisher is also thought to be close to Clay Johnson, another connected Texan who is now White House personnel director. Fisher furthermore was touted by Republican protectionists on the Hill like New York Rep. Amo Houghton (who also would have liked Barshefsky to stay on under George W.). The Texan also had some senate support (although nobody now wants his name attached to this article in that regard).

As I said, there is no telling how much was fog or smoke, and what was real. Fisher presumably didn’t help himself with the George W. camp — where self promoters are not said to be held in high esteem — by going around town saying that he had the USTR job nearly locked.

But this much was real:

At his January 4 confirmation hearing before the Senate Commerce Committee, Evans pretty much promised Sen. Jay Rockefeller (D-West Va.) that the Bush Commerce Department would seriously consider giving U.S. steelmakers even more trade protection than had the Clintonites, and that Uncle Sam would continue to be the world’s trade cop.

“I am disturbed when I hear that our laws are not being enforced,” Evans declared. ”I am disturbed when I hear that our agreements, our trade agreements, are not being complied with.” Evans said that U.S. enforcement of trade deals struck with countries like China would be a priority, as “compliance is going to be an absolute with me.” (Rockefeller’s constituents actually believe that the U.S. government does not enforce trade laws. This is absolute nonsense, but politicians like Rockefeller continually fuel the anti-foreign fears. In his testimony, Evans was signaling that he, too, is willing to play this game).
“Competition is okay.” Evans added. “But it is not okay if it is not a level playing field.”

On January 5, from his ranch in Crawford, Texas, Bush floated the idea to reporters that it would not diminish U.S. economic leadership if the USTR position would be downgraded and subordinated to the Department of Commerce. “Whether or not the person is called Cabinet or not, it will not in one way or another diminish the importance of the position,” the president-elect claimed.

Bush also claimed that his administration would be one “of free trade.” But as Bill Clinton would say, depends what you mean by free trade. Bush defined it the Commerce Department way. Sympathizing with demands for protection from U.S. steelmakers, Bush said, “One of the things we’re going to do is insist if we’re going to have our markets open we want others to have their markets open and we want to make sure by the way we enforce the anti-dumping regulations and laws on the books.” Clinton said the same thing — which is one of the main reasons why the launch of a new round of free-trade negotiations failed in Seattle in 1999, If Bush also refuses to put reform of U.S. antidumping laws on the WTO’s negotiating table, he will learn the meaning of “deja-vu, all over again.”

“It’s going to be important that we have somebody who’s strong and tough when it comes to opening up markets around the world,” Bush said, referring to the USTR. “We want everybody to be playing on the same playing field.” Clinton loved to go around telling people how tough Charlene Barshefsky is (George Bush’s father used to say the same thing about his USTR, Carla Hills; the difference was that Hills and Daddy bush knew when to pull back before hot rhetoric meant for domestic consumption really damaged foreign relations, and the Clintonites didn’t).

Bush said that he would help farmers as well as steelworkers. He would not “view American agriculture as just part of some bargaining chip to toss away.” That must have been great news for the (embarrassingly) protected U.S. sugar and peanut lobbies.

Happy with the opening, The Stand Up for Steel lobby took out expensive advertisements on inauguration day in major newspapers to pin down the new administration.

The ads quoted a Bush campaign speech in Everett, Washington on May 17, in which he said, “As President, I will safeguard American markets against unfair practices like dumping. And I will also ensure that the rules we negotiate are enforced.” They also quoted Vice President Dick Cheney, who said to steelworkers in Weirton, West Virginia on October 26: “If our trading partners violate our trading laws, we will respond swiftly and firmly…[and] vigorously enforce anti-dumping, countervailing duties and other American laws to combat trade practices, including illegal foreign subsidies.” The ads also quoted Don Evans’ tough talk on antidumping at his January 4 confirmation hearing.

All these rumblings caused a vigorous outcry from the entire Washington trade community (minus steel, sugar, peanuts, and textiles, of course). George W. hadn’t even been sworn into office, yet seemed to be locking himself into the same positions that tarnished American economic leadership under Clinton. Calls of were made to Bush transition headquarters by concerned Republicans like Rep. Bill Thomas (Calif.), the new head of the Ways and Means Committee, and by Sen. Charles Grassley, the Iowan who now heads the Finance Committee.

On January 10 the plain spoken Grassley told Doug Palmer of Reuters that demoting the USTR job “would be a terrible mistake for the economic good of the United States and the world.” If Bush sent any such proposal to congress, or even thought of putting USTR inside Commerce, Grassley said, “it would never get out of my committee.”

On January 11, George W. formally tapped Zoellick for his Cabinet. “As USTR, Mr. Zoellick, soon to be Ambassador Zoellick, will be a full partner in the trade team and a full member of my Cabinet,” Bush said.

“Mr. Zoellick will serve as our country’s top trade negotiator and will be a key advisor to the president on trade policy,” Bush said.

We will see what Bush meant by “a” key advisor, and whether the new administration will be captured by the special interests like Clinton’s was. (As this went to press, Zoellick’s confirmation hearing hadn’t yet been held; meanwhile there were rumblings from Sen. Jesse Helms (R-N.C.) that if Zoellick knew what was good for him, he would pick a protectionist Helms staffer to be the USTR’s textile negotiator.)

With everything else that was going on in Washington last month, all of this went by so quickly that nobody really had the time to think through the implications. The more optimistic observers wanted to believe that while the new president had nearly made a major mistake on trade, when it was brought to his attention, he did the right thing.

We haven’t seen much of that in Washington in recent years.

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