A history lesson: Why presidents should stay close to their U.S. trade representatives

February, 2003: The Yankee Trader

By Greg Rushford

Published in the Rushford Report

Reflect upon the little-known history of the U.S. Trade Representative’s office. This is an important topic that presidents of the United States — including the current incumbent — don’t always appreciate as well as they should.

            As his administration works toward its number one trade-policy priority — the successful conclusion by January, 2005 of the World Trade Organization’s Doha Round of negotiations to cut global trade barriers — who really has President George W. Bush’s ear? U.S. Trade Robert Zoellick would assert that he is the president’s main man on trade. But is he, really? Many suspect otherwise. The widespread impression — and concern — is that the real power behind U.S. trade policy in Washington today is Secretary of Commerce Don Evans. Bush and Evans, unlike Zoellick, most always use mercantilist rhetoric when they talk about trade. This complicates the prospects for genuine U.S. leadership during the Doha negotiations, when the time comes to cut the big deals.

            It takes a basic understanding of USTR history to appreciate why this is a cause for concern.          

            When the Office of the Special Trade Representative was created in December, 1962 pursuant to the Trade Expansion Act of that year, President John F. Kennedy made a very smart move that still resonates 41 years later. Kennedy ensconced his STR, former Secretary of State Christian Herter, in a suite in the Old Executive Office Building . Kennedy understood that the STR’s clout depended upon his being perceived as the president’s man. The president needed a trade adviser who would think in broad presidential terms instead of reflecting the parochial views of the heads of other departments, notably the Secretary of Commerce.

            (Kennedy’s turning to diplomat Herter raised some eyebrows on Capitol Hill; then, as now, many lawmakers didn’t appreciate the State Department’s habit of putting foreign policy ahead of the parochial concerns of, say, the textile- or steel lobbies.)

The narrow world view of Commerce secretaries

Why is it always a mistake for any Commerce secretary to be the president’s top trade adviser? Whether we are talking about Maurice Stans (under President Richard Nixon), Robert Mosbacher (George H.W. Bush), or William Daley (Bill Clinton), Commerce secretaries are cut from the same cloth: presidential pals and major political fundraisers. Their ideas on international trade turn mainly on the notion that exports are good, imports are to be mentioned as little as possible, and that what America really needs is to insure a “level playing field” to deal with foreign cheaters. Commerce secretaries are not embarrassed that they are in the distasteful business of administering textile quotas. Their door is always open to domestic steel lobbyists. If you doubt that Don Evans is a charter member of this club, just read his speeches and testimony on Capitol Hill.

            Moreover, Commerce has long been a cumbersome second-rate bureaucracy made up of trade policemen, textile-quota administrators, and zealous antidumping enforcers. By contrast, the list of top-flight talent that has been attracted to USTR over the years is a long one.

            But since President Kennedy, subsequent presidents have not always recognized how important it is to keep their top trade negotiators within the White House orbit. True, the STR (since 1980 called USTR, for the Office of the U.S. Trade Representative) was elevated to formal cabinet status in 1974, and today is located in the historic Winder Building , just a few steps from the White House. But too often, the USTR has seemed to be more of junior cabinet aide. “There has been a fairly consistent pattern of presidents seeking to downgrade the trade representative’s office,” observes veteran trade scholar I. M. “Mac” Destler of the University of Maryland ’s school of public affairs.

A pattern of presidential ambivalence

That pattern began with President Lyndon Johnson. LBJ had “no relationship” at all with STR Christian Herter, nor with successor William Roth, who served from 1967-69 after Herter died, author Steve Dryden reported in Trade Warriors, his 1995 study of USTR history. Johnson wasn’t antagonistic, just ambivalent.

            Other presidents also at times seemed to be ambivalent about their trade negotiators. In the 1980s, Ronald Reagan proposed shuffling his USTR aside in a new department of trade. A decade later, Bill Clinton’s interest in USTR seemed to wax and wane, depending upon the president’s domestic political concerns of the moment.

            Over the years, presidents generally have created problems for their own trade agendas when they have relied upon Commerce secretaries or other advisers with parochial political views for advice on trade. President George H.W. Bush, for example, was famously embarrassed by taking the CEOs of Detroit’s Big Three automakers to Japan in December, 1991, where they were widely perceived to be protectionist whiners. This is the trip that seemed to mark the beginning of the elder Bush’s political demise, memorialized by television shots of the Leader of the Free World vomiting  at dinner in the lap of the Japanese prime minister. The idea to take the CEOs to Japan came from Bush’s commerce secretary, Robert Mosbacher, not USTR Carla Hills .

            Another famous presidential trade blunder happened in April, 1999, when Clinton sent visiting Chinese Prime Minister Zhu Rongji packing without sealing the deal to bring China into the World Trade Organization. Clinton should have listened to his USTR, Charlene Barshefsky, who had the deal wrapped up. Instead, Clinton and his White House political advisers caved to the protectionist pressures from the AFL-CIO. The president ended up with diplomatic egg on his face that took months to wipe off.

            By contrast, when presidents have worked well with their USTRs, U.S. trade-policy successes have happened. Jimmy Carter and USTR Robert Strauss, one of the Democratic Party’s most astute political operatives, wrapped up the Tokyo Round in 1978 and pushed the deal through Congress the next year. Reagan looked smart when he let his USTR, Clayton Yeutter, take the lead in defusing Japan bashing. Yeutter, who served from 1985-89, understood the importance of the U.S.-Japanese diplomatic and security relationship. He knew when it would be counterproductive to push Japan too hard. And in the administration of the first President Bush, USTR Carla Hills and her savvy deputy, S. Linn Williams, also made deft moves aimed at not harming the overall relationship with Uncle Sam’s most important Pacific ally, even as they pressed Japan hard to open markets.

            Of course, not all trade representatives had such good judgment. Mickey Kantor was willing to risk wrecking U.S.-Japan relations for domestic political reasons in the nasty 1995 auto fight. Kantor subsequently looked more comfortable when Clinton named him Commerce secretary.

How Richard Nixon undermined his first trade representative

President Richard Nixon went beyond ambivalence. He deliberately undermined the man who was supposed to be the administration’s top trade-policy official. Newly available documentation from the Nixon presidential archives (see the article on page one of this issue), provide the details. 

            After he took office in January, 1969, Nixon wanted to move his first STR, Carl J. Gilbert, into the Commerce Department. The president was talked out of that idea, thanks in large part to Henry Kissinger and Fred Bergsten (then a young, very much free-trade oriented National Security Council aide).

            But Nixon made sure that Gilbert — a former chairman of the Gillette Co. who had a reputation as a free-trade advocate — would be a figurehead. Commerce Secretary Maurice Stans, a close Nixon friend and major political fundraiser, called the shots.             

            An April 23, 1969 “Action Memorandum” to Kissinger from Bergsten explained the larger concerns associated with the president’s undercutting of his STR.

            “The Secretary of Commerce, not the President, offered the position to Carl Gilbert,” Bergsten noted. “The President gave the Secretary of Commerce the option to locate STR physically within Commerce.”

            Bergsten worried that Gilbert seemed not to care much about asserting himself. Meanwhile, the aggressive Stans had already raised widespread concerns about the direction of U.S. trade policy by openly campaigning for textile quotas.

            “Gilbert accepted the position without any conditions concerning direct access to the President or his relationship with other agencies. His well-known eagerness for the position suggested in advance that this would be his response.”

            Bergsten noted that on a trade mission to Europe , “Gilbert has been excluded from private meetings between Stans and key foreigners.”

            Bergsten, then a somewhat brash youngster several years short of 30, accurately perceived the larger issues. The “undermining of STR’s leadership role in U.S. trade policy” would “adversely affect” the president’s ability to make “substantive progress on trade policy generally and move toward a far reaching Nixon Round” of multilateral trade negotiations, Bergsten warned Kissinger. Commerce, the young NSC staffer rightly pointed out, was a protectionist-minded bureaucracy that simply could never hope to attract the kind of talent that would be drawn to STR. Bergsten also reminded Kissinger that moving STR to Commerce would have foreign policy consequences. Foreigners, he said, had already been upset by the appearances that STR’s influence would be diminished. “They would be even worse now because the protectionist image of Commerce has been greatly intensified by the Stans approach on textiles.”

            On May 19, Kissinger, agreeing with his young aide, initialed a memo to Nixon recommending that “STR remain physically, as well as legally, within the Executive Office of the President.” Secretary of State William Rogers, Treasury Secretary David Kennedy, and Council of Economic Advisers Chairman Paul McCracken also opposed downgrading the STR.

            On May 21, Nixon’s powerful White House assistant, H.R. Haldeman, sent a memo to Peter Flanagan (assistant to the president for economic affairs) with instructions that “the President would like you to make clear to Secretary Stans that he does not want the office itself moved. As the Secretary knows, the President will look to Stans for overall supervision of this office, but he feels it should not be moved from its present location and that any attempt to do so would create serious problems on the Hill, among other things.”

            While the badly-treated Carl Gilbert was never the president’s trade negotiator except for the public appearances, his more politically astute successor avoided such indignities. William D. Eberle, who served as Nixon’s STR from 1971-75, made access to the president a condition of his accepting the job. “He put in a phone in my office directly to him,” Eberle recalls. “I never had any problems with direct access to the president.”

            While the Nixon presidency was later derailed by the Watergate scandal, Eberle still was successful in moving the legislation that put STR into the cabinet in 1974. Eberle also got a new round of multilateral trade negotiations launched (although the “Nixon Round” became the “Tokyo Round,” to be concluded when Jimmy Carter was president).

Who is really George W. Bush’s top trade official?

It could be that President George W. Bush — much like Nixon — claims that his US Trade Representative is the administration’s lead policy-maker, while in practice his Commerce secretary is the senior trade official.

            The inexperienced Bush toyed in 2001 with the idea of taking the USTR out of his cabinet. Bush nominated his close friend Don Evans, who had raised more than $100 million for the campaign, as Commerce secretary on December 20, 2000 . Evans immediately fell into Commerce economic doublespeak that continues to this day. “Competition is okay,” Evans told senators at his Jan. 4, 2001 confirmation hearing. “But it is not okay if it is not a level playing field.”

            To veteran trade observers, it looked like a case of Here We Go Again. Evans’ main qualifications for high office were that he was a presidential pal from Midland , Texas and, as chairman of the Bush/Cheney 2000 campaign, was a major conduit for political cash. But Bush signaled that Evans would be his administration’s true top policy-maker on trade. On Jan. 5, 2001 the president-elect, speaking in his usual confident manner, asserted to reporters that it would not diminish U.S. economic prestige if the USTR position would be downgraded. “Whether or not the person is called Cabinet or not, it will not in one way or another diminish the importance of the position,” Bush declared.

            The forceful and experienced Robert Zoellick — who was left hanging for 22 days after Bush had nominated tapped Evans for Commerce — made it clear that he would not accept the USTR job without the Cabinet status. Still, Bush revealed his ambivalence by not getting around to nominating Zoellick until January 11, as the last of the cabinet positions were finally announced.      

            Zoellick — although he has put on an energetic front and is not a man to be dismissed lightly — is still fighting the perception that it is Evans who really has the president’s ear. The buzz in Washington has it that Zoellick is a junior member of the cabinet, while nobody doubts that Evans is very senior.

            Bush and Evans use the same mercantilist rhetoric when they talk about the benefits of international trade. The president and his commerce secretary repeatedly tell audiences on the hustings that they are for “free and fair” trade, that they want to insure a “level playing field,” and so forth. Bush and Evans even pretended at an appearance at the Port of New Orleans a year ago that the port existed solely for the benefit of American exports — ignoring the vital role of imports (see, Snackgate: Bashing Imports Along the Mississippi,” The Rushford Report, February 2002).

             By contrast, Zoellick — while he remains a partisan Republican, a loyal administration team player, and has associated himself with such embarrassments as the Bush steel plan — is too well-educated to explain trade to audiences in mercantalistic terms. The USTR, for example, has repeatedly lamented the burdens for American consumers resulting from higher prices associated with quotas and tariffs on their clothing. If the United States wants to successfully conclude the WTO’s Doha process, the USTR has to acknowledge such realities.

            But while Zoellick’s words have gone down well at WTO headquarters in Geneva , the problem remains that back in Washington the USTR often sounds out of tune with Bushspeak.

            The fear is that when the crunch comes in the Doha negotiations on tough political issues involving demands from the WTO’s poorer members to obtain more access to U.S. markets — reform of antidumping, the lowering of textile and clothing tariffs, and serious cuts in farm subsidies — Zoellick won’t be able to deliver.

            Perhaps Bush should learn from John F. Kennedy, and give his USTR an office suite in the White House.

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