Capitol Comments

New Administration Signals Shifts in U.S. Trade Policy for Nonwovens

By Peter G. Mayberry, Contributing Editor | February 2, 2017

Nonwovens industry should watch how policy change will affect the TPP.

Throughout the contentious U.S. Presidential election last year, candidate Donald J. Trump repeatedly and consistently blamed China for labor pains and economic instability within the U.S. Pointing to U.S. manufacturing losses once China became a member of the World Trade Organization (WTO) in 2001—as well as a significant increase in the U.S. trade deficit with China—candidate Trump even went so far as to say China is “raping” the U.S. when it comes to international trade.

Historically the U.S. nonwoven fabrics industry has strongly supported global efforts to reduce the duties and tariffs other countries charge on exports from the U.S. Free trade agreements and WTO ascension have been seen as opportunities for the U.S. nonwovens industry to enter foreign markets more easily. And since production of nonwoven roll goods is an inherently automated process, labor issues have not been as big a concern for nonwovens producers as they are for other members of the textiles sector.

Overall, in fact, promotion of “free trade” has been a U.S. priority going back to at least 1972 when the Nixon Administration first sought normalized relations between the U.S. and the Peoples’ Republic of China. After that, every U.S. Presidential Administration since Ronald Regan has made free trade a significant pillar of their platform.  

The U.S. now appears poised to move in a different direction, and the impact of this shift on nonwovens production is hard to imagine.  

Specifically, late last year President-elect Trump announced the creation of a new White House National Trade Council (NTC) to advise the President on “…innovative strategies in trade negotiations, [and] coordinate with other agencies to assess U.S. manufacturing capabilities and the defense industrial base and help match unemployed American workers with new opportunities in the skilled manufacturing sector.” 

This is important to any nonwovens entity with interests in China because the NTC—which will work “collaboratively and synergistically” with the President’s National Security Council, National Economic Council, and Domestic Policy Council – will be headed by Peter Navarro, a professor at the University of California, Irvine, who has co-authored “Death by China: Confronting the Dragon – A Global Call to Action” (2011) and “Crouching Tiger: What China’s Militarism Means for the World” (2015). Navarro also produced video versions of both books which are freely available on Youtube.com.

In making the announcement that Dr. Navarro had been picked to head the NTC, the Trump transition team noted: 
For the first time, there will be a council within the White House that puts American manufacturing and American workers first, and that thinks strategically about the health of America’s defense industrial base and the role of trade and manufacturing in national security.

In his work, Navarro points to Chinese currency manipulation, counterfeiting, export subsidies and other practices for demise of U.S. manufacturing capabilities and argues that “trade reform” – described as a citizen “movement” akin to, but different from, the Tea Party – is needed whereby U.S. citizens, in mass, demand government policies aimed at ensuring 20-25% of all U.S. jobs are in the manufacturing sector moving forward. 

And, while the actual role that Dr. Navarro will play within the Trump White House is obviously going to be as broad, or as narrow, as President Trump decides, the president elect’s nomination of Robert Lighthizer to serve as his United States Trade Representative (USTR) appears to show the entire world an unequivocal shift from U.S. trade policies which have been in place for decades.
USTR is a critical component of each Presidential Administration dating back to the early 1960s.  It is a unique role within the U.S. government—similar to the U.S. Treasury and the Office of Management and Budget—in that it is part of the White House. 

Departing USTR Ambassador Michael Froman recently explained that the office of the USTR was created so countries all around the world would be assured the U.S. speaks with “one voice on trade.” As such, Froman continues, USTR is “…one single place where all of the trade interests of the government came together in a single, coordinated effort, with no opportunity for forum shopping or contradictory agendas.”

Robert Lighthizer is a partner at the DC-based law firm Skadden, Arps, Slate, Meagher & Flom LLP who served as Deputy USTR during the Reagan Administration at a time when, as Lighthizer notes, the White House “…imposed quotas on imported steel, protected Harley-Davidson from Japanese competition, restrained import of semiconductors and automobiles and took myriad similar steps to keep American industry strong…How does allowing China to constantly rig trade in its favor advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China largely because of the actions of its government.”

With Lighthizer and Navarro on board, President Trump appears to send clear signals his Administration will pursue trade policies that harken to the Reagan era.  Against this backdrop, departing USTR Froman notes:

Arguably, for 13 of the last 15 centuries, China was the dominant force in Asia. Only during the last two centuries did it find itself eclipsed by others. One of the defining features of our time is how to accommodate the rise of China into an international system that is far more interdependent—economically, politically and strategically—than ever before. Our approach has been to give them a seat at the table and press them to be responsible participants in global governance, such as through the G-20, but at the same time, to use every tool at our disposal, including trade enforcement, to hold their feet to the fire when they fall short of that objective. 

Which leads to one of the biggest current issues of interest to the nonwovens industry:  what will the Trump Administration do with regard to U.S. participation in the Trans-Pacific Partnership Agreement (TPP)? As Ambassador Froman remarked, “There simply is no way to reconcile a get-tough-on-China policy with withdrawing from TPP. That would be the biggest gift any U.S. President could give China, one with broad and deep consequences, economic and strategic. It would be huge for China.”

As Ambassador Froman further emphasized: “From our friends and allies in the region to our own military commanders, we have heard clearly that failure by the U.S. to move forward [on TPP] would be a debilitating blow to U.S. leadership and credibility in the region, one that would create a void that China is all too happy to fill, and one that would leave our closest military allies and partners no choice but to line up behind China. We see it happening in real time. What we feared and what we warned would come true is coming true before our eyes.”

Ambassador Froman concludes: “I can’t imagine why any President would want to abdicate our leadership in the Asia-Pacific, to be responsible for handing the keys of the castle to China, for driving our historic allies and China’s historic rivals into China’s arms. It would be a strategic miscalculation of enormous proportions.” 

Indeed, there is significant support for TPP ratification within the U.S. Congress and organized business. President Trump would likely pay a stiff political price, therefore, if he carries through on campaign pledges regarding U.S. withdrawal from the TPP. 

Likewise, the world has changed significantly since the 1980s and the Reagan Administration – the WTO didn’t even exist back then, for example – such that virtually all U.S. foreign trade policy is now governed by mutually-binding, virtually-unalterable treaties. Under global norms, in fact, if one side unilaterally violates codified treaty terms it can be seen as an act of war by other signatories. 

For nonwovens producers, one prevalent sentiment on Capitol Hill these days is that “tough talk” on the U.S. campaign trail is something the Chinese government has grown used to and, inevitably, newly-elected U.S. Presidents come to see the benefits of globalization as well as China’s role in the world marketplace. This, in turn, leads to serious negotiation for mutual benefit. Once in office, this thinking goes, we will see if President Trump is really willing to risk the consequences of fulfilling a number of his campaign promises related to U.S. trade policy moving forward.
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