Lighthizer appointment signals tough trade talks ahead for China

December 07, 2018 09:37
US Trade Representative Robert Lighthizer, a known China hardliner, has been appointed to lead the American side in the trade negotiations with Beijing. Photo: Reuters

US President Donald Trump has picked top American trade envoy Robert Lighthizer, a China hardliner, to lead the negotiations with China.

During the administration of Ronald Reagan, Lighthizer had led talks with the Soviet Union and Japan, and was known as a hard-nosed negotiator.

His appointment in the trade talks with Beijing has dampened investor sentiment after Trump's meeting with Chinese President Xi Jinping at the G20 summit over the weekend rekindled hopes of a breakthrough in the negotiations.

It seems that the United States is not satisfied with the pledges so far made by China, including tariff reductions and more purchases of American products. Washington might press Beijing to make more concessions such as changes in its industrial policy and market structure.

Lighthizer, now 71, started his career as a lawyer. He was named deputy trade representative in the Reagan administration.

After that stint, he became a partner at law firm Skadden, Arps, Slate, Meagher & Flom LLP. But he was frequently called upon to represent the US in major foreign trade negotiations.

In 1983, Lighthizer led the trade talks with Japan, which led to Tokyo lowering the tariffs on cars and signing the Plaza Accord that allowed the sharp appreciation of the Japanese yen.

Lighthizer also asked Japan to stop subsidizing certain industries and check the monopoly of Japanese conglomerates. The talks also led to Tokyo changing its high land price policy, which was blamed for impeding consumption growth, in order to help US companies open up the Japanese market.

So Lighthizer leading the US side in the latest trade negotiations could be bad news for China. It is possible that he might lead the talks beyond trade and put pressure on Beijing to stop forced technology transfers and limit the expansion of state-owned enterprises – or even abandon its Made in China 2025 plan.

China has agreed to reduce tariffs on American car imports and increase imports of agricultural, energy and industrial goods from the US, as revealed after the Trump-Xi meeting. For these agreements alone, it is quite difficult to hammer out the details within 90 days.

However, if Washington takes a tough stance in the talks and tries to force Beijing to make major concessions as regards its industrial policy or market structure, China would see it as an interference in its internal affairs and is unlikely to cave in.

Investors are probably not expecting too much from the talks. It’s more likely that the two nations would reach a deal on tariff reductions and increased imports.

Washington may not get what it wants with regard to the other issues, but it would keep pressing Beijing.

This article appeared in the Hong Kong Economic Journal on Dec 6

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist