Trump packs trade team with veterans of steel wars with China

President-elect Donald Trump is stacking his trade transition team with veterans of the U.S. steel industry's battles with China, signaling a potentially more aggressive approach to U.S. complaints of unfair Chinese subsidies for its exports and barriers to imports.

Led by Wilbur Ross, a billionaire steel investor and Trump's nominee for commerce secretary, Dan DiMicco, the former CEO of steelmaker Nucor Corp , and three veteran steel trade lawyers, the team is expected to help shift the U.S. trade focus more heavily toward enforcement actions aimed at bringing down a chronic U.S. trade deficit, Washington trade experts said. Based on their past efforts, this could include more challenges to China's trade practices through the World Trade Organization and more U.S. government-initiated anti-dumping and anti-subsidy cases against a wider range of Chinese products. The latter would be argued before the U.S. International Trade Commission - a forum where the steel industry has had considerable success.

Ross, DiMicco and other leaders of Big Steel have been on the front-line battles against the world's export superpower.

Hit by a flood of cheap imports from China and other countries, the U.S. steel industry has brought 16 new cases in the past three years, seeking punitive duties from the Commerce Department to combat below-cost dumping and unfair subsidies that slashed prices of various steel products to historic lows last year, causing layoffs at U.S. steel mills. (See graphic http://tmsnrt.rs/2gUFGAf)

Some of these cases have resulted in massive penalties against Chinese imports, including duties of more than 500 percent on Chinese cold-rolled steel used in autos and appliances.

Lawyers Robert Lighthizer and Jeffrey Gerrish have represented United States Steel and Stephen Vaughn has represented AK Steel in these cases. The three are also part of Trump's trade team.

Lighthizer, Gerrish, Vaughn, Ross and DiMicco either declined to comment for this story or did not respond to Reuters' requests for interviews.

Trade experts familiar with their views and their history of confrontation with China, however, say they will not be afraid to push the limits of what is legal under World Trade Organization rules in defense of U.S. trade interests.

Lighthizer, who along with DiMicco is considered a strong candidate to be the new U.S. Trade Representative, is known for his work during the Reagan administration pressuring Japan into voluntary export restraints.

PUSHING WTO LIMITS

"Bob Lighthizer is very smart, very strategic and totally fearless," said a Washington attorney who has worked with him for three decades and asked not to be named because Trump's USTR selection process was still under way. "If he's in charge you can expect him to use every tool available to create leverage to get China and anyone else to stop the cheating. He is no fan of the WTO."

Lighthizer told a congressional panel in 2010 that the WTO's dispute resolution system was ineffective and that the United States "should consider aggressive interpretations of WTO provisions that might help us deal with Chinese mercantilism."

Such tactics could include imposing temporary import quotas and surcharges and factoring in the effect of currency manipulation into U.S. anti-dumping duties, he said.

Ross, who advised Trump's presidential campaign on economic issues, has signaled he will use access to the lucrative U.S. consumer market as leverage to negotiate better trade terms. The United States is China's biggest export market.

During his presidential campaign, Trump vowed to levy a punitive 45-percent tariff on Chinese goods and label Beijing a currency manipulator. It is not clear though whether he will follow through on those threats once he takes office.

Ross told CNN last week that Trump will not be "willy nilly slapping a 45 percent tariff on everything," but will maintain the threat of tariffs as part of negotiations.

If DiMicco is named head of USTR, his personal blog gives some indication of how he would approach China. He has accused China of waging a "mercantilist trade war" on the United States for two decades, through currency manipulation, unfair subsidies and intellectual property theft.

On the issue of currency manipulation, many economists disagree, saying Beijing is no longer keeping its yuan artificially undervalued to make its exports cheap, citing the hundreds of billions of dollars in reserves it has spent to prop up the yuan's value this year.

A key question for Trump's trade team is how far they can push China to change its trade practices without provoking a trade war that will hurt both countries.

"If what they plan to do is get a little scratchier with China on enforcement within the existing WTO rules, that's OK," said Scott Miller, a China trade expert at the Center for Strategic and International Studies in Washington. "But if they go outside those guardrails, it will be unpleasant because that will draw retaliation."

He Weiwen, vice president at the Center for China and Globalization, a government-affiliated think-tank in Beijing, said any punitive action against China by the Trump administration would invite a retaliatory response.

"We will certainly respond in the same way," he said, adding that Washington and Beijing "should find good solutions that are acceptable to both and not go to extremes. It will hurt both."

Chinese state media have warned that any new tariffs imposed by Trump would lead to retaliation against Boeing aircraft, Apple iPhones and U.S. corn and soybeans.

(Additional reporting by Michael Martina in Beijing; Editing by David Chance and Ross Colvin)