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July 1, 2013

Trading Up: From Texas to the Global Stage and Back Again

Former U.S. Trade Representative Ron Kirk on our current global trade challenges

Growing up in the segregated South, outgoing U.S. Trade Representative Ron Kirk says politics was a sore spot and source of frustration. His parents were denied the right to attend Texas colleges and the right to vote. 

Ambassador Kirk believed at the time that the courts offered the most effective opportunities for political action and he, therefore, became a lawyer. His hero was Thurgood Marshall, the first African-American Supreme Court justice who took the bench in 1967. 

“In the ’50s and the ’60s, most of the social progression in this country was fueled by courageous lawyers who used the power of the law to hold America accountable,” Ambassador Kirk says. “I felt politics was for people who created new excuses to avoid addressing difficult problems.”

But, as he grew older, Ambassador Kirk realized that fulfilling his civic responsibility to honor his parents’ and others’ fight for social justice required political involvement. In 1981, he began his political career as a legislative aide to U.S. Sen. Lloyd Bentsen.

“The fact that I have been able to freely move between my love of the law, while serving the public at the highest level, has been exceptionally rewarding for me,” he says. “I have lived the most incredible life, and I am the embodiment of the American dream in every manifestation of it.”  

Today, the ambassador’s career includes a long list of accomplishments in his home state and at the federal level: Texas Secretary of State from 1994 to 1995, two terms as the first African-American mayor of Dallas, Texas, from 1995 to 2002, a partner at an international law firm and, most recently, USTR under President Barack Obama, from 2009 until this past March. 

Despite his deep Texas roots, Ambassador Kirk did not think twice when asked to leave his home state for Washington, D.C. “When the president calls and asks you to serve, there’s only one answer: Yes,” he says.  

As USTR, Ambassador Kirk says his most productive accomplishments were a bilateral trade agreement with Panama, Colombia and South Korea that had been stalled for several years, and paving the way for what he hopes will become a significant trade agreement with the European Union (EU). That said, Ambassador Kirk leaves his successor with the challenges of finally forging a Pacific-region trade deal and, effectively, enforcing trade rules with China. (At press time, the Senate Finance Committee approved White House international economics adviser Michael Froman as the new USTR.)

You famously stated at your confirmation hearing that you weren’t going to join the U.S. Trade Representative’s office with “deal fever,” a rush to churn out trade agreements without appropriate analysis. Who was in a rush, and how did you deal with them?

If you’re from a state like Texas that leads the nation in exporting, you tend to believe all trade is good. Whenever I would meet with businesses or legislators from that part of the country, their direction would be: “Let’s get these trade bills done.” But there were plenty of interests involved that felt they were not being consulted. I felt we were at a dangerous place and we weren’t helping the cause of trade by force-feeding these agreements over the objections of so many Americans who aren’t so gung-ho about trade.

Instead, I sat down with labor groups, the auto industry, the steel industry and those who voiced reservations about trade and said, “Tell me what’s wrong [with the current trade system].” Because we took the time to understand all sides of the issues, we were able to pass agreements with South Korea, Colombia and Panama with an unprecedented level of support. 

Had we not invested the time to engage with stakeholders in the business, agriculture and labor sectors, I don’t think we would have had such success. I took the time to travel around the United States, rather than just going to Geneva, Paris or China. The time that I spent in steel mills in Pennsylvania, the textile factories in the Carolinas and the paper mills up in the far northeast in Maine, listening and finding out what they thought the problems of trade were and what they wanted to see us improve was invaluable. 

So, because we invested the time to get it right, we are now in a much stronger position to close the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, which would open up new markets for U.S. manufacturers [in Australia, Malaysia, Singapore and New Zealand]. 

You did not have a background in trade when you took this job. What about it appealed to you? 

Having been the mayor of a big, complex, unwieldy entity like the city of Dallas, I liked the fact that the USTR is a very small, nimble agency. I passionately believe in the power of trade to improve our own economy. The opportunity to serve in this capacity was one that, frankly, just excited me to an extraordinary degree. I also love international travel.

In 2010, the president stated his desire to double exports within the next five years. Would you say we are achieving this goal? 

I think the president was very bold when he made that challenge in his 2010 State of the Union address. We’ve seen explosive growth in America’s exports since then and had a record year in trade of goods and services in 2012. [According to the U.S. Department of Commerce, American exports totaled almost $2.2 trillion, surpassing a previous record of $2.1 trillion in 2011.] We have also set records for exporting agricultural products each of the last three years. 

However, we don’t operate in a vacuum. The economic slowdown in Europe and slowed growth in Brazil and India mean we now have to work harder to reach the five-year goal.  

The U.S. trade deficit widened to $38.8 billion in April, from $38.5 billion in December 2012. What is the administration doing to close this gap?

Ambassador Ron Kirk's career accomplishments include: Texas Secretary of State, two terms as the first African-American mayor of Dallas, Texas, and U.S. Trade Representative under President Barack Obama.

The deficit has gone up and down over the past several years. Today, we are less dependent on foreign sources of oil and energy than any period over the last 25 years. Continuing to focus on innovation, opening up markets, enforcing our agreements, becoming energy efficient and less dependent on foreign sources will all affect the health of our trade balance.  

We’re proud of the work and expansion we’ve seen in the export of American goods and services, but I think we should also be careful and more honest about how we assess the value of what we bring into this country. 

It’s important to note that not all imports are bad. One of the concerns raised by some trade economists was that the focus of exports as job creating could lead to the assumption that imports harm job creation in the United States. It’s important to understand that many imports are component parts of products manufactured in the United States and later exported around the world.

What place, if any, does the Keystone XL pipeline and drilling—expanded offshore and other types—have in ensuring U.S. energy independence?

The USTR had no direct, nor indirect, role in the review of the Keystone pipeline. However, I personally do believe Keystone will allow us to take advantage of enormous oil finds in Canada and move that energy to the eastern and southern points in the United States. We can’t put all of our eggs just in the Keystone, natural gas or wind baskets. We need all of them.  

Although the Obama administration and its predecessors have refused to officially declare China a currency manipulator, do you believe that China’s behavior is a major contributor to the U.S. trade deficit?

The Obama administration was the first to use a powerful enforcement tool that no administration, Democrat or Republican, on China had ever used before. [It was the first time the United States imposed a tariff under a special safeguard provision that was part of its agreement to support China’s entry into the World Trade Organization (WTO).] We did that, particularly in response to the United Steel workers who filed a case against China over dumping cheaper tires on this country. And, the International Trade Commission found harm to the automotive industry, and the Obama administration imposed a tariff on these imported tires. We have also continued to move aggressively against China in a number of matters in which we felt they were engaging in anti-competitive behavior or behavior that didn’t square with the covenants that China made with being admitted into the WTO.  

If you look at the administration’s track record, it is indisputable that it has brought twice the number of enforcement cases against China than any previous administration. More critically, it has prevailed in every case. China is a country with enormous challenges, but also extraordinary opportunities for American business. In some cases, China provides more than 90% of the raw and precious materials that we need for metals production. It’s a relationship that we can clearly benefit from if we can get China to behave in a thoughtful and fair manner. 

Do you think the United States is a bit too focused on China? Are there other nations that we should consider a threat to U.S. competitiveness?

Absolutely. We are entering a world where 95% of the world’s consumers live somewhere other than the United States. And, for good reason, we’re working with high-growth countries that have been moving hundreds of millions of people out of poverty and into a higher income status.  

We have focused particularly on enforcement activity in the emerging markets known as BRICS—Brazil, Russia, India, China and South Africa. [The diversity of the world’s consumers is why] President Obama announced in 2012 we would create an Inter-Agency Trade Enforcement Center (ITEC) with the Department of Commerce to make sure we have the resources within the federal government to pursue unfair trade practices, no matter where they occur. The ITEC has filed a number of enforcement actions against China, India, Indonesia and other countries that have administered trade practices discriminating against U.S. businesses. Most of the cases are pending, but the ITEC is a part of the president’s commitment to bring a holistic government approach to enforcing the rights of American exporters and insisting that our trade partners play by the rules. We did, after all, have the largest victory in the history of U.S. trade policy against the EU over its unfair financing of large-body aircraft. That was critically important to the tens of thousands of workers involved in our aviation industry. 

Clearly it takes several years for trade resolutions to pass. There have been considerable complaints about the WTO, even though it is the main forum for addressing global trade issues. Do you think the WTO is too bureaucratic?

The answer to that may be yes, but the WTO is still, as my father would say, “the cleanest shirt in a bag of dirty laundry.” The work of the WTO as a bulwark against protectionism is critically important. But we also believe the institution can and should work better. 

The United States is working to improve the productivity and efficiency of the WTO committees that address critical areas of global trade. The United States, for example, is trying to modernize and update the Information Technology Agreement (ITA) [which requires participating countries to eliminate their tariffs on a specific list of information technology and telecommunications products]. There are important conversations going on about how we can improve the efficiency of the dispute resolution system through the ITA. 

What effect has sequestration had on the USTR?

Sequestration was intentionally designed to have a negative impact on the operation and administration of government. Unfortunately, due to the extreme partisan environment in Washington, the sequester went into effect, and USTR like every other government agency has felt its impact. 

Due to its small size and modest budget, it is likely that USTR will have to furlough staff to meet the cuts mandated by the sequester. This will obviously impair the agency’s ability to fully carry out its mission.

What inspired your decision to leave the USTR in March?

I went into the job knowing it was an assignment, not a full-time career. I wanted to return to Dallas after several years away. And I’m now pleased to be back home and engaged in the practice of law with Gibson, Dunn & Crutcher. 

I am most excited about using what I have learned from negotiating with leaders of the most powerful economies in the world to benefit American business in my home state of Texas.

At press time, Senate Finance Committee approved White House international economics adviser Michael Froman as the new USTRWhat advice do you have for your successor?

I’d like to think there is opportunity for my successor to grow our economy and meet the needs of new consumers in a coming-of-age world. One of the challenges, however, will be that he will have to immediately jump in to the talks on the Trans-Pacific Partnership and the proposed Transatlantic Trade and Investment Partnership. The leaders in Europe have been very vocal about the fact they would like to see this done in an expedited manner because Europe is looking for any jolt to its economy.  

What concerns me the most is the agency having to do more with increasingly fewer resources—and the USTR is already about as lean as it gets. While we address our concerns about the proper role of how we reduce the deficit and grow the economy, I also hope Congress will understand the value of investing in an agency like the USTR, whose singular mission is creating opportunities for American businesses that will help grow our economy and create jobs here at home.