Trump’s commerce pick faces questions over China ties

Wilbur Ross still holds investment with Beijing-backed fund in oil tanker company 
By James Fontanella-Khan in New York and Shawn Donnan in Washington

Donald Trump (left) and Wilbur Ross, his choice for commerce secretary

Wilbur Ross, Donald Trump’s incoming US commerce secretary, is facing questions over potential conflicts of interest stemming from his business ties to China’s largest sovereign wealth fund.
The billionaire investor and China Investment Corp (CIC), the state-controlled fund, were part of a consortium that invested $1bn in Diamond S Shipping, an oil tanker business, in 2011.
The company is one of the few that the financier-turned-politician has decided not to sell to join the government, according to disclosure documents. 
CIC, which owns about 9 per cent of the company, has been one of Beijing’s main overseas investment vehicles, and Ross is set to be one of China’s leading interlocutors in the new US administration on matters of trade and investment once he is confirmed by the Senate. 
Their ties could affect the ability of one of Trump’s top economic advisers to deal with Beijing. 
Ross’s Commerce Department oversees the prosecution of anti-dumping and other trade enforcement cases and has in past administrations played a broad role in trade negotiations and other issues between the US and China, including internet privacy.
Kathleen Clark, a Washington University law professor, said Ross’s ties with CIC raised questions about his impartiality. 
“By reason of that type of co-investor relationship, Ross’s impartiality in handling a Commerce Department proceeding involving CIC could reasonably be questioned, so he should recuse [himself] from any proceedings involving CIC,” she said.
Richard Painter, a former White House ethics lawyer under George W Bush, said that by keeping a 32 per cent stake in Diamond S Shipping, Ross would also have to recuse himself regularly from broader trade policy discussions, given the direct impact these could have on his transoceanic oil tanker business. 
Another top lawyer, who asked to remain anonymous as he is working with several Trump administration nominees seeking US Senate confirmation, said an ethics agreement signed by Mr Ross in which he revealed he would hold on to his shipping stake was worded in a way that could expose the commerce secretary to legal attacks.  
A spokesman for Mr Ross said he had been willing to divest his stake in Diamond S Shipping but had been told he could keep it by government ethics officials who saw no potential conflicts of interest. The spokesman also noted that CIC was “a passive minority investor” in Diamond S Shipping and that the structure of his own stake once he entered government meant Ross would have no control over the company’s business decisions.
“Mr Ross has committed that, if confirmed, he will faithfully execute the law and the commitments in his ethics agreement, and will follow the advice of the department’s ethics officials with respect to any matter about which they advise him that a conflict of interest would arise,” the spokesman said.
“The department’s ethics officials are career staff with extensive experience, and together with Ross are committed to serving the public and faithfully executing the law,” he added.
Scrutiny of Mr Ross’s potential conflicts of interest could have implications for the Trump administration as the 79-year-old former investment banker has been identified as one of the central figures steering the new US trade policy, which aims to put “America first” by renegotiating deals with partners across the globe.
Mr Ross, who has agreed to divest most of his holdings and business interests, has been cleared by the Office of Government Ethics over potential conflicts. 
He told the Senate Commerce Committee in January that “I intend to be quite scrupulous about recusal in any topic where there’s the slightest scintilla of doubt”.
Charles Borden, an Allen & Overy lawyer who has taught classes on government ethics at Harvard Law School, said the fact that OGE and Commerce Department officials had approved Mr Ross’s ethics agreement indicated they did not think his shipping interests were likely to create concerns under federal conflict-of-interest laws. 
Mr Borden noted that many aspects of trade policy are too general to give rise to legal violations, but cautioned Mr Ross could face legal exposure if he participated in “particular matters” relating to his shipping business.  
Nowhere in the ethics agreement approved by OGE is the CIC co-investment mentioned, raising questions over whether the body reviewing conflicts of interest is aware of Mr Ross’s connection to the Chinese state-backed fund. 
OGE and CIC declined to comment. 
Throughout his career in business Mr Ross has had an ambiguous relationship with Beijing, shifting from China-basher to China-lover depending on circumstances. 
Since Mr Ross became a close aide to Mr Trump during the 2016 election campaign he has repeatedly criticised China, labelling it “the biggest trade cheater in the world”.
But in 2012 he was defending China’s reputation, arguing “China-bashing” in the US was “wildly overdone”. 
His Commerce Department will also have a key role in scrutinising Chinese acquisitions of US assets under the Committee on Foreign Investment in the United States. 
Chinese companies, which have been on a buying spree in the US in recent years, have been subject to more reviews of deals for national security reasons than any other country’s companies in recent years, US Treasury data show.
Mr Ross decided not to sell Diamond S Shipping because at present market valuations he would have exposed himself to a substantial financial loss, said two people who are familiar with his thinking. The financier tried to take Diamond S Shipping public in March 2014 but at the last minute decided to kill the initial public offering after the market pointed to a lower valuation than he had expected. Other investors in Diamond S Shipping include the investment arm of agribusiness giant Cargill and First Reserve, an energy-focused buyout group. 
Theodore Kassinger, a lawyer at O’Melveny & Myers who advised Mr Ross on his ethics agreement, declined to comment.