U.S. Trade Chief to Engage With China on Trump-Deal Shortfalls

U.S. Trade Chief to Engage With China on Trump-Deal Shortfalls

13:55 - The Biden administration will directly engage with Beijing in the coming days to enforce commitments in their trade deal and start a new process to exclude certain products from U.S. tariffs in an effort to help American workers and businesses.

U.S. Trade Representative Katherine Tai is set to speak to Chinese Vice Premier Liu He soon, in what will be the first meeting where she will mainly stress China’s shortfalls in the agreement struck under former President Donald Trump.

“I am committed to working through the many challenges ahead of us in this bilateral process in order to deliver meaningful results,” Tai said in a speech at the Center for Strategic and International Studies in Washington on Monday. “But above all else, we must defend -- to the hilt -- our economic interests.”

While the Biden administration won’t take any tools off the table when dealing with Beijing, it doesn’t intend to escalate the trade tensions, an administration official said in a call with reporters. The official acknowledged that China may not change its practices and therefore the U.S. needs a strategy that takes that into account.

Tai’s speech focused on the Biden administration’s approach to the U.S.-China trade relationship and comes after months of internal reviews and deliberations on how to deal with Beijing’s economic practices.

The world’s two largest economies share the biggest bilateral trade relationship but are at odds on economic, military and political fronts. Flashpoints include billions of dollars in tariffs on each other’s goods, U.S. concerns about China using American technology know-how to beef up its military, abuse of state-owned enterprises, subsidies, forced-labor allegations in the Xinjiang region, and conflict over supplying next-generation telecommunications equipment to other nations.

U.S. officials say Beijing hasn’t lived up to its commitments made under the so-called phase-one agreement of January 2020. Certain parts of the deal are set to expire at the end of this year. China is far behind its purchasing targets, in which it pledged to buy an extra $200 billion in U.S. agriculture, energy and manufactured products over the 2017 level in the two years through the end of 2021.

Enforcing the terms of the phase-one pact “is the starting point, because that is the structure, and that is the architecture of the trade relationship we have right now,” Tai said in an answer to questions at the CSIS. What the U.S. does in response “depends on how the conversation goes” with Beijing, she said.

Administration officials wouldn’t comment on a timeline by which they want to see meaningful progress on Beijing’s commitments before the White House considers taking additional steps.

Tai and Liu will engage under the agreement’s enforcement mechanism and the U.S. trade chief will also raise U.S. concerns with China’s industrial policies that are harming American workers and businesses, she said.

Exclusion Process
The USTR will also be reinstating a targeted exclusion process for certain products and does not rule out further exclusions in the future, Tai said. It’s not clear what products would qualify for exemption under the new process or when the application deadline starts.

The business community and many lawmakers have asked the administration to allow for such exemptions from the duties.

The Biden administration has been weighing a new investigation into Chinese subsidies and their damage to the U.S. economy as a way to increase pressure on Beijing.

Many Biden officials believe the duties imposed under Trump have not led to the desired changes in China’s behavior and over time have lost their ability to serve as leverage to get China back to the negotiating table or to fulfill its phase one commitments.

National Security
The White House is also concerned about protecting U.S. intellectual property that could be stolen or used to advance Chinese companies in strategic industries. The Biden administration has added a number of Chinese companies to a list of entities that U.S. businesses can’t sell to without a government license.

President Joe Biden’s team has been reviewing U.S. policy on China since taking office and inherited duties Trump imposed on about $300 billion of annual imports from the Asian nation in the hope of taming the goods-trade deficit. More than two years since the duties took effect, the countries are shipping merchandise to each other at the strongest pace on record, making it look as if the protracted tariff war and pandemic never happened.

Commerce Secretary Gina Raimondo, who has said Beijing doesn’t play by the rules and needs to be held accountable, wants to increase market access for American companies in China and once Covid-19 restrictions ease up, she’ll travel there with U.S. CEOs.

On Monday, Tai distinguished between increasing trade for the sake of helping exports and looking at sectors that are strategic and important to safeguard.

“Our traditional approach to trade has run into a lot of realities that are today causing us to open our eyes and think about: ‘Is what we’re looking for more liberalized trade, and just more trade, or are we looking for smarter and more resilient trade?,” she said.

“In terms of China’s scale, the direction of its industrial policies in particular, and in terms of the speed with which we’ve seen China accomplish many of its goals, there are a number of sectors and areas in our economy where we can no longer just wish for the best. We’ve actually got to do something to address it,” Tai said.

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