USTR

US Trade Policy Under Biden: More of the Same

US Trade Policy Under Biden: More of the Same

United States Trade Representative (USTR) Katherine Tai gave what was billed as a major speech at CSIS outlining US trade policy on October 4. A careful review of China policy has been underway for months and Tai’s speech was to deliver the results of this study. At the end of her prepared remarks and a short round of questions, observers were left with few clues about the future trajectory of US policies and little detail beyond broad brush strokes already sketched over previous months. What was made clear is that US trade policy, in practice, is not likely to look substantially changed from paths pursued by the previous Trump administration. In fact, if Tai’s speech were read alongside similar policy statements made under the Trump team, it would be difficult to pick out who said what. First, Tai argued that China has failed to follow appropriate actions or adjust its bad behavior despite a long history of engagement. The approach used under the Trump administration, in particular the Phase 1 agreement, may not have been exactly the model she would have chosen (what model she might have thought more suitable was not discussed), but it remains in place. Tai did express distain for the term “Phase 1,” even as she essentially promised to follow it. Tariffs will continue to be imposed on Chinese imports, although the administration will restart the process of reviewing requests for exclusion. With limited details available on the process, however, it is unclear whether tariffs will be waived in large part, or only in limited circumstances. Nor was there any clarity on how long the process may take to conclude. Given the relatively limited time “left” on the Phase 1 agreement, even a short delay may deliver only modest benefits to US firms struggling to manage tariffs of up to 25% which have now been imposed, in some cases, for years.

US Worker Centered Trade Policy Meets Global Competition

US Worker Centered Trade Policy Meets Global Competition

The United States has a new chief trade official. Katherine Tai was unanimously confirmed as the next US Trade Representative (basically trade minister). As USTR, Tai is expected to develop and execute US trade policies. The extent to which American policies on trade are adjusting remain to be seen. Thus far, Tai has been relatively quiet on her objectives, speaking only during her confirmation hearing. She has to hire her three deputies and a chief agriculture negotiator who will help flesh out and deliver policies. The early signs, however, suggest that potentially important changes are on the horizon. The key buzz word is that from now on, the US will pursue “worker centered” policies. It remains unclear what “worker centered” actually means. In practice, the phrase is likely to mean different things to different people. It will take cues from long-standing Democratic party objectives to support organized labor and environmental protection. These concerns have been embedded into a series of trade agreements for the United States, including the renegotiated NAFTA or USMCA. Tai took the lead role of shepherding the final USMCA document through Congress and building support from within Capitol Hill for the agreement. Her personal ability to forge bipartisan consensus on renewal helped with her smooth passage into her new role at USTR. US President Biden has suggested that trade agreements are not going to be part of American trade objectives in the near term. This suggests that worker centered policies will need to be anchored in something other than trade deals. Where might they be found? In large measure, it appears through enforcement. The US is likely to be giving extra scrutiny to US trade partners under various free trade agreements (FTAs) and other preference programs. It will also be looking hard at obligations and commitments made at the World Trade Organization (WTO) which have not been pursued with sufficient vigor by members. The US is also likely to change its position on a number of domestic policies. This includes an increasing use of “Buy American” policies and a probable review of US commitments under the WTO’s government procurement agreement and other similar chapters in existing FTAs.

Trump Acts Against China

While USTR officially has a year to make a determination in the pending Section 301 investigation into Chinese intellectual property theft and forced technology transfer, this deadline is likely to be moved up significantly.  USTR will probably rule that American firms have been harmed by Chinese actions and that these injuries require remedies.  Damages could involve significant tariffs, calculated by considering harm caused cumulatively over the past decade.  President Trump’s State of the Union address on January 30, provides the perfect opportunity to highlight the evolving trade agenda and note recent or upcoming actions, particularly vis-à-vis China.   

Section 301 Investigation: The Expected and The Unexpected So Far

So what happens next?  Under the terms of Section 301, USTR has completed two key items on the checklist.  It will likely issue a damage assessment figure that can be used as the basis for a preliminary calculation of potential sanctions.  These sanctions could be rolled out at any time between now and August 2018, if the US decides that China is making insufficient progress towards satisfactory resolution of the problems identified in the original complaint.

But as the comments and hearing illustrated, it remains unclear at this point what is the likely area or areas where USTR might chose to focus attention.  The comments failed to shed new light on specific challenges in a way that might have made it easier to guess which way the investigation will roll in the future.

Update: The 301 Trade "War" Countdown Has Started With China

The United States has now moved one step closer to dusting off a Cold War trade relic and applying it to China.  In authorizing US Trade Representative (USTR) Robert Lighthizer to investigate whether to self-initiate a Section 301 case against China for alleged unfair trade practices, we have started down a path first traveled in the 1970s and 1980s.  This will give rise to a dangerous trend that could rapidly shake the very system of global rules that have worked well for most firms for decades.  While there appears to be strong pressure from different quarters to Washington to “do something,” it is not at all clear that many understand the power of 301 to destroy the trading system now.