Wed. Oct 5th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

March 30, 2022

The following news report was anticipated, because Tai’s testimony to House was prescheduled and open to the public so some details were released on March 29, 2022. The tone of her testimony is also expected because the current political reality in DC is strongly anti-China.

Tai’s statement “a good-faith effort to engage with China’s government on trade may be hitting its limits” is expressing a sense of her frustration. It also means that there is a shift of her strategy, even though the door remains open for future “conversations.” It is interesting to note that she spoke of “conversations” instead of “negotiations, that may mean her position is not negotiable. It is also clear that China will not agree with the US unconditionally.

Tai is still using the Trump-Xi signed Phase-One Trade Agreement as the bottom line, which was expired on December 31, 2021. China did not fulfill all the purchasing commitments; one factor is the global COVID-19 pandemic. There is a “force majeure” clause in the Agreement.

She did not factor into the negative impacts to the US economy when she stated that “tariffs on $300 billion to $400 billion in Chinese imports has not incentivized Beijing to make fundamental changes.” If she meant to expand the tariff war against China, she will have to convince most of US businesses. Further, when she spoke of “defending our value” that is an ideology confrontation with China. Mixing ideology with trade (business) just makes life tough.

As the Biden administration has yet to announce the over “China Strategy,” Tai only talked about “trade defense” without any detail. She expressed the US “needs new tools” without specifics or timetable.

Obviously, the Ukraine war has damaged the global trade system, her envisioned “new US tools” may have to wait till the cease fire is reached. If nothing else, Biden Administration’s bandwidth is limited, and the US must “conclude” Ukraine war before starting any new offense.

Tai: U.S. must ramp up trade defense against China

Steven Overly Wed, March 30, 2022, 1:31 AM

China has not bowed to pressure to fulfill its obligations under a Trump-era trade agreement, and the Biden administration must now more directly confront the harmful effects of Beijing’s economic behaviors, U.S. Trade Representative Katherine Tai will tell lawmakers on Wednesday.

In her testimony before the House Ways and Means Committee, Tai signals that a good-faith effort to engage with China’s government on trade may be hitting its limits. The remarks provide a noticeable shift in tone from Biden’s top trade ambassador but stop short of outlining any new trade penalties against the People’s Republic of China. Instead, Tai will reiterate that existing tools aren’t up to the task.

“Our strategy must expand beyond only pressing China for change and include vigorously defending our values and economic interests from the negative impacts of the PRC’s unfair economic policies and practices,” Tai will say, per prepared remarks.

Tai initiated talks with her Chinese counterpart, Vice Premier Liu He, in October after pledging that the Biden administration would hold Beijing accountable for its commitment to purchase $200 billion worth of additional American goods over a two-year period under former President Donald Trump’s Phase One agreement.

Data show China fell short of that obligation, which it was expected to meet by the end of last year. Tai will tell the committee that her talks have revealed that Beijing “would only comply with those trade obligations that fit its own interests.”

“This is a familiar pattern with the PRC – from their actions at the [World Trade Organization] and in various bilateral high-level dialogues,” Tai will add. “The United States has repeatedly sought and obtained commitments from China, only to find that follow-through or real change remains elusive.”

The door remains open to further conversations, Tai will say, while calling for the U.S. to both challenge Beijing’s practices and bolster American competitors through domestic investments.

China is hustling to gain global dominance over critical technologies, such as electric vehicles, batteries and semiconductors. In the past, U.S. competitors have suffered from Beijing’s industrial subsidies and other market-distorting actions, which existing trade remedies were “too slow or ill-suited to effectively address,” Tai argues in her testimony.

“To ensure that our industries remain competitive, we must develop new domestic tools targeted at defending our economic interests, and make strategic investments in our economy,” Tai will say.

She will call on Congress to approve $52 billion for domestic semiconductor production and research through legislation now known as the Bipartisan Innovation Act. The House and Senate are currently preparing to launch a conference committee to reconcile competing versions of that bill.

U.S. must push China for change but act to protect economic interests -USTR’s Tai

David Lawder Wed, March 30, 2022, 8:01 AM

WASHINGTON (Reuters) -The United States will vigorously defend U.S. economic interests and values against the negative impacts of China’s economic policies as Beijing doubles down on its state-centered economic system, U.S. Trade Representative Katherine Tai said Wednesday.

Tai told the House Ways and Means Committee that Washington’s talks with Beijing about its unmet purchase commitments under a Phase 1 trade deal and broader non-market policies had been “unduly difficult” and new tools were needed.

“Going forward, our strategy will expand beyond only pressing China for change and needs to include vigorously defending our values and economic interests from the negative impacts of China’s economic policies and practices,” she said.

She said Washington “cannot stop pushing China for change,” but could no longer wait for China to change its policies, noting that tariffs on $300 billion to $400 billion in Chinese imports has not incentivized Beijing to make fundamental changes.

China only met about 60% of its Phase 1 deal commitments to increase U.S. purchases by $200 billion during 2020 and 2021 compared with 2017 levels and improve protections for U.S. intellectual property and grant more Chinese market access to U.S. financial services and agricultural biotechnology.

In addition to “continuing to create pressure for China to change,” Tai said the United States needed to take more steps on its side, including passing legislation in Congress to promote investments in innovation, semiconductors and the return of manufacturing supply chains to U.S. shores.

“That is the plan that we need to pursue going forward,” she said, echoing comments to Reuters last week.

Tai has long said that trade laws needed to be updated to deal with the challenges of China’s massive industrial subsidies, but she did not provide details on specific changes that she is requesting.

Regarding the Biden administration’s proposed Indo-Pacific Economic Framework, a series of negotiations with countries in the region aimed at countering China’s influence, Tai said it would not reduce tariffs but would include “meaningful economic outcomes” aimed at setting new, market-based standards for digital commerce, the environment and labor.

US to stress economic independence to counter ‘unfair’ China trade practices

Tue, March 29, 2022, 7:27 PM

The United States should focus on achieving economic independence from China rather than pressuring Beijing to change “unfair” trade practices, US Trade Representative (USTR) Katherine Tai said Wednesday, suggesting a shift in strategy toward the Asian giant.

The new approach takes into account Washington’s inability to force fundamental changes in business practices under a trade agreement signed two years ago during former president Donald Trump’s administration, she argued.

“While we continue to keep the door open to conversations with China… we also need to acknowledge the agreement’s limitations, and turn the page on the old playbook with China, which focused on changing its behavior,” she told the House Ways and Means Committee.

She noted that the United States has tariffs on hundreds of billions of dollars in Chinese products, but “that has not incentivized China to change.”

“It is very clear to us, I think, collectively, that we can’t keep doing what we have been doing,” she said.

In her appearance before Congress, Tai stressed that the US strategy must now “expand beyond only pressing China” into abandoning trade practices that Washington deems unfair.

“We cannot stop pushing China for change,” she said, and “we can’t just wait for China to change.”

The new approach must “include vigorously defending our values and economic interests from the negative impacts of the PRC’s unfair economic policies and practices,” she said, using the official term for the People’s Republic of China.

When she joined the administration of President Joe Biden in early 2021, Tai asked her staff to analyze the impact of these practices on US industry and workers, as well as on those of US allies.

“We have seen what happened in the steel and solar industries when existing mechanisms were too slow or ill-suited to effectively address the distortions wrought by China’s targeting of those sectors,” she said.

While China is also targeting critical industries such as high-tech, electric cars and semiconductors, Tai advocates “strategic investments” in the United States to no longer depend on China.

In her opinion, “significant progress” was made through last year’s American Rescue Plan stimulus bill, which she said helped businesses hit by the Covid-19 pandemic and made supply chains more resilient.

“But to truly boost America’s competitiveness, we urge Congress to quickly pass the Bipartisan Innovation Act,” she said, referring to a bill that would, among other things, facilitate the production of crucial technologies.

U.S. Trade Chief Outlines Policy Shift, Citing Ukraine War and Pandemic

Tai said that traditional trade policy tools, including tariffs, are no longer sufficient

By Yuka Hayashi Mar. 30, 2022 3:10 pm ET

WASHINGTON—U.S. Trade Representative Katherine Tai said Wednesday that the U.S. must shift the focus of its trade policy to rebuilding its domestic manufacturing industries, and lessening ties to unfriendly economies.

Appearing before the House Ways and Means Committee, Ms. Tai said that global events such as Russia’s invasion of Ukraine and the supply-chain disruptions triggered by the Covid-19 pandemic point to the need for new priorities.

“The problem that we are confronted with today—after two years of Covid and also Russia’s invasion of Ukraine—is that this version of globalization that we are living in has not taken us to a place where we feel more secure,” Ms. Tai told lawmakers. “We are feeling increasing senses of insecurity in terms of our supply chains, and our reliance on partners who we aren’t comfortable relying on.”

Ms. Tai, President Biden’s chief trade negotiator, said that traditional trade policy tools, including tariffs, are no longer sufficient.

The tariffs on Chinese imports imposed by former President Donald Trump, Ms. Tai said, haven’t convinced Beijing to abandon policies that the U.S. claims discriminate against foreign businesses.

The U.S. posted a record trade deficit last year, with the deficit with China growing 14.5% after shrinking in the previous few years.

Ms. Tai’s remarks came after her agency said the administration is realigning its trade policy toward China, looking at existing tools and potentially new ones, to combat Beijing’s nonmarket practices.

With her remarks Wednesday, she elaborated on what constituted such new policy tools.

Bilateral discussions since last fall to hold China accountable for failing to meet its purchase commitments for American products under Mr. Trump’s Phase One trade agreement have been “unduly difficult,” she said, highlighting the need for the U.S. to “turn the page on the old playbook.”

“We can’t just wait for China to change,” she said. “We need to start doing things on our side [such as] the reshoring and the rebuilding of our manufacturing base.”

The consequences of harsh economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict might transform the global economy.

Ms. Tai said another pillar of the administration’s trade policy is to strengthen cooperation with allies and friendly partners, while pursuing new ways of engagements different from traditional market-opening measures.

Some Republican lawmakers criticized the administration’s trade policy for focusing too much on bolstering the domestic economy and not pursuing market-opening measures through traditional trade agreements to expand opportunities for U.S. businesses overseas.

Some expressed concern that the new policy framework the administration is currently negotiating with Asia-Pacific nations may lack concrete measures to expand U.S. business opportunities in the region. 

“I’m concerned that the administration will not seek to address actual market-access issues,” said Rep. Adrian Smith (R., Nev.). “Endless dialogues and frameworks are no substitute for trade agreements that open markets for American products.”

The administration’s efforts since last year to mend trade relations with European nations—through the resolution of a longstanding aircraft subsidies dispute and removal of the Trump-era tariffs on European steel and aluminum imposed—have contributed to the swift policy coordination to sanction Russia over its invasion of Ukraine, Ms. Tai said.

“All of that work we have done is paying off now,” Ms. Tai said last week during an event hosted by the American Chamber of Commerce to the European Union.

Ongoing negotiations on steel and aluminum with the EU will address global overcapacity of metals, as well as addressing climate concerns by promoting cleaner products, she told lawmakers, describing it as an example of a new way of trade policy engagement.

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