- Last week, United States Trade Representative (USTR) Katherine Tai delivered her annual congressional testimony to the Senate Finance Committee and the House Ways and Means Committee to convey the Biden Administration’s trade agenda and to answer pertinent questions from members of Congress.
- Shifting from the Administration’s work thus far in trade, Ambassador Tai displayed an openness towards developing new trade agreements with the United Kingdom and Taiwan, and spoke positively of a potential critical minerals agreement with Japan and the European Union. She also emphasized a need for reforms in transatlantic trade agreements, the USMCA, and the World Trade Organization amid ongoing international trade issues.
- Tai faced exhaustive criticism and questioning over the Administration’s lack of a comprehensive trade strategy to counter China’s dominance in global trade. She was also questioned about the efficacy of the Indo-Pacific Economic Framework (IPEF), its lack of market access for American goods, and the absence of intellectual property protections.
On March 23rd and 24th, United States Trade Representative (USTR) Katherine Tai testified in front of the Senate Finance Committee and the House Ways and Means Committee, respectively. Ambassador Tai provided her annual congressional testimony focused on the Biden Administration’s trade agenda and ongoing trade pursuits. In almost seven hours of questioning, Tai answered hundreds of inquiries into issues such as possible new trade agreements, accountability in existing agreements, the protection of domestic workers and industries, and the global competitiveness of American production.
In their first three years in office, the Biden Administration and Ambassador Tai continued the Trump Administration’s platform of using protectionism to artificially support American industry. Thus, the United States has largely ignored the importance and development of global free trade during the current Administration. The avoidance of robust multilateral trade agreements has resulted in several matters of contention and trade disputes around the globe. During her time on Capitol Hill, Ambassador Tai was questioned about these concerns and the Administration’s solutions to disruptions in global trade.
Ambassador Tai signaled a possible shift of the Administration’s position on the development of new trade agreements. In an unexpected development, the Ambassador spoke positively of the bilateral negotiations taking place with the United Kingdom and Taiwan, as well as the critical minerals trade negotiations with Japan and the European Union. While Ambassador Tai did note that these deals would not include tariff liberalization, she did specify that she remained “open-minded that when it is fit with a partner and a time, we are happy to do the right thing by the U.S. economy.”
The long-awaited United States-United Kingdom trade agreement is gaining some institutional momentum, evident by Ambassador Tai’s positive reception to the deal. The United States had a total trade value of $117 billion with the United Kingdom in 2021, and that figure would increase with the elimination of non-tariff barriers in sectors such as regulatory compliance, financial services, medical products, and raw chemicals.
Similarly, the United States and Taiwan recently concluded their first round of negotiations of an agreement which would harmonize customs and simplify regulatory practices in trade between the two massive economies. The two nations shared a total trade value of $114 billion in 2021. A trade agreement with Taiwan is especially crucial, as they were unable to be included in IPEF for political concerns and the signatories’ fear of retribution from China. But the Biden Administration is hopeful that an agreement with Taiwan would provide a mutually beneficial economic counter to China in the Indo-Pacific.
Ambassador Tai touted the Biden Administration’s efforts in negotiating a potential critical minerals agreement with Japan and the European Union. Biden’s Inflation Reduction Act mandates that 40% of the minerals in electric vehicle batteries must be mined in countries that have agreements with the United States. As that figure will ramp up to 80% by 2027, the Administration is negotiating agreements with allies to decrease reliance on Chinese-controlled mining in the DR Congo.
In contrast to her receptiveness to new trade agreements, Ambassador Tai described the Administration’s struggles with several of the United States’ current trade agreements and frameworks.
- Tensions with the European Union over the climate subsidization practices in the Inflation Reduction Act.
- A stalemate with Mexico over the ban on imports of American genetically modified corn, which may escalate to a USMCA dispute resolution panel.
- Concerns over labor rights abuses in signatories of the Central American Free Trade Agreement (CAFTA), particularly Honduras.
- Ongoing disputes with Canada over Canadian dairy products and Canadian softwood lumber exports within the USMCA.
- Efforts to prevent the imports of Peruvian timber from illegal logging practices.
Ambassador Tai broadly explained the Administration’s desire to create and enforce stronger enforcement mechanisms in international trade disputes but did not provide tangible examples of proposed reforms, instead deferring to non-specific “tools” that could be used.
Similarly, Ambassador Tai stressed the need for reform of the World Trade Organization due to its lack of enforcement mechanisms and non-functional Appellate Body within the dispute resolution system, despite the United States’ responsibility for its lack of functionality. While she spoke about the need for urgency, she stressed that the United States cannot unilaterally enforce its desired reforms but must work cooperatively with the other 163 nations.
As with most congressional hearings of the 118th Congress, combating China was the top priority of many members. Ambassador Tai faced unrelenting questioning regarding the Biden Administration’s strategy to counter China’s rise as an economic superpower. In response to harsh criticism from Ways and Means Chair Rep. Smith (R-MO), Ambassador Tai reassured the committee “that every day that I am at work as the U.S. Trade Representative, I am in one way or the other working on China issues either directly or indirectly.” The Ambassador often suggested that the Indo-Pacific Economic Framework (IPEF) is building the foundation for American strength in Asia and will provide countries in the region with alternative trading partners rather than China. Some members questioned the success of the IPEF and believe the United States will not see great benefits because of the lack of tariff liberalization and market access contained in the agreement.
In addition to the endorsement of the IPEF, Ambassador Tai previewed a potential new doctrine from the Biden Administration regarding U.S.- China relations. While the Administration is pushing aggressive counters such as the critical minerals agreement and the IPEF, Ambassador Tai also conveyed strong rhetoric on Chinese offensives: “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.” Ambassador Tai again stressed the existence of “tools,” such as the use of Section 232 on steel and aluminum imports, that both the USTR and Congress could use to compel China into compliance with prior commitments. But as an enforcement tool, Section 232’s effectiveness has been heavily debated within the United States due to the excessive costs placed on consumers and lack of impact on China’s rising economic influence.