On October 4, 2021, United States Trade Representative (“USTR”) Katherine Tai delivered a speech at the Center for Strategic and International Studies (CSIS) highlighting the Biden Administration’s new strategy for navigating U.S.-China trade relations. Ambassador Tai focused her remarks on President Biden’s vision for a worker-centered trade policy in the U.S.-China trade dynamic, however the policy details from the speech signal a continuance of key elements of the status-quo left behind by the Trump Administration – specifically the use of tariffs on a wide range of U.S. imports from China.
USTR will continue to seek enforcement of the Trump Administration’s Phase One deal from January 2020 and shows little indication that the Section 301 tariffs targeting the vast-majority of Chinese imports will be removed. Despite maintaining the tariffs of up to 25 percent on approximately $360 million in US imports, Ambassador Tai announced that USTR will restart a targeted tariff exclusion process for Section 301 duties. While encouraging, this suggests only limited relief for some portion of U.S. businesses and consumers who have been hit with the existing tariffs.
In her speech, Ambassador Tai took aim at China’s economic system by saying that, “Beijing has doubled down on its state-centered economic system” and it “is increasingly clear that China’s plans do not include meaningful reforms to address the concerns that have been shared by the United States and many other countries.” She directly tied China’s economic growth to the “expense of workers and economic opportunity here in the U.S.” and highlighted the injury to the U.S. steel injury which has seen employment drop “40 percent since 2000.” Other industries highlighted in the remarks included the extensive Chinese-state subsidies into photovoltaic solar cells and semiconductors as well as the unequal market access for U.S. agriculture.
After detailing the woes stemming from U.S.-China trade relations, Ambassador Tai shared that a priority for the Biden Administration is for the U.S. is to invest in American workers, infrastructure, R&D, clean energy technology and incentives for companies to Buy American, among others. The USTR promised to discuss China’s performance under the Phase One Agreement and directly engage with China on its industrial policies with an objective not to inflame current trade tensions. Furthermore, the U.S. will seek to work more closely with allies to construct a fair international trade system. In contrast to using language such as “decoupling”, the single phrase from Ambassador Tai that best encapsulated the new U.S. strategy is “durable coexistence.”
A notable omission from today’s presentation was any mention of a possible new Section 301 investigation targeting Chinese industrial subsidies which had been reported by multiple news outlets in September. A new investigation with additional tariffs would be certain to add fuel to the tariff-war that began in 2018. For the time being, the Biden Administration will be sticking with the status quo of tariffs. Former USTR Robert Lighthizer has criticized the idea to restart the exclusion process as he claims companies have had more than two years to reconfigure their supply chains away from China. Proponents of the exclusions point out the burden of the tariffs on US importers and consumers, a point Ambassador Tai seemed to acknowledge in the Q&A that followed her speech
Although the headline from the speech from a business perspective is the establishment of a new tariff exclusion process, Ambassador Tai offered few details about either the scope or timing. With the exception of medical products needed to fight the pandemic, the last of the Section 301 exclusions from the first exclusion-process expired in December 2020. It remains to be seen if the exclusion process will be open to all industries and how far retroactive duty relief will stretch back in time. As the multiple rounds of exclusions continued during the Trump administration, USTR became more and more selective on which products were granted exemptions. Crowell & Moring calculates that for List 1 USTR granted 33.8% of all exclusion requests while for the larger List 3 the number dipped to 4.9% granted. In the rebooted version of the Biden Administration’s exclusion process, USTR could possibly take a more lenient approach. Ambassador Tai stated that “we will keep open the potential for additional exclusion processes, as warranted.”
To view a video of the speech and the Q&A, click here for a link to the CSIS event.
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