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Tai’s Trade Challenges

Feb 25, 2021

In early December, President-elect Joe Biden named Katherine Tai as his administration’s chief trade counsel, a cabinet-level position entrusted with negotiating terms of international trade on behalf of the United States. The facts that Tai is fluent in Mandarin, is the first Asian American to hold this post, and has worked on China-related issues for the Obama Administration signal to many that Biden is looking to add some nuance to Trump’s hardball approach to foreign policy, as well as counter and manage the growing economic competition with China. According to the Biden transition team, “Her deep experience will allow the Biden-Harris administration to hit the ground running on trade, and harness the power of our trading relationships to help the U.S. dig out of the COVID-induced economic crisis and pursue the President-elect’s vision of a pro-American worker trade strategy.” 

Tai is well-respected by both Democrats and Republicans after more than a decade of working on Capitol Hill, and she will assume the role of U.S. Trade Representative at one of the most trying times in modern history. Several U.S. allies, along with China, are in the midst of engineering new trade deals, oftentimes excluding the United States. When she is confirmed in late February, Tai will face not only the global implications of the COVID-19 pandemic, a soured relationship with China which has resulted in often illegal and aggressive trade policies towards the U.S., and an economy exhausted by business closures and ever-extending safety regulations.

So what does Biden’s trade agenda look like? He has been clear about his disagreement with predecessor Donald Trump’s unilateral, bully-into-submission approach, especially towards China. He has affirmed that he wants to collaborate with U.S. allies, and he’s backed Nigerian Finance Minister Ngozi Okonjo-Iweala to serve as the World Trade Organization’s next director-general, which Trump had opposed. Aside from these two actions, the President hasn’t laid out much of a roadmap; the delay might be due to the administration’s focus on urgent domestic priorities and unrest. Many are waiting to see if Biden will roll back the soaring tariffs of up to 25% imposed on Chinese imports during the Trump presidency, and if his references to working with “allies” implies partnership with the United Kingdom to counter China’s influence. 

While the new U.S. administration struggles to establish direction both at home and abroad, China, European nations, and Japan are restructuring long-existing trade relationships. According to Wendy Cutler, VP at the Asia Society Policy Institute, the concern lies in timelines. “While we’re trying to figure out a trade policy that works for us domestically… China is not holding still, and at the same time we’re losing our leverage with other countries, which want to reduce their reliance on the U.S. Look at the trade flows: Other countries are trading more and more with China and less with the U.S. That percentage lowers our leverage.” More than 60% of the world’s nations now export more from China than they do from the United States, and China is set to become the world’s largest economy, a position that the U.S. currently holds, by 2030. 

China and the EU negotiated a new investment pact at the end of 2020. Germany has ignored the U.S.’s strong opposition to Huawei and will continue to buy their equipment. At the end of 2020, China, Japan, South Korea, and 12 other Asian nations signed the Regional Comprehensive Economic Partnership, effectively creating a trade zone bigger than the EU. In early February, Biden received pressure from the UK, the EU, and French President Macron to resolve the Boeing and Airbus tariff dispute which, if unaddressed, could give China a unique opportunity to assert itself in the global aircraft and airliner industry. Tai will also have to move quickly to address a digital services tax that was opposed by the Trump administration, steel and aluminum tariffs imposed on allies, and the partly finished trade pact with Britain. 

So how will new U.S. Trade Representative Katherine Tai view these challenges? Clete Willems, deputy director of the National Economic Council, calls her an “expert at pushing and at building on alliances,” a claim that is backed by her success in persuading the WTO to reduce Chinese export quotas on raw materials and rare-earth minerals, using Japanese, Mexican, Canadian and European alliances to build her case. Although she hasn’t made any official comments prior to her confirmation, her history of speaking up against forced labor, state subsidies, and intellectual property violations in China, as well as her championing of the U.S. worker against unfair competition makes it clear that she will be able to navigate her new role with the support of both the Democrats and the Republicans. For the labor movement and worker advocate groups, Tai’s appointment signals an opportunity to have a voice in trade decision-making. This comes in large part from her contributions to the 2018 USMCA agreement, which focused on reducing Chinese imports into the U.S. and supporting local workers against unfair competition. 

It’s clear that the direction Washington needs to take to counter China’s increased influence: the United States must once again become the foremost protector and champion of the World Trade Organization. The Trump administration’s blatant disregard for the WTO’s rules has put the U.S. in a precarious plane. While China continues to sign agreements to cooperate and negotiate, Trump’s outright violation of the rules (tariffs on Chinese imports) cratered U.S. credibility, and made it far easier for smaller nations to lean towards China. These tariffs, if lifted, would not only bring the U.S. back to the discussion table, but also put an end to the damage they are causing U.S. companies. 

Once the U.S. is able to recover its position with the WTO, efforts can and should be put into improving and strengthening the WTO Appellate Body – whose powers were drastically limited by the Trump administration - to ensure trade disputes are handled efficiently. Only when the WTO has been restored to its previous strength will the U.S. be able to use WTO channels to address Chinese state subsidies, intellectual property violations, forced technology transfer, and win support by championing other nations affected by the Chinese violations of WTO rules (such as Australia). This is where Tai can truly shine – bringing her deep familiarity with China’s economic system, as well as fluency in Mandarin, Tai is poised to lead strategic decision making and win back support from countries whose relationships with the U.S. have weakened. 

As Edward Alden said in Foreign Policy, “Washington should stop standing on its own and reestablish itself as the champion of the trade system it first began building nearly 75 years ago. The system has served the United States and the world well for decades, and it will help Biden [and Tai] meet the growing China challenge.”


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