In an article from last week, Politico Pro had some interesting quotes from U.S. Trade Representative Katherine Tai on the issue of the Section 232 steel and aluminum tariffs. I wish I had the full transcript on this, but I don't, so I'll have to make do with the excerpts in the article. Here are the key points:
U.S. Trade Representative Katherine Tai on Tuesday called on the EU to join America in tackling what she said was a national security threat stemming from global steel overcapacity — suggesting that both the EU and the U.S. should work together in restricting imports of Chinese steel.
... While Tai indicated America was in no mood to totally reverse Trump’s measures because of the risks posed by Chinese overcapacity, she hinted that there could be room to go easier on Europe if it joined forces on confronting China’s state-backed mills.
“We’re really committed to figuring out how we can work with Europe on a national security threat that we think that Europe faces as well, in terms of the impact of overcapacity in steel and aluminum on the EU market and the EU’s ability to produce.”
Speaking to a a small group of reporters, Tai defended the way Washington cited national security to tax steel and aluminum imports, arguing that under U.S. law, that exemption was meant to protect critical industries.
“This action really wasn’t about declaring that Europe is a national security threat. It’s declaring that the impact of global overcapacity driving down prices, distorting markets, undermining the ability of U.S. producers in steel and aluminum to produce — that is a national security threat,” she said, adding that the EU faced the same concern.
...
“Steel and aluminum as basic industrial inputs are critical to a country’s national security. I think on that we probably don’t disagree,” Tai argued. “These are industrial products that really are the base for a country’s ability to defend itself, but also to keep its economy going and to build its infrastructure.”
...
Tai said she would seek to apply the Airbus-Boeing playbook — pausing transatlantic tariffs to jointly tackle China — to end the transatlantic trade dispute that has resulted in both sides slapping tariffs on steel. ...
“I want to emphasize that the Section 232 [national security] conversation that we’re going to have, and we’ve actually started with the European Union, that conversation shares the basic fundamentals of the one around large-scale aircraft,” Tai said.
“First of all, it is taking tension right now between the U.S. and the EU, which are these tariffs on both sides of the Atlantic, converting that into collaboration on a shared challenge that we have, which is global overcapacity that is driven primarily by China.”
One of the options discussed by the former Trump administration was to exempt allies such as the EU from tariffs and instead impose quotas. Tai did not directly comment on that approach, but admitted it was a “contradiction” that Washington was taxing EU imports.
“I think that the consternation that we encounter, which is completely understandable, is that in imposing the tariffs at the border, that those tariffs have gone on in a global nature, so that they’ve affected imports that come from everywhere, including from countries that we consider to be strong allies and good friends and that’s the contradiction,” Tai said.
...
“There are hard questions that we have to face,” Tai said. “There are feelings, deep feelings that we’re going to have to address. And it’s serious. It’s really serious.”
I have a few comments here.
First, the underlying issue seems to be this: What can be done about Chinese overcapacity? I don't know that I've ever seen the problem fleshed out in detail, but I assume it arises from some combination of SOE behavior and government subsidies, with the Chinese government using these actions to maintain production at higher than market levels in order to keep employment up. It is these industrial policy-type actions by the Chinese government or related entities that create the overcapacity problem.
It's not clear to me why people think existing WTO rules in this area are insufficient, and I would start by filing more complaints and seeing how they go. China's accession protocol/working party report have rules on SOE behavior and the SCM Agreement has rules on subsidies, and those provide a good start. An alternative approach that has been tried here is to file domestic AD/CVD complaints, but those just offer protection to the domestic industry and are unlikely to change a foreign government's behavior (that's my sense anyway). If the goal is to change foreign government behavior, I would pursue multilateral remedies rather than unilateral ones.
Second, in terms of working with allies, the longstanding EU view here has been that the right approach to challenging Chinese trade practices is to use a combination of WTO litigation and negotiations. At this point, it's not clear to me how the Biden administration would want to approach things differently. Do they have some alternative in mind? If so, what is it? How do they envision having the U.S. and EU work together on this?
And finally, what is the scope of "national security"? If steel and aluminum are included, what else is in there? Lumber? Food? Data? I certainly understand how, say, fighter jets are part of the concept of national security, but for those pushing the envelope, it's worth thinking about how other countries might push it too, so as to cover various products that might be considered sensitive or important to them at a particular moment.
