This is from a Katherine Tai interview with Bloomberg TV anchor Haslinda Amin:
Amin: You've been criticized for your trade policy, some say that it lacks ambition, some say you've not done enough to bring cost down for American companies. What do you make of those criticisms and what can you do to allay some of those concerns?
Tai: Well, I think that for the people who are criticizing our trade policy, it is either because they are not hearing us when we describe what our objectives are, which is to bring a new approach to trade that ensures that trade policy can be and is a force for good. And I think that some of the other critics are impatient. So what I would say is, we are very much focused on the vision for trade, and the vision for America's leadership in trade and global economics, that is focused on ensuring that trade is a tool for moving us into a better world.
I think patience is important, and it does take a while to get people in place and come up with a strategy. It all seems very easy from the outside, but trying to take into account all the interest groups and the various people with opinions must be overwhelming. USTR career staff, officials at other agencies, congressional staff and members of Congress, pro-trade interest groups, trade skeptic interest groups, etc. all have views here, and they somehow need to be synthesized. And then trying to apply a combination of your own view and these other views to the wide range of long-standing and Trumpian trade actions out there is complicated, to say the least.
But eventually, there does need to be some clarity on an administration's trade policy vision, and I think we have it in some areas but perhaps not yet in others.
I think one of Tai's big ideas is to pull back on the fights with the EU, and I see some clarity in this area. While China has been the focus of recent trade concerns coming from the U.S., trade fights with the EU have been around longer and many have lingered on. I get the sense from some people in the U.S. trade policy world that they are madder at the EU than they are at China. Tai seems determined to tone down many areas of U.S.-EU conflict, and in my view that is a positive development. We have to set priorities, and even many of those who are most critical of the EU would probably acknowledge that there are bigger issues with China than with the EU (despite what the interest groups pushing particular EU issues might say).
Another area of clarity is with the idea of market access achieved through new trade agreements. Here, I think Tai has been very clear that the Biden administration will not be pursuing this. In her testimony to the House Ways and Means Committee last week, she said:
... when we talk about market access in trade speak, generally what we are talking about is tariff liberalization, tariff reductions, and it is true that we are not talking about tariff reductions in the context of the Indo-Pacific Economic Framework. ... We're actually living in a pretty tariff liberalized world as it is. That's not to say that there aren't further gains that could be made or more tariffs that could be brought down, but we're in a pretty fluid world for the movement of goods. The concern that we've run into, over the course of this version of globalization is, especially here in the US, a real concern about the offshoring and the erosion of our jobs and our industries.
I would say it's pretty clear from this statement that traditional market access in the form of tariff liberalization through trade agreements is not something Tai wants to pursue. Instead, the focus will be on issues like labor and the environment through less enforceable instruments such as the Indo-Pacific Economic Framework.
On this issue, I think the critics are actually hearing the Biden administration very clearly, but simply disagree with the objectives that have been stated. In terms of what would make trade policy a "force for good," many people, including me, think that when you balance out the benefits and costs, trade liberalization is a force for good. Protectionism, by contrast, is a force for bad when you do that same balancing. You can impose dispersed costs on everyone for the benefit of a favored few, but you really shouldn't.
To the extent Tai is doing some political calculations here, I suspect one of her concerns is that traditional trade agreements are political losers for Democrats right now. My own view is that rather than abandon trade agreements entirely, we should come up with a better approach to them, including both the substance involved and the choice of negotiating partners. I think there is a package that could work politically, although it would mean standing up to some interest groups, and that won't be easy. One thing I'd really like to see is how much tariff liberalization the U.S. could get from foreign governments if it focused trade negotiations on that instead of issues such as labor, the environment, and IP protection.
In contrast to these areas of clarity, I think the Biden administration's trade policy vision still needs to be fleshed out in a few areas. Two big ones are WTO dispute settlement and China.
On WTO dispute settlement, as I've said before, I think there are a number of packages of reforms to restore the Appellate Body that are politically achievable. The administration just needs to settle on something and make the case for it to other WTO Members, in order to get the negotiations started.
As for China, while Tai has stated that the administration has not given up on changing China's trade practices, nevertheless there does seem to be a shift in priorities here. In a hearing at the Senate Finance Committee last week, Tai said:
... it is high time for us to turn the page on the old playbook with respect to China. That old playbook had us focused exclusively on changing China's behavior. We must now expand our work to include a strategy to vigorously defend our values and economic interests.
Along the same lines, she said:
... it is the time to turn the page on the old playbook, which focused exclusively on pressuring China and seeking China to change its ways or ... pressing China for compliance. We are not giving up on pressing China on compliance or on changing its ways. And yes, all tools remain on the table with respect to dispute settlement and enforcement. But my main point is that that's not the only thing we can do now and we have to expand our strategy to include developing the tools that we need to defend the interests of our economy.
In terms of defending values and economic interests, if trade remedies falls into this category, it seems to me we have been doing a lot of that for a long time. It looks like new rules on imports of forced labor are now getting thrown into that mix as well, and I guess the industrial policy-type actions people are pushing in Congress are also part of that category. But I worry that pressing China for change could get lost in this new mix, which is a shame. In my view, a lot could be achieved in this regard through the WTO dispute process (if restored, as noted above). China is unlikely to take seriously unilateral demands from the United States (this was clear before the recent Section 301 actions, but is even more so now), but it does seem to respond positively to rulings from neutral international trade adjudicators. Political scientists and China experts can debate why exactly that is the case, but it seems to be true, so why not take advantage of it?
