Former Assistant USTR for China Thinks Phase 2 Negotiations Could Provide Section 301 Off-Ramp
Even though the Joe Biden administration will have a very different approach to trade than did the Trump administration, that will not mean a wholesale rejection of what its predecessors did, analysts said during a Center for Strategic and International Studies webinar Jan. 21.
A former assistant U.S. trade representative, Claire Reade, said the phase one deal with China is a form of leverage, “and it should not be hastily jettisoned.” Reade, senior counsel at Arnold Porter, said China should be pressed to meet the intellectual property commitments it made in the deal, and on its “seriously lagging purchase commitments.” Reade was one of several speakers on the online panel on how the Biden administration will approach China. She said that if the U.S. can get satisfaction on phase one, it's possible that removing tariffs as part of phase two could be a “win-win,” since the tariffs harm the U.S. economy, and removing them could build trust with the Chinese.
Scott Kennedy, a China expert at CSIS, said he thinks there's room for change in the China policy, since the Biden administration doesn't reflexively see trade as “a danger or a threat,” as the Trump administration did. But he said that it's not just a question of evaluating more than 200 measures the Trump administration adopted on tariffs, quotas, sanctions and export restrictions. He said that in many cases there are issues “that I don't think the Biden administration should just roll back willy-nilly,” unless it can get China to offer some reciprocity or address the underlying issue that motivated the action. He expressed skepticism that China would be willing to cooperate in many areas.
John Holden, who leads McLarty Associates' China practice, said that while China will negotiate with us, there will be no sea change in the relationship. Reade agreed. “It’s clear the United States has some leverage, but it’s limited,” she said. “And that’s why the allies are important.”
Kennedy said he expects Biden could remove Section 232 tariffs from allies without negotiating first, but Reade was more skeptical. “I think it's very politically difficult to pull down those tariffs,” she said. Negotiating a coordinated way to prevent China's steel overcapacity from entering foreign markets would allow the U.S. to exit Section 232 tariffs, but, she said, “using allies has limits and is going to take much more time than anyone thinks.”
Holden said that one of China's greatest fears is that the U.S. and other allies will coordinate to box it in. “That’s why you saw the Comprehensive Agreement on Investment rushed through at the end of December,” he said, referring to the European Union-China trade agreement (see 2101040066). Reade said the text of the CAI isn't out yet, but the talk is that it doesn't break new ground. “That should leave the EU with a stronger sense that the relationship with China is in no way cost-free, and they need to be more skeptical,” she said, saying that would create room for U.S.-EU negotiations on how to confront Chinese practices that distort world markets.