Tai Optimistic About Airbus/Boeing Resolution in Next 3 Months, Noncommittal on China Policy
U.S. Trade Representative Katherine Tai heard many bipartisan complaints about the pain of both Section 301 tariffs and Europe's retaliatory tariffs in response to steel tariffs, but stood her ground on both during a hearing in front of a Senate Appropriations subcommittee responsible for funding the Office of the U.S. Trade Representative.
Ostensibly, the April 28 hearing was about the budget request for USTR, which received $71 million for the current fiscal year, but Tai did not ask for any particular amount of funding, and the only time funding was discussed, she said that USTR is not on track to spend its budget because of travel restrictions and the difficulty of retaining and recruiting staff during the pandemic.
Ranking Member Jerry Moran, R-Kan., told Tai: “I remain concerned about the harm that tariffs have caused to families, businesses, farms manufacturers and workers.” He also asked her to reopen the exclusion process for the China tariffs, as he did in a letter signed by 40 senators earlier in the month. She did not commit to restoring expired exclusions or allowing new applications, but said in general she agrees that exclusions should be available to tariff actions like these. She said she knows that both the exclusions and the Section 301 tariffs themselves “are very consequential to stakeholders large and small,” and while she wants to evaluate both the tariffs and the exclusions as part of an evaluation of how the U.S. can be more strategic and effective in China trade policy, she also said, “I am keenly aware time is of the essence.”
On retaliatory European tariffs against recreational boats, whiskey and bourbon, which could go up to 50% in June, Tai assured senators from states that export those goods that she and her negotiators are working to avoid the doubling of the tariffs. But she also reassured Sen. Mike Braun, R-Ind., that she will not lift the Section 232 tariffs on Europe without a strategy from the EU that would prevent unnaturally cheap steel from China from entering the European market. The U.S. industry believes that EU exports of steel go to the U.S. as a result of China's uneconomic steel production beyond what China needs.
“The tools … have had an impact on steel production here in the United States, a positive one, but they have also carried with them costs,” Tai told Braun. She said she and Commerce Secretary Gina Raimondo are trying to address the friction Section 232 tariffs have caused with trading partners, something she called “unintended consequences.”
Aside from 25% tariffs on European steel, the Airbus and Boeing subsidy disputes are the biggest friction between the U.S. and the EU, and Moran told Tai he's very encouraged by the four-month pause in tariffs in that dispute. He noted that Kansas is a center of aviation manufacturing, and asked her what the outlook is for reaching a settlement within the next three months.
“I am very serious when I say it is time for us to resolve these disputes,” she said, and echoed the European argument that the U.S. and the EU have to resolve their differences over subsidies so they can come together to confront China's aviation subsidies, though she did not call out China directly in her answer. She said she's committed to making the most of the pause. “I am very motivated and hopeful that we will get the traction we need with our trading partners,” she said. She said the U.S. needs to seize the opportunity “to show we can move on [from this long dispute], because we have to.”
In her opening statement, Tai pointed to this pause and the negotiated settlement between South Korean companies that make electric vehicle batteries in the U.S. as the first victories for American workers.
“The [battery] settlement is the type of trade policy I believe we need: it supports a larger strategy for creating jobs and investing in innovation and manufacturing leadership by bolstering sustainable renewable energy supply chains, leveling the playing field, discouraging regulatory arbitrage,” she said.
Green energy was also on the mind of Sen. Chris Van Hollen, D-Md., who complained that safeguard tariffs against imported solar panels have led to job losses in solar panel installation, and are contrary to the administration's climate goals. The safeguard was supposed to step down to 15% this year, but instead, the Trump administration set it at 18%. It is supposed to expire next year. The safeguard was sought by two solar panel companies after antidumping cases against Chinese and Taiwanese solar panel manufacturers were not enough to prevent a sharp decrease in global prices as production ramped up in China (see 1709290035).
Tai acknowledged that the solar tariffs are a complex issue, given the different industry stakeholders' needs. But, she said, the fact that there's only one domestic producer left, when 10 years ago, it was a strong sector, is "a very sad story.”
“The story of the solar panel industry in the United States really gets at a fundamental issue that we need to confront in our competition with China,” she said. “It is a pattern that we see over and over again.” She said the U.S. needs to get ahead of subsidization of Chinese industry, and named cement as one area that needs attention. “If we don’t keep our eye on the ball, we will continue to experience these types of fights over the last scraps of an industry that we have lost to competitors, and in particular to the Chinese.”
Tai said she has not yet talked with her counterpart in China, which is supposed to happen twice a year as part of monitoring the phase one agreement with China. She got several questions about whether China is living up to its purchase promises under the agreement, and she responded that the office is evaluating China's compliance, which also covers biotech approvals, intellectual property protection and market access for certain services. “The picture is more nuanced than you might think, just looking at the trade data,” she told Moran.
Several senators talked about the high price of lumber right now, and Sen. Susan Collins, R-Maine, specifically said the U.S. should return to the approach it had with Canada from 2006 through 2015, when Canada had unlimited access to U.S. customers without antidumping or countervailing duties once U.S. prices reached a certain threshold (see 12012401), and Canada restrained its exports in times of low demand.
Collins said, “When domestic sources can’t meet the demand, as is the case right now, and prices are so high, we desperately need an agreement … so we are not imposing antidumping and countervailing duties on Canadian softwood lumber.”
Tai did not agree that a return to that approach is needed, but in response to a more general question about the price of lumber and the duties, she said that negotiators are trying to "engage our Canadian counterparts in some out-of-the-box thinking.”
Also on the topic of relations with USMCA neighbors, Tai heard from subcommittee Chair Jeanne Shaheen that exporters in the states are concerned that Mexico is not living up to its promise to increase de minimis levels. Tai said the U.S. has shared a number of concerns about USMCA compliance with Mexico, but also said, “The last year has not been a normal year, and I do want to recognize that COVID-19 has affected all of us. That doesn’t stop us from wanting to make sure that trade is still happening, and promises are fulfilled.”
She said that USMCA has tools for settling disputes, both cooperative, confrontational and in between. “In order to do USMCA justice … we need to use all of these tools to see if they work, and then improve them and our use of them. That is the point of doing a trade agreement,” she said. “It’s not to put it on a shelf and look at it -- it’s to make sure that it works.”